Skip to main content


Representing Individual, High Net Worth & Institutional Investors

Office in Indiana


Home > Blog > Category Archives: Stockbroker Investigation

Category Archives: Stockbroker Investigation

Have You Experienced Investment Losses?

In March of 2020, America has experienced the unprecedented pandemic known as the Coronavirus. The US stock market has declined by more than a 1/3 from its all-time high in February 2020. Some investors have watched their own portfolios decline by 30-50%.

In some instances, your investment losses could be normal market decreases. However, in other instances your losses could be due to mistakes made by your financial advisor. You could have been unsuitably invested in a portfolio that was too risky for you. Some of your investments could have been inappropriate. The risks of your investments may not have been accurately discussed with you. The typical American investor needs an experienced attorney to help him or her evaluate whether their losses are actionable against the advisor or firm that recommended them.

At Maddox Hargett & Caruso, P.C., we have been advising clients about their investment losses for over 30 years. We give investors free initial evaluations to help them understand the viability of their case against their financial advisor and his firm. If you are trying to understand whether your investment losses are attributable to normal stock market declines or breaches of duty by your advisor or firm, please contact us. We are here to help you make an informed decision. Call us at 317-598-2040 or check out our website at

Former JPMorgan Chase Broker Oppenheim, Charged in $20 Million Fraud

Our firm will be looking into investor complaints against former JPMorgan Chase broker, Michael J. Oppenheim, as a result of the federal authority’s accusations of embezzlement from his clients over the past four years. Checkout the latest on this breaking story below.

Tim Durham Objects to Proposed 225-Year Sentence

Convicted Ponzi schemer Tim Durham is crying foul over a presentencing report that recommends the disgraced Indianapolis businessman spend 225 years in prison and pay more than $200 million in restitution to victims of Fair Finance Company.

The presentencing report is not available to the public. However, Durham’s attorney, John Tompkins, revealed contents of the report in a 38-page filing on Oct. 31, calling the proposed sentence “absurd.”

Durham’s fate, along with co-defendants Jim Cochran and Rick Snow, will be decided on Nov. 30 by Judge Jane Magnus-Stinson. In June, a federal jury found Durham guilty on all 12 felony charges stemming from the collapse of Akron, Ohio-based Fair Finance.

Prosecutors in the case allege that after Durham and Cochran bought Fair Finance in 2002, they used it as their own personal piggy bank to fund their lavish lifestyles and to cover financial losses at various businesses they owned.

Prosecutors say that the huge withdrawals allegedly made by Durham were recorded as “loans,” and ultimately left Fair Finance unable to repay 5,000 Ohio residents who purchased more than $200 million of the company’s unsecured investment certificates.

FBI agents raided and shut Fair Finance down in November 2009.


BrokerCheck a Good Line of Defense for Investors

Failed deals involving private placements, non-traded REITs and high-risk investments like inverse and leveraged exchange-traded funds (ETFs) shed new light on why investors need to be as informed as possible about their financial investments. And the Financial Industry Regulatory Authority’s BrokerCheck database is a good place to start.

BrokerCheck is designed to help investors quickly and easily search the professional backgrounds of brokers and investment firms. This month – partly in response to address recommendations made in a January 2011 study by the Securities and Exchange Commission (SEC) – FINRA announced the addition of several new features to its BrokerCheck system.

With the latest improvements, investors and others now have:

  • Access to more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm. In addition, new Help icons are designed to clarify commonly referenced terms throughout the system and within BrokerCheck reports.
  • Centralized access to licensing and registration information on current and former brokers and brokerage firms, and investment adviser representatives and investment adviser firms.
  • The ability to search for and locate a financial services professional based on main office and branch locations, as well as the ability to conduct ZIP code radius searches in increments of five, 15 or 25 miles.

In 2011, individuals used BrokerCheck to conduct 14.2 million reviews of broker or firm records. Investors can access BrokerCheck here.


Insider Trading Harms Everyone

Insider trading, in which trades are made based on certain “inside” knowledge or information about a major corporate happening, is a crime – and one that cheats everyone. A Sept. 25 article in Investment News describes what happens when insider trading occurs and why the perpetrators involved should be punished to the fullest extent of the law.

“Every owner of shares manipulated by insider trading is a victim,” the article says. “In addition to direct investors, the victims of insider trading are the thousands, if not millions, of 401(k) plan participants, mutual fund shareholders and bank trust customers who received lower prices for their shares because a few cheaters had inside information.”

Several individuals accused of insider trading are gearing up to face their sentences. One of them is hedge-fund titan Raj Rajaratnam. Rajaratnam, co-founder of Galleon Group LLC, was convicted on May 14 of conducting the world’s biggest insider-trading scheme. His sentencing is set for Oct. 13. The government, hoping to send an loud and clear message that illegal insider trading will not be tolerated, is asking the judge in the case to sentence Rajaratnam to 20 to 24 years in jail.

Last week, the Securities and Exchange Commission (SEC) issued subpoenas to hedge funds and other financial firms as it investigates possible insider trading prior to the downgrading of the U.S. government’s credit rating by Standard & Poor’s.

Insider trading allows people like Rajaratnam to profit from non-public information. In making their profits, insider traders are slowly but surely undermining the faith and trust that investors place in the financial markets. And that harms all of us.

Chasing Returns With Risky Investments That Promise Big Payoffs

Lured by false promises of big yields and high returns, investors often make the mistake of putting their money into one investment basket – one that contains risky and obscure financial products that fail to live up to their hype.

On July 25, the Financial Industry Regulatory Authority (FINRA) issued an Investor Alert on this very subject. In the alert, FINRA offers insight on why more investors are “chasing returns,” meaning they are putting their assets into more and more riskier investments.

Many investors do not realize they could be taking on more risk if they invest in products with higher returns, FINRA says. Those investments include non-traded real estate investment trust (REITs), high-yield bonds, structured products and floating-rate loan funds.

Before investors consider moving their assets to another investment, FINRA suggests that they ask themselves the following questions:

  • Does the higher return from the investment come with increased risk? In most cases, the answer is “yes,” FINRA says.
  • Do you thoroughly understand how the investment operates? A number of investments come with an unwanted surprise, such illiquidity, exit fees, loss of principal or the return of the investment in a form other than cash.
  • Are there costs and fees associated with the new investment? Not only is the promise of higher return associated with greater risk, but some of these investments have higher costs, as well.
  • Is the product callable? A callable investment means that after a period of time, the issuer can redeem the investment prior to the investment reaching maturity.
  • Could the new investment be fraudulent? Legitimate investments that promise returns of 30, 50 or even 100% annually without any risk to your principal exist only in fantasy land. To confirm the status of an individual broker or firm, use FINRA’s BrokerCheck. To check the status of an investment adviser or firm, use the Investment Adviser Public Disclosure database.

The bottom line: It’s important to read and understand the fine print about an investment before deciding to put your money into it. In almost every instance, a product that promises high yields and returns also comes with considerably more risk – and a greater potential for financial loss.

To learn more about various investments that investors are turning to as a way to “chase returns,” go to

New FINRA Database Provides More Info About Rogue Brokers

In the wake of soured private placement deals in Medical Capital Holdings and Provident Royalties – as well as other investments gone bad at the hands of rogue brokers – the Financial Industry Regulatory Authority (FINRA) is putting more information about its disciplinary actions online for investors and others to view.

Launched May 17, the new Disciplinary Actions Online database provides access to FINRA complaints filed against firms and individual brokers, settlement agreements and decisions by FINRA arbitration panels. In the past, anyone wanting information about those items had to contact FINRA directly.

The new and improved database will provide enhanced functionality, allowing users to conduct searches by broker or firm name, timeframe, key words and case numbers.

The database also includes pending complaints that FINRA has filed against firms and brokers. As reported May 18 by Investment News, this feature alone could make pending complaints easier to find, compared to the multistep process needed to locate pending actions disclosed on FINRA’s BrokerCheck system.

Beginning June 15, FINRA’s monthly disciplinary action summaries will contain links to corresponding documents in the new disciplinary database.

FINRA Fines, Disciplines Executives Over Private Placement Deals

Top executives of various broker/dealers that sold private placements in Medical Capital Holdings and Provident Royalties have been fined and sanctioned by the Financial Industry Regulatory Authority (FINRA).

Among the executives cited for failing to conduct a reasonable investigation of private placement sales offered by Medical Capital Holdings and/or Provident Royalties:

· Robert Vollbrecht, Workman Securities’ former President. Vollbrecht was barred in any principal capacity and fined $10,000.

· Timothy Cullum, former Chief Executive Officer, and Steven Burks, former President of Cullum & Burks Securities of Dallas, Texas, a now-defunct firm. Both men were each suspended in any principal capacity for six months and fined $10,000.

· Jeffrey Lindsey and Bradley Wells, two former executives with Capital Financial Services. Lindsey and Wells have been suspended for six months in any principal capacity and fined $10,000.

· Jay Lynn Thacker, former Chief Compliance Officer for Meadowbrook Securities, LLC (aka Investlinc Securities, LLC). Thacker was suspended for six months in any principal capacity and fined $10,000.

· David William Dube, former Owner, President, Chief Compliance Officer and Anti-Money Laundering (AML) Compliance Officer of (now-defunct) Peak Securities Corporation. Dube was barred for failing to conduct adequate due diligence, as well as a failure as AML Compliance Officer to detect, investigate and report numerous suspicious transactions in 10 customer accounts where “red flags” existed.

According to FINRA, without performing proper due diligence, the broker/dealers that sold the private placements could not identify and understand the inherent risks of the offerings. Moreover, the sanctioned principals did not have reasonable grounds to allow the firms’ registered representatives to continue selling the offerings despite the red flags that existed regarding the private placements.

Merrill Lynch Settles SEC Fraud Charges

On Jan. 25, the Securities and Exchange Commission (SEC) charged Merrill Lynch with civil securities fraud for “misusing customer order information” to place proprietary trades and for charging customers undisclosed trading fees.

Without admitting or denying the charges, Merrill has agreed to pay a $10 million fine and consent to a cease-and-desist order.

According to the SEC, the infractions occurred between 2003 and 2005 on Merrill Lynch’s proprietary equity strategy desk, which traded for the firm’s benefit and had nothing to do with executing customer orders. Merrill’s trading desk was located on its main equity trading floor in New York, where market makers received and executed customer orders.

The SEC says Merrill’s equity strategy traders had access to institutional customer orders and used that access to place trades on Merrill’s behalf after the customer trades were made. The SEC went on to say that this misuse of information was contrary to claims by Merrill Lynch to customers that orders would be maintained on a strict need-to-know basis.

“Investors have the right to expect that their brokers won’t misuse their order information,” said Scott W. Friestad, Associate Director in the SEC’s Division of Enforcement. “The conduct here was clearly inappropriate. Merrill’s proprietary traders had improper access to information about the firm’s customer orders, and misused it to place trades on the firm’s behalf.”

The SEC’s order also found that between 2002 and 2007 Merrill had agreements with certain institutional and high net-worth customers that Merrill would only charge a commission equivalent for executing riskless principal trades. However, in some instances, Merrill also charged customers undisclosed mark-ups and mark-downs by filling customer orders at prices less favorable to the customer than the prices at which Merrill purchased or sold the securities in the market.

Bank of America acquired Merrill Lynch in 2009 in a $20 billion deal forged with the help of government bailout dollars during the height of the financial crisis in 2008.

SEC Charges West End Investment Firms, Top Officers With Fraud

The Securities and Exchange Commission (SEC) has charged three New York investment firms – West End Financial Advisors LLC, West End Capital Management LLC, Sentinel Investment Management Corp. – and four senior officers – William Landberg, Kevin Kramer, Steven Gould and Janis Barsuk – of conning investors into believing their money was invested in stable, safe investments designed to provide steady streams of income. In reality, West End was in the throes of a deepening financial crisis stemming from failed investment strategies.

The misconduct reportedly occurred from at least January 2008 to May 2009, the SEC says.

“The investment advisers here grossly abused the trust of their clients,” said George S. Canellos, Director of the SEC’s New York Regional Office. “They misappropriated and commingled their clients’ assets and sustained the illusion of a viable and successful business through a range of false representations.”

David Rosenfeld, Associate Director of the SEC’s New York Regional Office, added, “West End raised millions from investors by touting false positive returns while concealing fraudulent bank loans, cash flow problems, and the misappropriation of investor assets.”

In its complaint, the SEC alleges that Landberg used substantial amounts of fraudulently obtained bank loans to make distributions to certain West End fund investors, thereby creating the false impression that West End’s investments were performing well. During the same period, Landberg also misappropriated at least $1.5 million for himself and his family. Landberg’s wife, Louise Crandall, and their family partnership are named as relief defendants in the SEC’s complaint.

The SEC further alleges that Gould and Barsuk knew, or were reckless in not knowing, that Landberg was defrauding the bank that provided loans to a West End fund by misusing funds in a related interest reserve account. Both officers nevertheless participated in the fraud by facilitating Landberg’s misappropriations from that account, the SEC says.

The SEC also alleges that Gould conceived and used improper accounting methods to conceal aspects of the fraud, as well as issued account statements to investors showing false investment returns. Barsuk facilitated Landberg’s uses of investor money to cover his personal obligations.

Similarly, Kramer knew, or was reckless in not knowing, that West End faced severe financial problems and had difficulty obtaining sufficient financing to sustain its investment strategy. Kramer failed to disclose those material facts to investors as he continued to market the funds to new and existing investors through April 2009.

Top of Page