Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | oil and gas schemes

Jun/11

8

Provident Private Placement Paper Trail Lands on Fidelity’s Doorstep

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In an article from InvestmentNews.com, June 7, 2011, Bruce Kelly writes that the litigation stemming from a series of oil and gas private placements that failed two years ago have now ensnared a giant in the clearing and custody business, National Financial Services LLC, a unit of Fidelity Investments.

The trustee overseeing the liquidation of assets of Provident Royalties LLC, which the Securities and Exchange Commission charged with fraud in 2009, last month requested that a federal judge in Dallas issue a subpoena to National Financial. In the court filing, the trustee wants access to retirement account documents of clients of four broker-dealers that sold preferred stock of Provident and used National Financial as a clearing firm.

Bruce Kelly writes that dozens of broker-dealers sold the Provident offerings from September 2006 to January 2009, raising $485 million. Regarding National Financial records, the trustee wants documents of 579 clients who bought $39.1 million of Provident from four firms: J.P. Turner & Co. LLC, Milkie/Ferguson Investments Inc.,National Securities Corp. and Securities America, Inc.

A spokesman for National Financial, said the firm typically does not comment on matters involving its correspondent clearing, broker-dealer clients. Clearing firms do not sell securities but rather hold them for broker-dealers and their clients.

The InvestmentNews.com article goes on to say that calling Provident a “massive Ponzi scheme,” the trustee claimed that the “trustee is entitled to information concerning the relationship between the broker-dealers and their respective clearing houses, and how those funds were transferred, paid for and accounted for by the clearing houses,” the court filing stated.

“As custodial fiduciary, [National Financial] should have agreements with the various broker-dealers they did business with and records for every dollar that went through their controlled account,” according to the filing.

Last year the trustee sued dozens of broker-dealers to claw back revenue and commissions from the sale of Provident.

If you feel you have been an alleged victim of these or other broker-dealers and were sold Provident Royalties private placements, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Apr/11

19

Pinnacle Partners and Brian Alfaro Suspended by FINRA

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WASHINGTON — From an article on FINRA’s website, The Financial Industry Regulatory Authority (FINRA) announced today that it has suspended indefinitely Pinnacle Partners Financial Corporation, of San Antonio, TX, and its President, Brian K. Alfaro, for failure to comply with a FINRA Temporary Cease and Desist Order prohibiting their fraudulent misrepresentations. The suspension resulted from FINRA’s Notice of Suspension that alleged that Pinnacle and Alfaro had continued to make fraudulent oral and written misrepresentations and omissions in connection with their offer and sale of certain oil and gas joint interests, and had otherwise failed to comply with the terms of the Temporary Order FINRA issued on January 21, 2011.

It was reported that FINRA filed a complaint against Pinnacle and Alfaro on Dec. 3, 2010, alleging that Alfaro and Pinnacle operated a “boiler room” in which numerous brokers placed thousands of cold calls on a weekly basis to solicit investments in oil and gas drilling joint ventures Alfaro owned or controlled. The complaint further asserts that Pinnacle raised more than $10 million from over 100 investors, and that Alfaro diverted some of the customer funds for unrelated business and personal expenses. The hearing on these allegations will be Sept.12, 2011, at which time the Hearing Panel will consider the merits of these claims and whether to order additional penalties.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, said, “Brian Alfaro and Pinnacle pose a serious risk to the investing public. Even after the issuance of a Temporary Cease and Desist Consent Order, Alfaro and Pinnacle continued to market oil and gas offerings through material misrepresentations, with the intent to deceive investors.”

Pinnacle and Alfaro included numerous misrepresentations and omissions in the investment summaries for the offerings as charged by FINRA, including grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns and estimated monthly cash flows. Pinnacle and Alfaro deliberately attempted to mislead investors by deleting unfavorable information from well operator reports and providing them with doctored maps, which omitted numerous dry, plugged or abandoned wells near their projected drilling sites. Also, according to the complaint, Alfaro’s misuse of customer funds included attempts to retain the grossly inflated “drilling costs,” which were funds Alfaro obtained by convincing customers to allow him to transfer their money into other fraudulent offerings. In another instance, Alfaro collected more than $500,000 in subscription costs for a well that was never drilled, and used those funds for unrelated personal and business expenses.

This article was obtained on FINRA’s website. 

If you feel you have been a victim of these alleged fraudulent schemes of  Pinnacle Partners Financial Corporation and Brian Alfaro, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Dec/10

9

Cease-and-Desist Ordered by FINRA to Halt Ongoing Fraud and Misuse of Funds by Pinnacle Partners and its President Brian Alfaro

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WASHINGTON — On December 3, 2010, FINRA announced that it filed a notice seeking a Temporary Cease and Desist Order (TCDO) against San Antonio-based brokerage Pinnacle Partners Financial Corporation and its President, Brian K. Alfaro. The TCDO would halt allegedly fraudulent and illegal sales activities at the firm relating to eight unregistered private placement offerings selling interests in oil and gas joint ventures. FINRA is seeking the order based on belief that customer harm and depletion of customer assets will likely continue before a formal disciplinary proceeding against Pinnacle and Alfaro can be completed.

 FINRA alleges that from August 2008 to the present Alfaro and Pinnacle have operated a “boiler room” in which numerous brokers place thousands of cold calls every week to solicit investments in Alfaro’s oil and gas drilling joint ventures. The operators of the ventures are entities owned or controlled by Alfaro. Through the boiler room Alfaro and Pinnacle have raised more than $10 million from over 100 investors for offerings that are alleged to materially misrepresent or omit material facts. In addition, FINRA charges Alfaro with misusing customer funds by collecting funds from investors for drilling and testing of wells, and then spending those funds for unrelated business and personal expenses.

 FINRA has also charged Pinnacle and Alfaro with the sale of unregistered securities; the destruction of documents and the maintenance of inaccurate books and records; and the failure to report numerous customer complaints.

Additionally, FINRA charges that Pinnacle and Alfaro provided investors with investment summaries for eight separate oil and gas offerings that included numerous misrepresentations and omissions including grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns and estimated monthly cash flows.

Under the FINRA rules, a hearing shall be conducted not later than 15 days after service of the notice and filing that initiates the temporary cease and desist proceeding, unless extended, and the Hearing Panel shall issue a decision not later than 10 days after receipt of the hearing transcript. If the temporary cease and desist order is granted, it will generally remain in effect until the underlying disciplinary action against the firm for this misconduct has been resolved. FINRA may seek to suspend or expel a firm for violating a TCDO.

As to the related underlying complaint, under FINRA rules, the individuals and firms named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible sanctions include a fine, an order to pay restitution, censure, suspension, or bar from the securities industry.

This information was obtained from FINRA’s website.

If you feel you have been a victim of these alleged fraudulent schemes of  Pinnacle Partners Financial Corporation and Brian Alfaro, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Aug/10

9

Florida’s Office of Financial Regulation releases 2010 Top 10 Investor Traps

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Florida –On August 4, 2010 the Florida Office of Financial Regulation (OFR)released the 2010 list of most commonly used cons or traps investors should avoid.  Regulators found as the impact of the financial crisis continues along Main Street, investors seeking to jump-start their investment portfolios are most vulnerable and need to be wary of these popular scams.

“Investors should remember the speculative investments promising high returns are most often the ones that turn their hard-earned money into thin air,” said OFR Commissioner J. Thomas Cardwell.  “We need to warn consumers not to be lured into get-rich-quick schemes.  If it sounds too good to be true, or promises large returns in a short period of time, thoroughly investigate the investment and the person and firm selling them before investing.”
The article went on to say that Commissioner Cardwell strongly encourages investors to familiarize themselves with the warning signs of investment fraud and independently verify any investment opportunity, as well as the background of the person and company offering the investment.  OFR’s Division of Securities can provide detailed information about a firm’s, broker’s or investment adviser’s employment and disciplinary history.  Investors should call OFR at 1-800-848-3792 for additional information.  In addition, investors should learn as much as possible about the firm, individuals and investment so that they can be comfortable with and fully understand the deal and its risks. 
“Knowledge, attention to detail and a healthy sense of skepticism are a triple threat to fight investment fraud,” said Franklin L. Widmann, OFR’s Director of the Division of Securities.   “The Division and other state securities regulators can provide the public with detailed background information about those who sell securities or give investment advice, as well as about the products being offered.  The more you are prepared, the better your chance of sidestepping a trap that can leave you in a financial hole for many years.”
 
Top 10 Investor Traps from Florida’s OFR
The following products and practices deserve special scrutiny:
   
Products
• Exchange-Traded Funds (ETFs). While ETFs resemble mutual funds in many respects, some, such as leveraged and inverse ETFs, may contain hidden traps and complexities, and may consist of highly leveraged bundles of exotic financial instruments, including options and other derivatives. Given their potential for volatility, leveraged ETFs may not be suitable for most retail investors. These types of ETFs are primarily designed for short-term trading (such as day-trading), and not for buy-and-hold strategies. Also be aware that some ETFs are thinly traded and may not always be liquid.
• Foreign Exchange Trading Schemes. Currency trading and foreign exchange (forex) trading schemes can be particularly harmful to unsuspecting investors. Trading in foreign currencies requires resources far beyond the capacity of most individual investors. Promoters profit by charging high commissions or selling investment strategies assuming that trades are actually made.  In some instances, salesmen and promoters who claim to have complex algorithms or propriety software programs which allow them to beat the market are actually just running Ponzi schemes. Too often, state regulators have encountered situations where there are no trades; the money is simply stolen.
• Gold and Precious Metals. High gold prices have trapped some investors in gold bullion scams in which a seller offers to retain “purchased” gold in a “secure vault” and promises to sell the gold for the investor when it gains in value. In many instances the gold does not exist. Investors have also been harmed by promoters pitching investment pools in precious metal commodities and gold mines.
• Green Schemes. Investment opportunities tied to the development of new energy-efficient “green” technologies are increasingly popular with investors and scammers alike. Scammers also exploit headlines to cash in on unsuspecting investors, whether from investments related to the clean-up of the Gulf of Mexico oil spill or the rising national interest in environmental innovations tied to “clean” energy, such as wind energy, wave energy, carbon credits and other alternative energy financing.
• Oil & Gas Schemes. Regardless of the price at the pump, fraudulent energy promoters continue to capitalize both on interest in the commodity and on oil and gas as investment alternatives to the stock market. Oil and gas investments tend to be highly risky and unsuitable for traditional, smaller investors who cannot afford the risk. Securities investments offering profit participation in oil and gas ventures can be legitimate, but even when the underlying project is genuine, any revenues realized can be absorbed by high sales commissions paid to the promoter and dubious “expenses” skimmed off by the managing partner. Some promoters, many of whom have had past run-ins with regulators, have attempted to structure their “joint ventures” or “general partnerships” to avoid securities regulation and deprive investors of important protections.
 
Practices

• Affinity Fraud. Scam artists have found it lucrative to abuse membership or association with an identifiable group to convince a potential investor to trust the legitimacy of the investment. Typical affinity groups include religious, ethnic, professional, educational, language, age and any other group with shared characteristics that allow investors to trust members of the group. Rather than trusting a person or company due to a common affiliation, investors should seek further information about the investment from an unbiased, independent source and review both the promises and risks.
• Undisclosed Conflicts of Interest. When obtaining investment advice about securities, investors need to know that not all advice is given with their best interest at heart. Some salespeople can receive lucrative commissions when they sell a product that is risky or inappropriate for an investor, but don’t have to disclose that financial incentive. Investors should demand that anyone giving advice or recommendations disclose how they are compensated.
• Private or Special Deals. Some investors encounter investment opportunities or deals couched as “private” or only for “special” clients. While securities laws do offer businesses the opportunity to raise capital by selling securities to a relatively small number of investors in a non-public offering, these securities are not subject to the same review as others. Many state securities regulators have seen continued or increased abuse of fraudulent private offerings made under federal exemptions or not regulated at all. Although properly used by many legitimate issuers, private offerings have become an attractive option for con artists looking to steal money from investors by promoting the special or private nature of these schemes and by making false and misleading representations.
• “Off the Books” Deals. “Off the books” sales are an increasingly common threat to investors. Be cautious if your broker offers an investment on the side instead of one sold through his or her employer. These “off books” investments may not only be illegal, but they can also be especially risky without the oversight and supervision of the broker’s employer.
• Unsolicited Online Pitches. Promoters of fraudulent investment schemes are moving beyond e-mail and turning to social media and online communities, such as Facebook, Twitter, Craigslist and YouTube to solicit unsuspecting investors. Some may use these sites to spread misinformation to artificially inflate the value of stock before selling in a “pump and dump” scheme. Others may promise high-yield, tax-free returns from investments in offshore markets. Once the money is sent to another country and is in someone else’s control, investors may not be able to get it back. In many cases, these offers turn out to be Ponzi schemes. Investors should approach any unsolicited investment opportunity with suspicion.
“Investors should do business with licensed brokers and advisers and should report any suspicion of investment fraud to OFR’s Division of Securities,” Cardwell said. “One call can protect your financial security and might prevent others from becoming victims.”
This very valuable information was obtained from the Florida OFR’s website.
Call a FINRA Securities arbitration lawyer for a free consultation on how to recover stock losses and securities losses.  Call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC. Representing investors nationwide before FINRA and the NFA.

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