Dow Corning Corp. has filed another ARS lawsuit - this one against Merrill Lynch over a $166 million loss in auction rate securities. The lawsuit, filed Nov. 20, alleges that Merrill Lynch misled the silicone supplier about the safety and liquidity of the instruments and the ARS market, which collapsed in February 2008.

This is the second lawsuit that Dow Corning has filed over losses in auction rate securities. The first complaint was filed Nov. 7 against BB&T Corp. and alleged that the North Carolina bank falsely represented the safety and liquidity of $667 million in auction rate securities that Dow previously purchased. According to the complaint, Dow bought the ARS bonds from 2005 to February 2008 after BB&T touted the investments as a “highly liquid, highly rated and secure investments that were equivalent to cash.”

The latest lawsuit involving Merrill Lynch is Dow Corning Corporation et al v Merrill Lynch & Co, U.S. District Court for the Southern District of New York, No. 09-9697.

Tell us about your situation with auction rate securities by leaving a message in the Comment Box below or via the Contact Us form. You may have a viable claim for recovery of your investment losses.

Schwab YieldPlus investors have approximately 30 days to opt out of a class action lawsuit involving the Schwab YieldPlus Fund Select Shares (SWYSX) and the Schwab YieldPlus Investor Shares (SWYPX). Investors who do not opt out by the deadline of Dec. 28, 2009, will be bound by the final outcome of the class action.

Investors are considered part of a class action unless they formally request exclusion. For individuals who suffered significant financial losses in their Schwab YieldPlus investments, this decision needs to be weighed carefully. Class action representation can often be an attractive legal option when individual financial losses are small. In other instances, however, filing an individual claim with the Financial Industry Regulatory Authority (FINRA) may be more economically viable. Investors should consult with legal counsel to thoroughly review all of their options.

When Schwab first advertised the Schwab YieldPlus Funds, they were characterized as a safe alternative to money market accounts, with the intent to preserve capital while generating income at relatively low risk. Ultimately, those representations did not pan out. Instead, evidence shows that the YieldPlus Funds contained more than 45% of toxic mortgage- and asset-backed securities.  As a result, investors were exposed to not only more risk but also the potential for more financial losses.

Many investors have filed arbitration claims with FINRA, alleging that Charles Schwab misrepresented the YieldPlus Funds and failed to disclose crucial details about their large and inappropriate concentration in mortgage-related holdings. As reported Oct. 14 by Investment News, Schwab stated in July that it had paid $21 million in the first half of the year to settle client complaints and arbitration claims related to YieldPlus investments.

For more information about the Dec. 28 deadline to opt out of the Charles Schwab class action or if you are an individual or institutional investor and have questions about your Schwab YieldPlus investments, please contact us at 866-827-6537.

Tell us about your situation with Schwab YieldPlus Funds by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

Wells Fargo & Co. will refund $1.4 billion in non-liquid auction rate securities to investors, charities and small businesses nationwide, including about $700 million to California investors. The agreement, which was reached Nov. 18 with the California Attorney General’s Office, puts to rest a California fraud lawsuit that alleged Wells Fargo misrepresented auction rate securities to thousands of investors as safe-as-cash investments.

As part of the settlement agreement, the bank also will pay a $1.9 million fine, plus legal costs and future monitoring expenses incurred by the attorney general’s office.

In April, California Attorney General Edmund G. Brown, Jr. sued three Wells Fargo investment subsidiaries, accusing them of securities fraud by convincing investors to purchase auction-rate securities with false promises of healthy returns and liquidity. The company also was charged with failing to supervise and train its sales agents and selling unsuitable investments.

When the market for auction rate securities collapsed in February 2008, those same investors suddenly found themselves holding essentially worthless investments.

The North American Securities Administrators Association also had launched an inquiry of the Wells Fargo subsidiaries over sales of auction rate securities.

“Wells Fargo convinced thousands of investors to purchase auction rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold,” the California attorney general said in announcing the agreement with Wells Fargo. “Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”

Wells Fargo joins more than a dozen brokerages and investment firms that entered into settlement agreements with regulators to buy back auction rate securities from investors. To date, companies have agreed to repurchase approximately $61 billion of the risky investments.

Tell us about your situation regarding auction rate securities by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

Dow Corning, the world’s biggest silicone supplier, is suing BB&T Corp. over allegations the North Carolina bank falsely represented the safety and liquidity of $667 million in auction rate securities that Dow has been unable to sell. According to Dow’s complaint, it bought the auction rate bonds from 2005 to February 2008 after BB&T touted the instruments as a “highly liquid, highly rated and secure investments that were equivalent to cash.”

Problems for investors holding auction rate securities reached a fever pitch in February 2008 when the $330 billion ARS market came to a standstill after brokerages abandoned their support for the instruments. Meanwhile, individual investors and institutional investors were left stranded, unable to sell their so-called cash-like investments.

As reported Nov. 6 by Bloomberg, Dow’s complaint accuses BB&T and its Scott & Stringfellow broker/dealer unit of fraud, breach of fiduciary duty, negligent misrepresentation and omissions, and violations of the Michigan Uniform Securities Act.

Tell us about your situation with auction rate securities by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

A Morgan Keegan lawsuit involving 26 Alabama residents who allege the Memphis-based firm misled them about the risks of several collapsed RMK bond funds that invested in mortgage-backed securities is headed back to state court. The story was first reported Nov. 13 by Law360.

The investors initially filed their lawsuit in August, naming Morgan Keegan - a subsidiary of Regions Financial Corp. - and two of the brokerage’s financial advisers as defendants. The investors in the case are seeking $1 million in restitution, as well as some $3 million in punitive damages.

Morgan Keegan apparently opposed the move back to state court, according to the Law360 article, claiming the plaintiffs had relied on “legal gymnastics” to avoid referencing substantial issues of federal law - including the federally regulated mutual funds at the heart of the dispute - in their complaint.

Judge Myron H. Thompson of the U.S. District Court for the Middle District of Alabama disagreed with Morgan Keegan’s arguments and granted the plaintiffs’ motion to remand the suit last week.

The plaintiffs in the Alabama case are in the same boat as many investors who once placed their money in certain Morgan Keegan bond funds based on assurances that the bonds were safe and diversified investments. Instead, the funds were over-concentrated in risky mortgage-backed securities. In the summer of 2007, when the housing market began its downward spiral, several of the RMK bonds suffered a massive meltdown.

As reported earlier this summer by the Birmingham Business Journal, investors in the RMK funds cried foul, contending the “safe” investments that Morgan Keegan had sold them essentially were now worthless. Hundreds of arbitration claims against Morgan Keegan soon followed, along with several class-action lawsuits.

Morgan Keegan’s bonds were fat with some of the “worst pieces of structured finance deals,” on the market, said securities expert Craig McCann of Virginia-based Securities Litigation & Consulting Group in the May 1 Birmingham Business Journal article.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

The acquittals of Ralph Cioffi and Matthew Tannin, two former Bear Stearns hedge fund managers, may portend a dramatic shift in the way prosecutors approach similar cases involving allegations of securities fraud. In particular, they will likely be more prone to rethink the importance and value of getting the right experts on board.

It was the testimony by expert witnesses that apparently swayed the jury in the Cioffi/Tannin trial. As reported in a Nov. 11 article by the Wall Street Journal, one jury member, Aram Hong, said she looked at Cioffi “as the captain of a sinking ship who tried to do whatever he could to save it.” Her reasoning was aided via testimony by the defense’s expert witnesses and, in particular, of R. Glenn Hubbard.

According to the Wall Street Journal article, Hubbard, the dean of Columbia University’s business school, testified that he had reviewed data about the collapsed Bear Stearns hedge funds and reached the conclusion that Tannin and Cioffi could, in fact, reasonably expect the funds to return to profitability.

Prosecutors, meanwhile, had argued that the two men knowingly deceived investors about the fiscal health of the funds and that they were well aware the mortgage-related funds were headed for trouble. Ultimately, losses in the funds cost investors about $1.6 billion and launched the near demise of Bear Stearns itself. The firm avoided bankruptcy when it was bought out by JPMorgan Chase & Co.

As evidenced by the verdict, the jury rejected prosecutors’ line of thinking regarding Cioffi and Tannin.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

Former Bear Stearns managers Ralph Cioffi and Matthew Tannin were found not guilty on charges they lied to investors who lost $1.6 billion in two failed hedge funds in the summer of 2007. The jury deliberated less than a day before reaching its verdict.

As reported Nov. 10 by Bloomberg, the Cioffi/Tannin trial is the first criminal trial to result from the government’s probe into the collapse of the housing market. That event is said to have cost investors nearly $400 billion and trigger a global breakdown of the world’s financial markets.

Cioffi and Tannin faced as many as 20 years in prison on charges of conspiracy, securities fraud and wire fraud.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

Institutional and individual investors failed to emerge victorious in two recent auction rate securities arbitration claims against Citi Smith Barney and Raymond James Financial. As reported Nov. 9 by Investment News, a Miami FINRA (Financial Industry Regulatory Authority) panel denied claims brought by the Banco Industrial De Venezuela against Smith Barney in October. That same month, a Texas FINRA panel denied an investor’s claim involving more than $10 million worth of auction rate securities purchased from a Raymond James broker in 2006 and 2007.

For more than a year, thousands of retail and institutional investors have struggled to find a solution to their auction rate securities (ARS) woes. The problems began in February 2008 when the once $330 billion ARS market abruptly came to a standstill, leaving investors who thought their money was as liquid as cash in dire financial straits.

Following the collapse of the auction rate securities market, a number of state and federal investigations ensued. The result of those investigations led to allegations that many Wall Street firms aggressively marketed and sold auction rate securities as liquid cash investments, while failing to tell investors about the considerable risks associated with the instruments and the fact that the auctions for the securities could fail.

A number of Wall Street brokerage firms have since announced ARS buy back programs, agreeing to repurchase their clients’ auction-rate investments. In total, more than 20 firms - including Citigroup, Wachovia, Morgan Stanley, UBS, Goldman Sachs, Bank of America, TD Ameritrade, Fidelity Investments and Merrill Lynch, have agreed to repurchase $61 billion of the instruments from some customers.

In the recent case involving Raymond James Financial, it’s worth noting FINRA’s explanation of its decision (FINRA No. 08-03386) in the case. The panel’s findings state that Raymond James broker Rick Woolfolk “was poorly trained with respect to the ARS product. At various times, he described the investment as a unit trust, short-term paper or short-term stuff.”

The panel also noted that it was unclear whether the investor who purchased the auction-rate securities from Raymond James Financial was aware of the risks of failed auctions when he directed the initial purchase of the instruments. It was only after the purchase that Raymond James disclosed the risks of the products, according to the panel’s findings.

Despite denying all relief to the claimant, the FINRA panel said it remained “troubled by the inadequate training and other firm-related deficiencies” on the part of Raymond James Financial. Forum costs totaling $7,000 were assessed to Raymond James.

Meanwhile, investors continue to fight their ARS battles by filing individual arbitration claims against the brokerages that sold them investments in auction rate securities. As reported in a Nov. 8 article in the New York Times, almost 500 auction-rate securities claims have been filed by investors with FINRA following the collapse of the ARS market. A total of 253 are pending; 242 have been closed.

Seventeen claims have gone to a final hearing. Of those, investors won in four cases; a $400 million award was handed down by a panel in one matter. But 146 of the 242 closed cases were settled by the parties involved in the dispute, the New York Times reports. Settlement terms aren’t made public, but such deals typically involve refunding much, if not all, of investors’ money, the New York Times article states, citing lawyers who handle the cases.

Moreover, some settlements involve “consequential damages” - additional money awarded to cover investors’ costs of the arbitration proceedings or investment opportunities they missed because they were unable to access to their money.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

For many institutional and individual auction rate securities investors, life remains in limbo. Their investments, once touted by Wall Street as liquid as cash, have proven otherwise, leaving investors with no where to turn.

Before the ARS market seized up, municipalities, closed-end funds, student loan companies, hospitals and other non-profit entities issued auction rate securities in the form of preferred shares or as debt instruments to companies and individual investors. Problems in the $330 billion auction rate securities market came to a head in February 2008, when auctions for the instruments stopped trading. Since then, several of Wall Street’s major brokerage firms have taken steps to redeem their clients’ ARS holdings, or face the wrath of state securities regulators.

Some brokerage firms, including Oppenheimer and Raymond James, have not gone this route, however. This means their clients are essentially in the same position as they were a year ago. In other cases, investors’ efforts to retrieve their money through class action lawsuits are coming up short, according to a Nov. 8 article by Gretchen Morgenson in the New York Times. Judges overseeing at least 23 auction rate class actions have dismissed them in recent months, the article says.

A coalition comprised of 25 companies holding approximately $8 billion in frozen auction-rate securities backed by student loans is trying to draw attention to ARS illiquidity and the broader consequences of what will happen if there’s no solution to make good on the investments. The group contends if companies and individual investors were able to cash in their securities, the result would be an immediate $58 billion to $63 billion of economic stimulus. Currently, the coalition is taking its message to members of Congress and the Treasury Department, as well as other leaders in political and financial circles.

Individual investors, however, typically don’t have this kind of clout or resources. For them, filing an arbitration claim against the brokerage firm that initially sold them their auction rate securities may hold the most promise for resolution. As reported in the New York Times article, almost 500 auction-rate securities claims have been filed by investors with the Financial Industry Regulatory Authority (FINRA) since the collapse of the ARS market. A total of 253 are pending; 242 have been closed.

Seventeen claims have gone to a final hearing. Of those, investors won in four cases; a $400 million award was handed down by a panel in one matter. But 146 of the 242 closed cases were settled by the parties involved in the dispute, the New York Times reports. Settlement terms aren’t public, but such deals typically involve refunding much, if not all, of investors’ money, the article says, citing lawyers who handle the cases.

Moreover, as the New York Times points out, some settlements involve “consequential damages” - additional money awarded to cover investors’ costs or investment opportunities they missed because they didn’t have access to their funds.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options regarding auction rate securities. Tell us about your situation by leaving a message in the comment box or the Contact Us form.

Ralph Cioffi and Matthew Tannin, the two former Bear Stearns hedge fund managers, apparently won’t testify in their own defense in the first criminal trial related to the mortgage meltdown. Both men are accused of securities fraud, with prosecutors alleging they repeatedly lied to investors about the fiscal health of two hedge funds that collapsed amid the mortgage crisis in the summer of 2007. Investors in the funds lost about $1.5 billion.

Among the allegations against Cioffi is that he lied to investors during a conference call in April 2007. On the call, Cioffi reportedly said that, collectively, investors planned to withdraw a “couple million” dollars from the funds. Prosecutors, however, contend Cioffi made the statement only two days after learning one investor, Concord Management LLC, intended to withdraw $57 million.

Closing arguments in the case will begin Nov. 5. If convicted, Cioffi and Tannin could face up to 20 years in prison.

The case is U.S. v. Cioffi, 08-CR-00415, U.S. District Court, Eastern District of New York (Brooklyn).

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options regarding Bear Stearns hedge funds. Tell us about your situation by leaving a message in the comment box or the Contact Us form.