Merrill Lynch fined for late U5 filing

The U-5, the Uniform Termination Notice, is an important part of the information flow in the securities industry.  When a Registered Representative leaves a firm, a U-5 must be filed.  The firm has 30 days to do so.  Most firms have procedures in place to timely file a U-5.

Merrill Lynch, I am sure, has such procedures.  But those procedures were apparently missed when it came to a Missouri broker named Greg Campbell.  The firm received two complaints alleging theft from customer accounts.  Firms do not tolerate theft from customer accounts.

But when Mr. Campbell left Merrill Lynch and joined LPL, it took the firm a year to notify FINRA of the complaints.  That led to Campbell’s termination at LPL.  But I am sure that LPL would not have hired him in the first place had they known about the complaints.  And that would have avoided $500,000 of theft, the amount reported by the Wall Street Journal that was stolen from LPL customers.  This is on top of the $1.7 million stolen from Merrill Lynch customers.

I have seen situations like this before.  I’m wondering if LPL will go after Merrill Lynch for its failure to timely report, arguing that had Merrill Lynch reported the two complaints, LPL would not have hired the thief and not paid out $500,000 in restitution.  I guess we’ll see.  But it will be in arbitration, so maybe we won’t see unless a decision is reported.

That’s the view of one lawyer from beautiful Jupiter, Palm Beach County, Florida.  I’m Marc Dobin and I’m looking at blue skies outside my window.

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A Senior Citizen Scam “-” Michael Lieberman at 866-883-2294 who claims to be from a law firm.

I am not the only lawyer in my family.  My sister, Andrea, is a bankruptcy lawyer in New Jersey.  My dad is a retired lawyer after having practiced 40 years with one firm in Pennsylvania.  I have three other members of the extended family who are lawyers in Florida.  But this post is about my dad.

He’s been getting phone calls from an outfit claiming that they have to serve papers on him.  They have left him messages to call them.  The last message was from a Michael Lieberman (probably not his real name) from a law firm somewhere in the United States (I guess).  Dad smelled a rat and was ignoring them.  I called the number “Michael Lieberman” left 866-883-2294.  A woman answered the phone.

I identified myself as a lawyer and asked to speak to Michael Lieberman.  I was told he was “in court.”  I asked where I was calling.  I was told “Washington.”  I asked if it was the State of Washington or the District of Columbia.  There was a pause, then she said the state.  I asked if she was in Seattle and she hesitantly agreed that she was there.  (I’m skeptical, by the way)  I asked for the name of the law firm.  She said “Feldman & Feldman”  Ah-ha, I thought, now we’re on to something.  So while I was talking to this woman, I went to Google and looked for Feldman & Feldman in Washington.

Surprise! No Feldman & Feldman in Washington state.  No Michael Lieberman in Washington state. She “brought up” my dad’s account.  She had the last four digits of his Social Security number.  I asked for the specifics.  She said that he owed HSBC some money and that he could pay it or they would “serve him with a judgment.”  I told her that he hasn’t had an account with HSBC and before they could “serve hims with a judgment” they would need to serve him and prove that he owed the money.  (They would also have to go through me, which she may have figured out.) I explained to her that it was not that simple.  And since she was in “Washington” it wasn’t going to happen overnight.  We got “disconnected.”

I called back.  I tried to resume the conversation.  We got “disconnected” again.  I was starting to feel like she didn’t want to talk to me any more.

I called again.  This time I was sent to voice mail.  I can’t remember if I left a message.

So, “Michael Lieberman” from Feldman & Feldman in Seattle, Washington, if you’re out there and reading this blog.  Call me.  We should talk.

And if you get a call from Michael Lieberman who leaves the number 866-883-2294, tell him I’m waiting for a call back.  I won’t be holding my breath.

That’s the view of one “fraud-fighting” lawyer in Jupiter, Palm Beach County, Florida.  I’m Marc Dobin (and not Elliot Ness).

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SEC files insider trading charges involving Post-it note eating.

OK, here’s a tip.  If you feel compelled to eat Post-it notes or napkins because you don’t want someone to know what you’re doing, your conduct is probably bad.  Apparently, the “middleman” in this insider trading scheme didn’t see anything wrong with consuming office supplies.  He sure didn’t see it as an indication of illegal activity.

The SEC charged two people, a law firm employee and a registered representative, with insider trading.  The law firm employee would allegedly disclose to the middleman the names of companies that he learned about from the firm’s files.  The middleman would then, allegedly, write the ticker symbol on a Post-it or a napkin, show it to the stockbroker, then chew up and/or swallow the piece of paper.  Ick.

The broker is then alleged to have concocted a paper trail showing the reasons for a recommendation to buy the tipped stock.  He also is alleged to have made this recommendation to a number of unsuspecting clients who just thought he was a good stock picker.  Wrong.

Oddly, the Post-it note eating middleman has not been charged.  Maybe eating Post-it notes was punishment enough.  I hope he used the small ones.

So the SEC figured out the little scheme, it claims.  FINRA got credit in the press release.  No word on whether they recovered any of the Post-it notes.

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Madoff Trustee victorious in calculating “profits”

The New York Times reports that Irving Picard, the SIPC trustee in the Bernard Madoff Securities liquidation, was successful in justifying his method of validating claims. His method, which uses the traditional “cash-in, cash-out” methodology, is one that has been used time and time again.

On the other hand, there were people who felt that, even though they had gotten some, or all, of their money back from Madoff, they were entitled to the values contained on their account statements, no matter how false. I was surprised to hear this theory has been used since it doesn’t make any sense to me. In fact, it would encourage people to believe whatever is told to them, rather than be diligent in their choice of advisors and investments. One could conceive a scenario where a fraudster conspired with “victims” to inflate values and let SIPC pay out. That doesn’t make any sense.

I said it when I was writing The Law Planet Blog, and I’ll say it again, there’s no free lunches, people. Bernie Madoff got away with this for so long because no one asked the simple question of “how does he do it when nobody else can?” No one, except for Harry Markopoulos, was willing to say that the Emperor was wearing no clothes. And that fell on deaf ears.

Mr. Picard’s lawyer says he expects the other side to appeal. It’s unlikely that the appeal will be successful, in my opinion.

But that’s the opinion of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin and what do I know?

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