GPB Falsified Financial Documents and Mislead Investors

GPB has had a variety of problems.  It has restated 2015 and 2016 financial statements of certain funds as part of an accounting review.  The firm’s auditor, Crowe LLP, resigned.  The firm is embroiled in litigation with a former employee, Patrick Dibre, who alleges that GPB purposely falsified financial statements and falsely reported to investors that they own certain dealerships.

In addition, Massachusetts announced that it is investigating some 63 broker-dealer firms selling private placements from GPB.  GPB is also named in a class-action lawsuit brought by aggrieved investors.

Recover Investment Losses From GPB Holdings & Automotive

If you were sold investments in GPB Holdings or GPB Automotive, you should consult with an investment fraud lawyer with experience in representing defrauded investors. Call The Doss Firm, LLC toll-free at (855) 534-4581 for a free consultation.

MIAMI June 12, 2019 — As health insurance fraud penetrates America’s healthcare industry to target vulnerable consumers, Miami-based law firm Levine Kellogg Lehman Schneider + Grossman (LKLSG) and Atlanta-based The Doss Firm filed a class action complaint against Health Insurance Innovations (HIIQ), Inc. and Health Plan Intermediaries Holdings, LLC (HPIH) for their role in the Simple Health Plans fraudulent insurance scheme.

The lawsuit alleges HIIQ and HPIH directed, aided and abetted the $150 million fraud perpetrated by Simple Health Plans, a South Florida company that was shut down in October 2018 by the Federal Trade Commission. The lawsuit alleges that HIIQ took part in defrauding hundreds of thousands of vulnerable consumers nationwide, leading them to believe that their limited benefit indemnity plans and medical discount plans were major medical insurance that met the requirements of the Affordable Care Act.

“The scheme carried out by HIIQ and HPIH through Simple Health Plans created devastating consequences for victims nationwide,” said Jason Kellogg, Partner at LKLSG. “These folks thought they were doing the right thing in purchasing health insurance. Instead, they were left mostly uninsured.”

Co-Lead Plaintiff Chris Mitchell of Kansas was left with bills exceeding $40,000 after having surgery to treat an aggressive form of cancer.  Co-Lead Plaintiff Elizabeth Belin of Ohio was billed more than $48,000 in medical expenses because her limited benefit indemnity plan, which she was told was a PPO, did not cover the surgery.

Simple Health was one of the largest brokers for HIIQ, a publicly traded distributor of health insurance and supplemental plans that financed, sold plans through, acted as the third-party administrator for, and provided customer service for Simple Health.

The Federal Trade Commission warned that thousands of potentially unaware victims continue to be charged by HIIQ for plans purchased through Simple Health.

“This scheme victimized the most vulnerable patients across the country,” said attorney Jason Doss, owner of the Doss Law Firm. “The plaintiffs are the consumers that the Affordable Care Act was designed to protect.”

For more information, you can call (855) 534-4581

Complaint below:Belin Complaint

If you were a victim of this alleged fraudulent scheme, we would be interested in discussing representing your interests with the hope and expectation of recovering some or all of your losses.  We will evaluate your case at no charge.

As background, Mr. Sanders’ CRD reveals over 30 customer complaints for the same type of account mismanagement.  On December 26, 2014, Triad Advisors, Inc. terminated and discharged Mr. Sanders for “mismanagement of RIA related accounts” involving options trading.  (“RIA” means “registered investment advisor.”)

Many of Mr. Sanders’ clients were elderly and retired income-oriented investors.  They have suffered substantial losses.  They entrusted their hard earned retirement savings to Mr. Sanders, who, acting with discretionary trading authority, mismanaged their accounts.  Mr. Sanders breached his fiduciary duty by using a “one size fits all” investment strategy with all of his clients without regard to whether it was prudent or suitable.

Leavitt Sanders of West Point, Georgia, is a former licensed stockbroker and investment adviser who operated in Georgia and Alabama.  Mr. Sanders is no longer in the industry for mismanaging the brokerage accounts of numerous clients by excessive trading in high risk investments, including put and call options, and day-trading huge stock positions on margin.  The options and stocks (or stock indices) included Priceline.com, Amazon, the S&P500 Index, NASDAQ-100 Index.

Mr. Sanders was registered with Financial Network Investment Corporation (“Financial Network”) from November 1998 through October 2008; Invest Financial Corporation (“Invest Financial”) from October 2008 through January 2014; and Triad Advisors, Inc. (“Triad Advisors”) from January 2014 to December 2014.  While still with Invest Financial, Mr. Sanders switched clearing firms from Pershing to TD Ameritrade in May 2013.  Mr. Sanders was also the owner-operator of two investment advisory firms – Sanders Yearian Advisory Group, Inc. and Leavitt Financial Group, Inc. – and was associated with Capital Asset Advisory Services, LLC.

Judith Shaw, the NASAA President and Maine Securities Administrator, said, “Working together we can and will close the holes in our safety net of support and protection for vulnerable adult investors.”

The model entitled “An Act to Protect Vulnerable Adults from Financial Exploitation” has four key objectives:

1. Require qualified employees of broker-dealers and investment advisors who reasonably believe that someone has been exploited to promptly notify Adult Protective Services (APS) and their state securities regulator, as well as a third party designated by the vulnerable adult as long as the party is not suspected of be participation in the exploitation.
2. Allow delay of disbursements from an account of a vulnerable adult if financial exploitation is suspected.
3. Allow qualified employees—any agent, investment adviser representative or person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or investment advisor—to provide relevant records regarding suspected or attempted financial exploitation to relevant authorities.
4. Provide immunity from administrative or civil liability for broker-dealers and investment advisors for taking actions permitted under the act.

This act applies to individuals 60 and older as well as people protected under APS.

“Putting customer interests first: A central failing FINRA has observed is firms not putting customers’ interests first. The harm caused by this failure may be compounded when it involves vulnerable investors (e.g., senior investors) or a major liquidity or wealth event in an investor’s life (e.g., an inheritance or Individual Retirement Account rollover). Poor advice and investments in these situations can have especially devastating and lasting consequences for the investor. Irrespective of whether a firm must meet a suitability or fiduciary standard, FINRA believes that firms best serve their customers – and reduce their regulatory risk – by putting customers’ interests first. This requires the firm to align its interests with those of its customers.”

This central failing is related to, and sometimes caused by, the other four recurring problem areas that FINRA identified: firm culture; supervision, risk management and controls; product and service offerings; and conflicts of interest. “Many of the problems we have observed in the financial services industry have their roots in firm culture” – i.e., a poor culture in which top management tolerates or even encourages improper sales practices and lax supervision. Fee and compensation structures that incentivize brokers to push certain products continue to lie at the heart of many conflicts of interest, according to FINRA. For example, high-commission, complex investment products with misleading “teaser rates” are often sold to investors by brokers who do not fully understand the risks of the product, and, therefore, do not disclose those risks to the investor.

The financial services industry, by and large, has not addressed these problems to the satisfaction of its own self-regulatory organization (FINRA). FINRA has proposed a rule to help it detect sales practice violations by brokers, called the Comprehensive Automated Risk Data System (CARDS). Under CARDS, firms would be required to periodically submit to FINRA data relating to securities and account transactions, holdings, and account profile information, excluding personal identifying information. The financial services industry is so upset about CARDS that it is going to war with FINRA over the proposed rule. See New York Times article entitled “In Push for Change, Finra Is Opposed by the Wall St. Firms It Regulates.”

Its argument is that CARDS would expose customers’ personal identifying information to security breaches via reverse engineering, even though CARDS would not collect such personal identifying information. Fred H. Cate, a senior fellow at the Center for Applied Cybersecurity Research at Indiana University in Bloomington, was quoted as saying that, while there were some valid concerns about data security, “it felt to me like an industry that doesn’t want to comply with the rules, sort of dragging out every argument it could think of, as opposed to focusing on what practical steps could be included to be sure information is secure.”

The message for the public is clear – the financial services industry does not want to be forced to put investors’ interests ahead of its own, and does not want FINRA to be an effective regulator.

Leveraged and inverse ETFs are complex alternative investments that are usually poorly understood by both the selling brokers and investors. They are designed to be short-term trading vehicles that “reset” daily. Consequently, over time, they fail to track the underlying index or benchmark. The use of leverage magnifies such discrepancies. Thus investors may experience large losses even though the long-term performance of the index may gain.

Securities firms and their representatives and their representatives are required to understand investment products before recommending them to their customers. Firms must conduct reasonable due diligence on complex products, train their sales force to adhere to appropriate sales practices, and supervise them to see that such practices are implemented. As in this case, however, selling firms often fall short of their duties.

Stifel and Century representatives did not have a good understanding of leveraged and inverse ETFs, but the firms allowed them to recommend the products to risk averse customers, who suffered significant losses, according to FINRA. FINRA further found that Stifel and Century failed to put reasonable supervisory systems in place. The time period involved was January 2009 though June 2013.

Stifel and Century consented to FINRA’s findings and agreed to pay the fines and restitution.

The two major categories of violations that concern FINRA are unsuitable recommendations and misrepresentation of the material facts about recommended investments. In general, the suitability rule requires selling firms to have (and be able to demonstrate) a reasonable basis for believing that a recommended investment is both (1) suitable for at least some investors based upon the nature of the investment and its potential risks and rewards, and (2) that the investment is suitable for the particular customer to whom it is being recommended based on that customer’s investment profile (e.g., age, investment experience, time horizon, liquidity needs, and risk tolerance).

FINRA has long been, and remains, concerned about sales practices related to a group of investments that share the characteristics of being illiquid, not transparent and hard to understand, and that are extraordinarily costly in that they pay outsized commissions to the agents that sell them to investors. In this regard, FINRA’s list includes the following categories of investments: Complex Structured Products, Private Real Estate Investment Trusts (also known as non-traded REITs), Frontier Funds and a group of interest rate-sensitive securities like Mortgage-Backed Securities, Long Duration Bond Funds, Long Duration Bond ETFs, and so on.

These products are typically sold to income-oriented investors, who are often retired people trying to live on a fixed income that consists of social security payments and investment income. Such investors typically have high liquidity needs and low risk tolerance. The low interest rate environment has sharply reduced their income. While these income-oriented investments promise more income, they are largely illiquid, higher-risk investments. For example, a number of non-traded REITs reduced or eliminated distributions in the wake of the real estate market crash, but they cannot be sold like a stock – i.e., they are illiquid, and investors were left holding a non-producing asset that was worth far less than what they paid for it.

FINRA is concerned that the selling brokers neither fully understand nor explain the risks and problems associated with these investments.

According to its letter, FINRA is also concerned about the disproportionate effect that chronic bad brokers, which it calls “recidivist brokers,” have on investors. However, if FINRA truly wanted to protect investors from recidivist brokers, it would take action to prevent brokers from expunging or whitewashing their customer complaint histories from the records it makes available to investors (and urges them to check out before investing) known as BrokerCheck. PIABA (the Public Investors Arbitration Bar Association), under the leadership of its President, Jason Doss, has launched a campaign aimed at improving disclosures of brokers’ histories to potential investors by placing more appropriate restrictions on brokers’ ability to expunge their records posted on FINRA’s BrokerCheck. We will keep you posted on those efforts. FINRA’s priorities letter can be viewed here.

The nation’s largest bank faced two felony charges of violating the Bank Secrecy Act because it did not file a Suspicious Activity Report after witnessing red flags about Madoff and did not have appropriate anti-money laundering compliance procedures in place. The charges come on top of other legal woes at J. P. Morgan, including a $13 billion settlement with the U. S. government in connection with its mortgage practices that led up to the financial crisis.

Madoff reportedly perpetrated his Ponzi scheme through accounts at J. P. Morgan from 1986 up until his arrest in 2008. Almost all of his clients’ funds were deposited at J. P. Morgan, and money flowed into and out of those accounts. In October 2008, one of J. P. Morgan’s analysts wrote a memo indicating that the bank could not verify Madoff’s trading activities or custody of assets. It also questioned Madoff’s “odd choice” of using a small, unknown accounting firm. Also in October 2008, J. P. Morgan filed a report with British regulators that stated in part that Madoff’s purported investment returns were “too good to be true.”

J. P. Morgan will pay approximately $2.24 billion to settle criminal charges plus another $350 million in civil penalties. In return, the U. S. will defer prosecution of the bank for two years as long as the bank complies with certain provisions, including reforming its anti-money laundering policies and cooperating with ongoing investigations. No individual executives at J. P. Morgan Chase were charged with a crime.

In addition to the criminal case settlement, the trustee for the liquidation of Bernard L. Madoff Investment Securities, LLC (“BLMIS”) appointed by the Securities Investor Protection Act (SIPA), Irving H. Picard, announced recovery agreements with J. P. Morgan totaling approximately $543 million for the benefit of BLMIS customers, for which bankruptcy court approval is being sought. The SIPA trustee has recovered approximately $9.783 billion for the BLMIS Customer Fund, or about 56% of the $17.5 billion that was lost in the Madoff ponzi scheme, according to a press release from the office of Mr. Picard.

While $1.7 billion is reported to be the largest bank forfeiture in history, investor advocates have been critical of the criminal case settlement. In particular, they criticize the failure to charge individual bank executives, who may have turned a blind eye to Madoff’s fraud, with a crime. They also criticize the leniency of the settlement terms as amounting to an ineffective deterrent.

Canellos worked as an assistant attorney to Ms. White while she was the U.S. Attorney for the Southern District of New York in the 1990s to early 2000s. Then he worked for six years as a litigation partner at Milbank, Tweed, Hadley & McCloy LLP. In 2009 he headed the SEC’s New York Regional Office from 2009 to 2012. Canellos has been serving as the SEC’s acting director of enforcement since January 2013.

Ceresney is joining the SEC after his tenure at Debevoise & Plimpton LLP. Ceresney was a partner when White headed the litigation department at Debevoise & Plimpton LLP.

The appointment of the enforcement co-directors is among the White’s first moves as head of the SEC.

First, the Board authorized FINRA to file with the SEC proposed amendments to FINRA Rule 12403 which would simplify securities arbitration panel selection rules. The proposed rule would allow all parties to see lists of 10 chair-qualified public arbitrators, 10 public arbitrators, and 10 non-public arbitrators. Furthermore, the proposed rule would permit four strikes on each of arbitrator list. Also, a party could select an all-public arbitration panel by striking all of the arbitrators on the non-public list or instead, if the parties leave on the non-public list one or more of the same non-public arbitrators, the parties could have a majority public panel.

Secondly, the Board authorized FINRA to file with the SEC proposed amendments to the Discovery Guide. The proposed amendments would provide general guidance on e-discovery issues and product cases, and clarify existing provisions relating to affirmations. The proposed amendments would cause the Discovery Guide to:
“1. Include guidelines for arbitrators to consider when deciding disputes relating to the form of e-discovery;
2. Add guidance on product cases to explain, among other matters, that these cases are different from other customer cases and that the Document Production Lists may not provide all of the documents parties usually request in a product case; and 3. Clarify that a party may request an affirmation when an opposing party makes a partial production.”

Under the bill, the user fees would be set by the SEC based on the cost and frequency of inspections, an advisor’s size, advisor’s AUM, types of clients, and risk characteristics.

Ms. Waters said, “This legislation answers a funding gap which has been largely responsible for the infrequency of investment advisor exams, and represents the simplest and most direct method for achieving the desired result: improved quality and quantity of these exams and another step toward restoration of public confidence in the markets.”

The bill faces an uphill climb in Congress though. It will be difficult for Ms. Waters, who introduced the bill with Rep. John Delaney, D-Md., to generate Republican support in the House.

The report details that there are more than 50 senior designations used to claim specialized knowledge in helping older Americans with retirement planning and its impossible for seniors to determine which ones are legitimate.

Furthermore, the CFPB believes, with all the above designations being overseen by different state and federal regulators, it is difficult for a senior seeking to file a complaint to know whom to file it with.

Hubert “Skip” Humphrey, assistant director of the Office for Older Americans, said in a CFPB blog post that, “when it comes to these specialty titles, they are anything but transparent…in fact, we found that many consumers don’t understand basic differences between brokers, investment advisors, insurance agents, and financial planners, let alone the 50-plus senior designations that many of those financial advisors add to their titles.”

Yahoo! Sports reports that many of Success Trade Securities Inc.’s clients were prominent NFL and NBA players and those investors were led by Jade Private Wealth Management to invest with Success Trade Securities. This will undoubtedly make Jade Private Wealth Management a prime target for investors seeking to recover their losses.

We recommend that all investors who were directed by Jade Private Wealth Management to invest with Success Trade Securities should document all conversations that you had with Jade and preserve all written communications.

In the complaint, FINRA alleged that players were typically introduced to Success Trade by representatives of Jade Management, including prominent Jade adviser Jinesh “Hodge” Brahmbhatt. In turn, Success Trade is alleged to have made at least $1.25 million in payments to Jade Management since March 2009. Furthermore, Success Trade funded Jade Management’s business from approximately March 2009 through March 2010.

Brahmbhatt is currently registered in the financial advisors program established by the NFL Player’s Association. Brahmbhatt spoke to Yahoo! Sports Wednesday night and said he still does not know whether Success Trade was operating a Ponzi scheme with investor money.

According to multiple sources that spoke to Yahoo! Sports, several professional athletes have either been contacted or been urged to contact investigators from the U.S. Department of Justice, the FBI and the SEC.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

Ms. Walter believes that, even with the proposed budget increase, the SEC still would lack the resources to boost investment adviser oversight substantially. Ms. Walter said that “there are simply not enough examiners to go around.” She furthermore stated that “the transfer of about 2,240 midsize advisors (with AUM of less than $100 million) from SEC to the states has not given the SEC more capacity to oversee advisors who have remained with the agency.”

The SEC has taken on about 1,400 newly registered private fund advisors, who now make up about 37% of SEC-registered advisors. The complexity of their funds has boosted the AUM of registered advisors to $49.6 trillion.

Success Trade is a deep-discount firm, based in Washington, which offers stock and options trades for $2.95 to investors who pay a $65 monthly platform fee.

FINRA claims that proceeds from the promissory note sales were used to make personal unsecured loans to Mr. Ahmed, as well as to pay off past investors and fund the firm’s operations. Furthermore, FINRA alleges that Success Trade is in “dire financial condition and unable to repay principal…and relies primarily on sales of the notes to keep the firm afloat.”

In a cease-and-desist order signed on April 11, 2013, Success Trade agreed to stop selling the notes and use assets only for normal business purposes.

The Doss Firm, LLC represents investors nationwide who have lost money as a result of investment fraud or due to faulty investment advice. If you believe that you may be a victim of investment fraud and would like to speak with us, please call our firm for a free consultation.

Under current law, financial advisors who switch to a new company, change their office address or open a branch office in Florida have to register with Florida’s Office of Financial Regulation. The process can take five days on average for a broker and six days for an investment advisor, potentially resulting in business operations delays.

Florida is one of eight jurisdictions, seven states and the U.S. Virgin Islands, that does not approve a branch office application immediately. Sixteen jurisdictions use notice filing and 29 require neither registration nor notice filing of branch offices.

Under the proposed law, advisors could start conducting business the moment they submit their registration application and a $100 filing fee. Furthermore, the bill would allow the Florida securities regulator to suspend a branch office if its filing is deficient and the adviser fails to make corrections within 30 days.

Under the proposal, the SEC’s budget would rise to $1.67 billion, from $1.42 billion. The SEC wants to use part of the money to “beef up” advisor exams.

In the SEC’s budget request document, it said that it examined only about 8% of 11,000 registered advisors in fiscal year 2012 and that 40% of advisors have never been examined. The SEC said that it wants to increase its examination rate to 45% to 55% annually, about the same rate of coverage of about 4,600 broker-dealers each year by the FINRA.

Overall, the $1.67 billion appropriation would allow the SEC to hire 676 additional staff members, 325 of whom would be examiners.

The indictment seeks forfeiture of properties and assets totaling $169 million.

The principals charged include Douglas Swenson, 64, co-founder and former president of DBSI; Mark Ellison, 64, co-founder and general counsel; and two sons of Mr. Swenson, David, 35, and Jeremy, 40, who were assistant secretaries.

DBSI raised money by allegedly defrauding investors out of $89 million with sales of high yield notes in 2008. In addition, DBSI raised money through the sale of securities known as “tenant-in-common.” Furthermore, the executives falsely represented DBSI as having a net worth of $105 million.

The indictment came one day after federal prosecutors reached a plea agreement with Gary Bringhurst, DBSI’s former chief operating officer. Bringhurst agreed to plead guilty to one count of conspiracy to commit securities fraud for falsifying financial statements used to artificially bolster the company’s financial standing and mislead investors about how their money would be used.

Susan Axelrod, FINRA executive vice president, said that “the data that FINRA is collecting will provide a good reflection point for us to better understand the [financial] world and take steps … to ensure the appropriate supervision of sales to seniors.”

Furthermore, FINRA chief executive Richard G. Ketchum said that seniors are especially vulnerable to offers of yield-chasing and high-risk products.

Investor advocates believe that if efforts to supervise financial advisors are not improved will be in a financial crisis. Mercer Bullard, president of Fund Democracy and Professor of Law at the University of Mississippi, asserted that “the United States is on the verge of a senior crisis posed by the risk of seniors’ outliving their assets and their declining ability to manage their money as they age.” According to Mr. Bullard, the increasing sophistication of financial products combined with longer life expectancy is creating an environment in which fraud can thrive.

In addition to FINRA, the Consumer Financial Protection Bureau also is targeting financial abuse of the elderly through its Office of Older Americans. In a comment letter last summer, the Certified Financial Planner Board of Standards Inc. urged the CFPB to create a ratings system for financial certifications and designations.

Bao worked in the finance department at Abaxis Inc. and allegedly regularly provided material non-public information to Nguyen. Nguyen would then trade in advance of Abaxis’s company quarterly earning announcements. $144,910.00 was generated in illicit profits from this trading.

Furthermore, the SEC charged Nguyen last year with insider trading.

To settle the SEC’s charges, Bao agreed to pay $144,910 and consented to a five year ban on serving as an officer or director of a public company.

The SEC’s charges stem from its ongoing investigations into expert networks that have uncovered widespread insider trading at several hedge funds and other investment advisory firms. The investigations have so far resulted in enforcement actions against 40 entities or individuals that have reaped more than $430 million in alleged insider trading gains.