Securities Fraud Attorney Blog

Articles Posted in Securities Fraud in the Media

Below is an American Lawyer piece which explains our clients’ pending $383 million FINRA arbitration against Citigroup. It goes on to talk about how there are more and more large and complex cases at FINRA. It’s true. As partner John Rich points out at the end of the article, our firm is involved in other multi-million dollar matters at FINRA. In fact, we handled the Bayou v. Goldman FINRA arbitration case which generated a $20.6 million award, and is mentioned in the article. We think FINRA arbitration will continue to attract sophisticated legal disputes because it is more efficient and timely than court litigation.

Too Big for Their Britches?

Nate Raymond
The American Lawyer
Just a few years ago, the Abbar family of Saudi Arabia could point to at least $383 million in investments managed by Citigroup Inc. Patriarch Abdullah Abbar and his son Ghazi had built the family fortune through an array of food import, travel, oil transport, and investment businesses. And beginning in 2006, they entrusted the bulk of their wealth to Citi.

Today the relationship has soured, and the money is almost gone. Both sides have lawyered up-the Abbars hired John Rich of Rich, Intelisano & Katz, and Citi retained Scott Edelman of Milbank, Tweed, Hadley & McCloy-and the legal battle is heating up. In August the Abbars filed a securities arbitration claim with the Financial Industry Regulatory Authority ­(FINRA), the U.S. securities industry’s self-regulator. But while defendants often prefer the privacy arbitration affords, Citigroup wants to move the case into the courtroom.

The Abbar complaint is one of roughly 200 pending FINRA cases with at least $10 million at stake. The number of cases and the size of potential awards increased significantly after the stock market collapse in 2008. Before then, most FINRA cases involved small investors who were suing their brokers. But after the crash, richer investors flooded ­FINRA with claims that they were duped by large institutions. “The claims coming in now are substantially larger than what we had a few years ago,” says Linda Fienberg, president of FINRA’s dispute resolution unit.

The financial institutions, faced with hefty awards that are near impossible to overturn, have taken notice. Lawsuits by banks challenging the arbitrations are increasingly common, often contending that sophisticated investors are trying to twist FINRA’s original definition of a brokerage customer to include their claims.

Established in 2007, FINRA is the result of a merger of two sets of self-regulatory organizations, the New York Stock Exchange’s enforcement arm and the National Association of Securities Dealers. Cases number in the thousands annually, and currently 7,000 claims are pending, Fienberg says.

For most parties in FINRA cases, arbitration offers a quick and private venue to deal with securities claims. But the arbitration landscape changed when financial service firms began teetering. “There were some very large losses during that period,” says Jonathan Harris, a commercial litigation partner at New York’s Harris, Cutler & Houghteling.

Harris is counsel to Woodside, California, investment management firm Aurum STS Aggressive Trading LLC. During the fall of 2008, Harris and his cocounsel at Steptoe & Johnson contend that Société Générale breached agreements on warrants the bank issued to Aurum in 2003 and 2004, and unilaterally imposed new terms. Aurum filed an arbitration claim in June 2009 against SocGen, and in October a three-arbitrator panel awarded the company $61 million-the second-largest award this year. SocGen has said that it disagrees with the decision, but its lawyers at Latham & Watkins have not sought to vacate it.

Big awards like Aurum’s have become more common in the wake of the subprime meltdown. Six of the ten largest securities arbitration awards were handed down during the last two years, according to Securities Arbitration Commentator Inc. In February 2009 FINRA awarded $406.6 million to ­STMicroelectronics N.V. in a fight with Credit Suisse Group AG, followed by a $80.8 million award to Kajeet Inc. against UBS AG in August 2010, and a $54.1 million payout to Colorado patent litigator Gerald Hosier and others in April 2011 over a squabble with Citigroup.

The largest award of 2011 involved options trading firm Rosen Capital Management LLC, which lost $90 million in fall 2008. Rosen’s lawyers at Quinn Emanuel Urquhart & Sullivan blamed its prime broker Merrill Lynch & Co., Inc., which had placed ill-fated margin calls amid a crisis that had just weeks earlier thrown it into a government-brokered $50 billion sale to Bank of America Corporation. In July a three-arbitrator panel awarded Rosen $63.7 million. Merrill’s lawyers at Wilmer Cutler Pickering Hale and Dorr moved in August to vacate the award.

Courts, though, rarely overturn arbitration awards. The Goldman Sachs Group, Inc. and its lawyers at Schulte Roth & Zabel unsuccessfully fought to vacate a $20.6 million FINRA award that resulted from the bank’s alleged failure to detect fraud at the bankrupt hedge fund Bayou Group LLC. In November 2010 Manhattan federal district court judge Jed Rakoff denied Goldman’s petition, saying that “having voluntarily chosen to avail itself of this wondrous alternative to the rule of reason, [Goldman] must suffer the consequences.”

Banks are fighting over who is permitted to bring claims to ­FINRA. UBS’s lawyers at Debevoise & Plimpton, with the backing of the Securities Industry and Financial Markets Association, argued that West Virginia University Hospitals, Inc., as an issuer, could not force the bank, as an underwriter, to arbitrate claims of more than $329 million in auction-rate securities. But in September the U.S. Court of Appeals for the Second Circuit rejected that narrow reading of who FINRA defines as a “customer.”

In the Abbar case, Citigroup has similarly filed a lawsuit in Manhattan federal district court seeking to enjoin the arbitration. Milbank’s Edelman, Citi’s lawyer, declined to comment. But Citi in a statement says the Abbars were not clients of the U.S.–based broker-dealer Citigroup Global Markets Inc., so “their claims should not be subject to FINRA arbitration.”

In the meantime, FINRA is adjusting to the bigger cases. In early 2012 it plans to implement a pilot program designed for cases with more than $5 million at stake, Fienberg says. The program, which will be tested in the Northeast and on the West Coast, will formalize the ways that FINRA ­allows parties to modify arbitration procedures. For example, parties could pick arbitrators who do not normally handle FINRA cases, such as former judges. Parties could agree to take depositions, which FINRA generally does not allow. And both parties would be able to pay arbitrators more than the $200 honorarium FINRA typically pays per hearing, a relief to some lawyers who worry about how the low pay might affect the complex cases.

And the Abbars’ lawyer? Rich promises more cases from himself as well. “We have other multimillion-dollar cases in the works,” he says. “This is not going to be an anomaly.”
Top Five Securities Arbitration Awards
Sanchez et al. v. Enrique Perusquia $429.5M STMicroelectronics N.V. v. Credit Suisse Securities (USA) LLC 406.6M Kajeet Inc. v. UBS Financial Services Inc. 80.8M 212 Investment Corp. et al. v. Myron Kaplan 74.8M Rosen Capital Partners LPv. Merrill Lynch Professional Clearing Corp. 63.7M Source: Securities Arbitration Commentator Inc.

Below is Bloomberg piece about our client’s $383 million FINRA arbitration claim against Citigroup Global Markets, Inc. related to hedge funds, private equity, and derivatives.

Citigroup Saudi Deal Haunts Pandit By Donal Griffin – Nov 30, 2011
Saudi businessman Ghazi Abbar, who claims in an affidavit he lost $383 million of his family’s fortune on investments with Citigroup Inc., was sold one of the transactions even though the bank questioned his ability to properly manage them, according to an internal memo.

The memo, an exhibit in arbitration proceedings with the Financial Industry Regulatory Authority, warned that Abbar didn’t have the risk-management capability of the large hedge funds that were typical clients of the bank’s “hybrid” desk, which in 2006 was trying to persuade him to move his family’s money into complex derivative securities.

Soured deals struck with wealthy clients are haunting Citigroup Chief Executive Officer Vikram Pandit. Finra awarded $54 million in April to customers of the New York-based bank’s municipal-bond hedge funds, and in February, Brazilian investor Bernardo Valentini sued the bank, claiming he lost more than $24 million on derivatives Citigroup told him had “no risk of loss.”

“The case is a setback in Pandit’s vision of delivering financial services with a higher sense of responsibility to customers,” said David Knutson, a credit analyst with Legal & General Investment Management in Chicago. “As each issue bubbles up, analysts or providers of capital to the firm have to say, ‘OK, what other tape bombs are lying in the dusty lines of Citi’s balance sheet?'”
Citigroup’s Lawsuit
Citigroup denies Abbar’s allegations, saying in a lawsuit that he was a sophisticated investor who knew the risks when he turned over control of his hedge-fund investments to the bank in exchange for derivatives that mimicked their performance. The bank has sued its former client in federal court in Manhattan to block the arbitration, arguing Finra has no jurisdiction because the deals were handled outside the U.S.

Danielle Romero-Apsilos, a Citigroup spokeswoman, declined to comment further.

According to the Finra claim, Citigroup had never before sold the investment idea to individual investors like Abbar, 56, whose family made its fortune in Saudi Arabia importing food and building businesses linked to tourism, aviation, cold storage, ship bunkering and oil. The hybrid team, which also arranged loans when clients wanted to leverage their bets, made about $200 million for the New York-based bank in 2007, people familiar with matter said.

Based in Jeddah, a port city on the Red Sea about 50 miles from Mecca, the Abbars were among the largest merchants in Saudi Arabia, with annual revenue of about $500 million, according to the internal memo. Family members had served in senior positions under the kingdom’s late rulers, kings Faisal and Saud, according to the memo.
Pandit Meeting
Citigroup executives lined up to court Abbar, who oversaw the family’s investments, according to the Finra complaint. Pandit, 54, met with Abbar after joining Citigroup in 2007 as part of the company’s effort to maintain a relationship with the family. So did Chief Operating Officer John Havens, former wealth management boss Sallie Krawcheck and current global markets head Francisco “Paco” Ybarra, according to the complaint.

Abbar moved about $350 million of his family’s wealth to Citigroup from Deutsche Bank AG (DBK) in 2006, and Citigroup rewarded the banker who persuaded Abbar to make the shift, Mohanned “Ned” Noor, with a trip to Hawaii, according to the claim. Abbar was introduced to the hybrid desk, which was growing under Pandit’s predecessor, Charles “Chuck” Prince. Prince was trying to boost revenue by taking more trading risk.
Burns, Mathur
The hybrid group was run by Richard Burns, a London-based Citigroup veteran, according to two people familiar with the group who asked not to be named because they aren’t authorized to speak about the matter. Burns oversaw structuring and trading of hybrid derivatives, securities whose values are tied to different kinds of underlying assets. Samir Mathur was head of hybrid trading for the group.

Abbar wanted a “simple loan structure” to finance some of the family’s hedge-fund investments, he claims. Over meals in restaurants in London and New York, the hybrid team persuaded Abbar to instead transfer control of some of those assets to Citigroup, according to one of the people familiar with the matter. The desk then created the hybrid derivative that would mimic the performance of those funds.

Abbar claims he invested $383 million in the product and a separate private-equity financing deal, which included funds he injected after his initial transfer from Deutsche Bank. Both transactions collapsed after markets plunged in late 2008.
Tiger Management
Abbar had more experience with hedge funds than most. He began investing his family’s fortune after he graduated with a master’s degree in business administration from Harvard University in 1978. He built close relationships with hedge-fund managers such as Julian Robertson of Tiger Management LLC and joined the board of one of the Tiger funds in 1997, according to Fraser Seitel, a spokesman for Tiger Management. Abbar said he also had relationships with Stephen Cohen, founder of SAC Capital Partners LP, billionaire Paul Tudor Jones and Louis Moore Bacon.

Still, as an individual, he was an unusual client for the desk, which typically dealt with large hedge funds and so-called fund of funds firms that make bets on other investment funds. Customers included Man Group Plc (EMG), the world’s biggest hedge fund; Tudor Investment Corp., Tudor Jones’s hedge fund; and Saudi Arabian financial-services firm Saad Group, according to the people familiar with the matter. Abbar didn’t have those firms’ resources, the bank said in the memo.
Operates ‘Alone’

“The Client is not like the typical fund of funds client the desk is used to dealing with,” according to the memo. “The Client does not maintain the extensive risk, due diligence and operational infrastructure that exists at most of the larger fund of funds. While Ghazi is experienced with alternative investments, he operates more or less alone with advice from his friends and industry contacts.”

Abbar’s lack of risk management concerned some Citigroup executives before he bought the product, according to one person familiar with the deal. Members of the hybrid desk concluded that his financial experience gave him the ability to manage the risks, and the bank approved the deal.

“Ghazi has the ability to understand the risks and rewards of the transactions,” Citigroup wrote in the internal memo.

After the deal went through, members of the hybrid team were encouraged to sell similar products to other wealthy individuals, according to the person, who didn’t want to be named because the matter is private.
Hedge Funds
Abbar’s hedge-fund investment collapsed in 2008 as Lehman Brothers Holdings Inc. failed and funds around the world plunged. The Eurekahedge Hedge Fund Index dropped almost 12 percent in the second half of the year, Bloomberg data show. Many investors who used derivatives to multiply their bets were wiped out, according to Satyajit Das, author of “Extreme Money: Masters of the Universe and the Cult of Risk” (FT Press, 2011).

The leverage used to increase derivatives bets “is like playing Russian roulette with six bullets in the chamber,” said Das, who isn’t familiar with Abbar’s case.

The failed investments erased the “considerable family wealth” the Abbars had placed with the bank and damaged relationships within the family, according to the claim. Citigroup now stands to gain $70 million as it sells off the hedge-fund assets at the center of the product, Abbar alleges.
‘Nuclear’ Products
“A lot of these highly leveraged, highly structured products, I analogize them to nuclear power,” said John Lovi, an attorney with Steptoe & Johnson LLP who handles cases involving derivatives and isn’t involved in the Abbar case. “There’s no doubt that it’s complicated and you better have your best and brightest on it and be watching it closely because when it goes bad, it goes really bad.”

The collapse of the deal came as Citigroup itself was posting record losses caused by the financial crisis and its investments in collateralized debt obligations, another form of derivative. The bank lost a total of $29.3 billion in 2008 and 2009 and took a $45 billion taxpayer bailout. Senior executives allowed their hunt for more revenue to eclipse proper risk management, according to a 2008 Federal Reserve Bank of New York inspection report.

Pandit, who took the top job in December 2007, disbanded part of the hybrid team in 2008 and began to wind down the structuring side of the business, the people said. He has since begun an effort to convince investors that the bank’s culture has changed to one of “responsible finance.”
New Team
“We have a new management team, a new governance structure,” Pandit said in a video on the bank’s website, called “We’re completely focused around the client. Each and every one of our businesses is structured and always thinks about what is it that my clients need and how do I make sure I deliver all of Citi to each and every one of my clients.”

Citigroup advanced $1.44, or 5.7 percent, to $26.68 at 10:46 a.m. in New York trading. The shares slid 47 percent this year through yesterday, compared with a 32 percent drop in the 24-company KBW Bank Index. (BKX)

Abbar is seeking $383 million. The largest award ever granted by Finra was $406.6 million for STMicroelectronics NV against Credit Suisse Group AG (CS) in 2009, according to Finra records.

Citigroup was on the wrong side of the largest award for individual investors in April, when Finra ruled in favor of a group of wealthy, Aspen, Colorado-based customers’ $54 million claim, the records show. The clients said Citigroup misled them about the level of risk tied to investments in the bank’s municipal-bond hedge funds.
‘Guaranteed’ Investment
In a suit brought in Manhattan federal court, Brazilian client Bernardo Valentini claims he lost more than $24 million on derivatives the bank told him were “guaranteed.” He was convinced of the merits of the deal by two Citigroup private bankers, who visited his office in Curitiba and said they “wanted to get to know him,” he said in the court filings. Citigroup denied the allegations.

Banks that sell complex derivatives to wealthy customers often face complaints when the deals don’t work out as planned, said Das, the banker turned author.

“Clients are always good winners,” Das said. “The moment they lose money, they suffer a 100-point drop in IQ.”
Food Imports
Today, Abbar runs the largest of the family’s businesses, Abbar Cold Stores, which imports frozen foods, fresh fruits and cheeses into Saudi Arabia, according to John Rich, an attorney in New York with Rich, Intelisano & Katz LLP, which represents the family.

Some of the executives mentioned in the case have since left Citigroup, including Ned Noor, the Geneva-based private banker who persuaded Abbar to move his money to the bank in the first place. He declined to comment on Abbar’s claims.

Richard Burns and Samir Mathur continue to work in derivatives for Citigroup. They also declined to comment.

The Abbar case is Citigroup Global Markets Inc. v. Abbar, 11-CV-6993; the Valentini case is Valentini et al v. Citigroup Inc. (C) et al, 11-CV-01355. Both cases are in U.S. District Court, Southern District of New York (Manhattan).

Below is an interesting Reuters piece by Matt Goldstein which quotes Ross Intelisano regarding securities fraud and Ponzi schemes.

Special Report: A fame-seeking Philly trader’s rap falls flat Photo Thu, May 12 2011
By Matthew Goldstein
NEW YORK (Reuters) – Tyrone L. Gilliams Jr., a commodities trader, part-time online preacher and hip hop event promoter, is not one for understatement.

In a promotional video for a celebrity-studded charity event last December — among the headliners was rapper Sean “Diddy” Combs — Gilliams mugs for the camera. Posing with stacks of money on his lap, he bills himself as a mogul, a philanthropist and a self-starter.

But now one of his investors is crying foul, suing the Camden, New Jersey, native and Ivy League graduate for fraud.

David Parlin, a businessman from Cincinnati, Ohio, claims Gilliams misappropriated much of his private foundation’s $4 million investment and used the money to pay for trips to the Bahamas, outings at Miami nightclubs and shopping sprees at Saks Fifth Avenue and a Cherry Hill, New Jersey Mercedes Benz dealership.

On its face, the investment venture that Parlin sunk some of his foundation’s money into seems dubious. He was promised, according to court papers, a five percent a week return — the kind of performance that would make even Ponzi king Bernard Madoff blush. And it was an investment strategy using U.S. Treasuries, where the current yield on a 10-year T-bill is 3.2 percent.

Worse, Parlin says he didn’t even know the money had been passed on to Gilliams to manage until shortly before he filed the lawsuit. He’s also suing New York financier Vassilis Morfopoulos, who transferred the foundation’s money to Gilliams.

It appears Parlin’s due diligence was not complete.

But some securities experts are not surprised. Nearly two-and-a-half years after Madoff’s decades long investment fraud came to light and prosecutors charged Allen Stanford with running a $7 billion Ponzi scheme, there has hardly been a pause in the number of new dubious investment schemes. Unfortunately, yield-hungry investors have been slow to grasp that if an investment opportunity sounds too good to be true — it probably is.

Last year, for instance, the Securities and Exchange Commission brought 47 enforcement actions against the architects of apparent Ponzi schemes. That’s just seven fewer than securities regulators filed in 2009. And tips about new investment schemes keep coming to the SEC on a regular basis.

“Every day we see tips alleging Ponzi schemes,” says Thomas Sporkin, who oversees the SEC’s new market intelligence unit, which is responsible for vetting and filtering the more than 30,000 tips securities regulators get each year from the public. “Unfortunately, investment schemes appear just as prevalent as ever.”

Tuesday, SEC Chairman Mary Schapiro, in testimony on Capitol Hill, told the House Oversight and Government Reform Committee that “fraudulent investment schemes disguised as investment opportunities” accounted for 22 percent of the agency’s enforcement actions in 2010.

Indeed, securities experts say each year individual investors — even sophisticated ones who should seemingly know better — lose hundreds of millions of dollars to financial charlatans. But many under-the-radar scams tend to get overlooked by regulators and short-shrift from the financial media because the dollars involved are relatively small and the alleged scamsters don’t work for big Wall Street banks like Goldman Sachs Group or JP Morgan Chase.

“You hear more about the bank cases because there is often a big pot of money at the end of the day,” said Ross Intelisano, a New York securities attorney with Rich & Intelisano. “But I get called on these small scams all the time. But sometimes they are even too small for us to get involved.”

It’s too soon to say how the Parlin case will play out. Parlin, who made his fortune from founding a Midwestern-based company that refurbished automated teller machines company called The ATM Exchange, has had at least one discussion about his 2010 investment with agents in the Cincinnati office of the Federal Bureau of Investigation, according to a court filing.

For his part, Gilliams, who did not respond to repeated requests by Reuters for comment and does not appear to have retained a lawyer, is keeping an uncharacteristic low profile. Earlier this year, he suddenly abandoned a small office he had in downtown Philadelphia, skipping out on the rent, according to court records.

The official headquarters for his TL Gilliams LLC trading firm, which claims to have offices in two dozen locations around the globe, is a so-called virtual office located in a building in a Philadelphia suburb. Mail is collected for Gilliams at the location and a receptionist takes phone messages. But a person familiar with the facility says the trader rarely shows up in person.

Beyond Gilliams, the litigation and interviews by Reuters also reveals an array of middleman and unregistered investment advisers, each of whom may have played a part in the investment venture. For instance, Morfopoulos, the New York financier who invested Parlin’s money with Gilliams, has his own questionable track record. In 2005, he was sued by the federal government for failing to pay nearly a quarter of a million dollars in back taxes.

Christopher Chang, the lawyer for Morfopoulos, says his client was duped just like Parlin and “denies any participation in the fraud perpetrated by Tyrone Gilliams.” Chang adds that his client intends to fully cooperate with Parlin in helping him get his money back.

Laura Keller, a San Francisco financial consultant, said she recommended Gilliams to Morfopoulos and another Bay Area investor group based on a recommendation she’d got from Blackhawk Wealth Solutions, a San Diego-based investment advisory firm. Phone calls and emails to Blackhawk executives weren’t returned.

Says Keller: “Proper questioning and trust and prior working experience and their vetting made the referral strong.”

Other middlemen who may have been involved in the deal, according to court records and interviews, were Brett Smith, also named as a defendant in the lawsuit, and Santiago Delgado of Global Fortress Inc. based in West Palm Beach, Fla.

Some of the allegations of profligate spending outlined in Parlin’s lawsuit filed in Manhattan federal court would seem to dovetail with images of Gilliams’ over-the-top lifestyle, which were captured last year in a series of videos he had posted online under the banner “TLG TV.” (

Gilliams, who graduated from the University of Pennsylvania in 1990 and was a standout basketball player for the Ivy League school’s team, hired a team of professional videographers to follow him around. He appears to have been trying to position himself as some sort of high-living Internet reality TV star who made a fortune trading oil, gold, diamonds and sugar.

His TLG TV was something like an online version of “Keeping up with the Kardashians,” the reality TV show about a celebrity family that parties hard for the cameras, crossed with “Trading Places,” the 1983 hit movie about Philadelphia commodities traders starring Eddie Murphy and Dan Aykroyd. In one online video, Gilliams brags that he will get Kim Kardashian, the reality show’s star, to walk the red carpet at the charity gala held at Philadelphia’s Ritz-Carlton Hotel. (

Kardashian was a no-show at Gilliams’ “Joy to the World Fest” event. Aside from Combs, other celebrities who did turn out included actor Lance Gross and Sheree Whitfield, from “The Real Housewives of Atlanta,” another reality TV show. Also attending the gala were local politicians such as Pennsylvania State Senator Anthony Williams and Chaka Fattah, a Democratic congressman from Philadelphia. Tickets for the events sold for between $250 and $1,200.

But in the wake of Parlin’s lawsuit a number of people who worked with Gilliams in arranging the event are distancing themselves from the trader. Privately some now say they question just how much money was raised for charity from the gala and how Gilliams got the start-up money to organize the event.

These people say Gilliams often arrived at a nightclub surrounded by a bevy of armed security guards, or showed up at some luxury car dealer and put down a deposit on an Aston Martin.

“I saw a lot of money going out but not much money coming in,” said Tim Fontaine, a videographer and producer with The Artist Warehouse in Chester, Pennsylvania, who was hired by Gilliams to produce the “TLG TV” online videos. “I have footage where I see him blow $70,000 on drinks. The idea was to party with the rich and famous … and to see the world through Gilliams’ eyes.”

A representative for Combs declined to comment. But the weekend of the event, Combs also was in Philadelphia for the grand opening of a new nightclub called Vault. More than two decades ago, Gilliams and Combs were part of a group of investors in a failed venture to represent professional athletes called Bad Boys Sportz. But the men are not reported to be close friends.

There are just as many unanswered questions surrounding Gilliams’ commodities trading business.

The website for his firm, TL Gilliams LLC, ( says the trader works with a “team” to analyze deals but offers few details. Neither Gilliams nor his firm are registered with the Financial Industry Regulatory Authority or the National Futures Association. On the website, Gilliams says he expects to become an owner of a “major refinery in Brazil.”

The litigation involving Parlin is not the first time Gilliams’ trading business has sparked controversy.

A year ago, Gilliams teamed up with a group of investors that tried to acquire $10 million in assets from a bankrupt coal mining operation in Utah. But the deal was scuttled when “T.L. Gilliams surreptitiously withdrew $10 million that had been deposited in the bank account” of the company the parties formed to buy the mining assets, according to court papers filed by lawyers for Kenneth Rushton, the trustee in the U.S. bankruptcy case for C.W. Mining Company.

In advance of the sale, the $10 million had apparently been deposited in the bank account by Gilliams’ firm, though it is not clear exactly whose money it was. The court record is not clear on why the money was withdrawn or what happened to it.

A few weeks before the sale was scheduled to take place, a U.S. bankruptcy judge held a hearing to determine whether Gilliams’ group had the financing to complete the transaction. During that proceeding, Joseph Giordano, who at the time was a principal with Fieldstone, a small New York investment firm, testified that he and Gilliams had worked together for “multiple years” on various transactions. Giordano also told the court he and Gilliams “co-manage” a trading account that “has approximately $400 million in it.”

It’s not clear, however, if such an account even exists.

Giordano, who no longer works for Fieldstone, could not be reached for comment. The only registered fund that Giordano is listed as having managed is the Fieldstone Value Partners Fund, which as of four years ago had raised less than $1 million.

Parlin’s lawsuit claims that Gilliams transferred $450,000 of his $4 million to a bank account held in the name of Fieldstone Value Partners Fund. Parlin says the money transfer “appears to have been part of a Ponzi scheme orchestrated by Gilliams.”

Officials with Fieldstone did not respond to a request for comment.

Neither Parlin nor his lawyer Louis Craco will comment on the litigation. But court papers reveal that in January, Parlin began demanding that Morfopoulos return his $4 million because the Cincinnati businessman had not received any of the promised returns on his investment. It wasn’t until mid-March that Parlin says he ultimately learned that Morfopoulos had inked a deal behind his back with Gilliams to manage the money.

On April 13, Parlin filed suit in Manhattan federal court against Gilliams and Morfopoulos, claiming they had defrauded him and that Gilliams misappropriated his money.

As it happened, just a few weeks before Parlin learned of Gilliams involvement, the Philadelphia trader was planning to raise money for new investment vehicle. On February 28, Gilliams filed a registration statement with the SEC for the “Black Fox Fund” — a planned $20 million stock-focused fund.

(Reporting by Matthew Goldstein; Editing by Jim Impoco and Claudia Parsons)

I couldn’t fight it any more. I started tweeting on securities fraud a few weeks ago. Here is the link:!/rossbi – Basically, I’m curating (hipster word alert) news stories related to Wall Street with a little comment layered over it. Have found it very helpful to follow breaking news and long form stories related to the Street via Twitter. Over-tweeting frustrates me – similar to people who talk too much. Take a look if you’re interested.

New York Super Lawyers, a publication of The New York Times Magazine, has named Ross B. Intelisano as one of New York’s top Securities Litigation attorneys in their 2010 publication. The list of Super Lawyers recognizes lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement in their respective fields. Super Lawyers’ selection process is a vigorous multi-phase rating process based on peer nominations and evaluations, combined with third-party research. Their selection process has been recognized by bar associations and courts across the country.

Ross Intelisano is the only attorney on the 2010 New York Super Lawyers top Securities Litigation list who primarily represents institutional and individual investors in securities arbitration.

Below is a profile of Ross Intelisano from the Spring 2010 edition of the Brooklyn Law School Magazine BLSLaw Notes.

The Magazine of Brooklyn Law School | Spring 2010
Alumni Update Ross Intelisano ’94: Fighting Fraud from Bear Stearns to Bernie Madoff and Beyond

In 2006, Ross Intelisano made a prediction. A seasoned securities arbitration lawyer with a reputation as one of the leading authorities on securities fraud and Ponzi schemes, Intelisano looked into the future and saw a financial crisis of unimaginable proportion. He put his vision on paper and published an article in Bloomberg Law Reports entitled “Hedge Fund Fraud – The Future of Securities Arbitration?” in which he predicted, one year prior to the Bear Stearns High Grade Funds implosion, that broker-dealers would roll out proprietary hedge funds that were bound to unleash havoc on the financial system. Unfortunately for the market, and for the countless number of investors hurt by Bear Stearns, Intelisano was right.

In 2007, as predicted, Bear Stearns’ High Grade hedge funds crashed, with $1.6 billion in losses. Intelisano was there to pick up the pieces, taking on Bear Stearns on behalf of Racetrac, a multi-billion dollar private company that had lost $5 million in Stearns’ High Grade Structured Credit Strategies Hedge Fund. In December 2009, after a 16-day arbitration in Atlanta, Intelisano won a $3.4 million arbitration award on their behalf. The award was groundbreaking for two reasons: It was the first verdict in any forum relating to the High Grade Funds, and it was rendered after portfolio managers Ralph Cioffi and Matthew Tannin were acquitted in a federal criminal trial.

While the Racetrac arbitration was an historic case, it was not the first time Intelisano had been on the pioneering end of an arbitration. He has long been a crusader for defrauded investors.

After graduating from the Law School in 1994, Intelisano joined Pressman & Associates, a one-man shop where he began to practice securities and employment law. Three years later, he was recruited by Eppenstein & Eppenstein, a premier securities arbitration firm, where he served as co-trial counsel on Engel et. al. v. Refco, the legendary commodities fraud case. The 100-day arbitration, on behalf of 13 individuals and family-run businesses, generated a $43 million judgment in 2001. It remains the largest collected arbitration award ever rendered on behalf of retail investors against a brokerage firm.

In 2003, he joined forces with Eppenstein colleague John G. Rich to form Rich & Intelisano where he continued to try landmark cases, most notably working on behalf of investors who lost over $25 million in the $300 million Bayou hedge fund Ponzi scheme run by convicted fraudster Sam Israel. In Bayou, Intelisano once again did the unprecedented, filing a group arbitration case not against Israel, but against the registered investment advisor who had recommended Bayou to investors, for failure to perform adequate due diligence. The case, which was settled in mediation, was the first time in the world of secu¬rities arbitration that anyone had implicated an investment advisor in a Ponzi scheme.

And then came Bernie Madoff and a Ponzi scheme so large that it dwarfed anything the securities world had ever seen ($18 billion is the latest estimate). Intelisano’s phone started ringing. “I spent hours consoling investors, listening to all of these tragic stories of middle class people who had lost every dime they had saved over a lifetime,” he recalled. “I knew they would never get it back. It was the lowest point of my career as a lawyer.”

While he knew he would not be able to help investors sue Madoff (their restitution is being handled by a court-appointed trustee), he brought back the “investment advisor theory” he advanced in Bayou, and is currently representing a group of 12 victims in claims against investment advisors to Madoff feeder funds. The hearings begin in June.

With the Madoff cases ahead of him, and the victories in Racetrac and Bayou behind him, Intelisano has become one of the country’s most well respected experts in the world of hedge fund fraud. He has appeared on The Today Show, Anderson Cooper 360, Dateline NBC, PBS’s Frontline, Closing Bell with Maria Bartiromo, and is regularly quoted in The New York Times and The Wall Street Journal.

Looking into the future, Intelisano believes the horizon remains clouded over with the potential for serious fraud. “Over-the-counter derivatives, credit default swaps, oil futures, all of these products that the government is worried about regulating are very complex and are improperly being sold to retail and institutional investors. Firms aren’t watching the shop. No one is.”

Prediction noted.

62 • BLSLawNotes

I’m often asked what I read on a regular basis regarding securities and investment fraud. Back in the day (say, pre-Enron), there was limited print and online coverage of investment misconduct. In fact, when I told people what I did for a living, some would actually question whether our niche practice was even viable, “you mean there’s fraud going on on Wall Street?” Ah, how the world has changed. First Sam Israel, then the Bear Stearns High Grade Funds, and finally, the big whale of the Bernie Madoff affair.

Now, financial fraud news is general business news. Just look how Vanity Fair has scored huge every month with one strong financial story after another (Madoff, Fairfield Greenwich, Marc Dreier, Goldman Sachs and Morgan Stanley survival, etc.). Here is a little a look at what I’m presently reading, for better or worse. Today, I’ll focus on newspapers.

I start with the Financial Times. Worldly, smart, a cut above the rest for global coverage of finance. I particularly like Gillian Tett’s column and Greg Farrell’s Street coverage. I read the NY Times business section (mostly because it’s attached to the Sports section, but that’s a whole other issue). Gretchen Morgenson, Jenny Anderson, and newly appointed wonder kid Andrew Ross Sorkin, are all strong. No one covers investor protection better than Gretchen. And I love Ben Stein. However, it’s too bad the Times won’t throw more resources at its Street coverage. I also read the Wall Street Journal daily, especially on breaking finance news issues. Kate Kelley’s coverage of Bear Stearns collapse was award winning stuff. When the Journal sends its entire squadron on a topic, no one can top its finance coverage. I used to read the Post’s coverage but since Roddy Boyd left, it’s not as interesting.

Since The Economist calls itself a newspaper, I’ll include it in this section. The most intelligent weekly by far. Their in depth, forward looking analysis is unparalleled. It’s a bit daunting however on a weekly basis (like The New Yorker).