Financial and Investment Fraud

February 27, 2020

Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network will pay a $35 million penalty to resolve charges that certain of Wells Fargo's investment advisors and registered representatives made unsuitable recommendations to retail clients regarding single-inverse ETF products.  The SEC charged that Wells Fargo lacked policies and procedures that would have detected such unsuitable recommendations, and failed to adequately supervise and train its financial professionals, who did not fully understand the products they were recommending.  Wells Fargo did not admit or deny the SEC's findings; the penalty will be distributed to harmed individuals.  SEC

February 21, 2020

Wells Fargo & Co. will pay a total of $3 billion in a federal settlement resolving criminal, civil, and administrative liability with respect to its “cross-selling” sales practices between 2002 and 2016 that led to the opening of millions of checking, savings, credit card, and other accounts on behalf of individual customers under false pretenses or without the customers’ consent.  As part of the settlement, Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed customer credit ratings, and unlawfully misused customers’ personal information.  Wells Fargo entered into a three-year deferred prosecution agreement requiring the bank to take certain compliance steps and cooperate with ongoing investigations.  Of the $3 billion settlement, $500 million resolves SEC claims that the bank, knowing about the underlying violations, mislead investors about the success of its business; the SEC settlement will be distributed to harmed investors.  The federal settlement is in addition to a $575 million 2018 settlement Wells Fargo entered into with 50 states and the District of Columbia and a $100 million 2016 fine from the CFPB arising from the same conduct.  DOJ; SEC; WD NC; CD Cal

February 19, 2020

Diageo plc will pay $5 million to resolve SEC charges that the alcohol producer's North American subsidiary, Diageo North America, engaged in channel-stuffing by pressuring distributors to buy products in excess of demand in order to meet internal sales targets in the face of declining market conditions. Diageo failed to disclose the trends that resulted from shipping products in excess of demand, the positive impact the overshipping had on sales and profits, and the negative impact that the unnecessary increase in inventory would have on future growth. SEC

Confidential - Securities Fraud Violation (Multi-Millions)

Constantine Cannon represented a whistleblower in making a submission under the SEC Whistleblower Program, which led to a successful government enforcement action and in a whistleblower award for our client of $1.7 million made in October 2020.  Read more --  CC.

February 11, 2020

Property developer Monique Brady of Rhode Island has been sentenced to 8 years in prison and ordered to pay $4.8 million in restitution for defrauding 23 investors of $10.3 million in a Ponzi scheme that ran from 2014 to 2018.  Brady told investors, many of them her own family, friends, and business associates, that her property rehabilitation business, MNB LLC, had secured contracts to perform large scale rehabilitation work on foreclosed properties in Connecticut, Massachusetts, New Hampshire, and Rhode Island.  To entice investors, Brady promised a 50% return on profits and showed forged emails that purported to show the contracts were valid.  In reality, however, the jobs she was hired to do were menial and paid less than $1,000, and she was using investor funds to finance an extravagant lifestyle.  When she became the subject of a federal investigation, she told investors to delete all records of their investments with her company, then met with federal officials to request that they investigate her investors for usury, before attempting to abscond to Vietnam.  DOJ; USAO RI

January 31, 2020

A former financial adviser, Li Lin Hsu, AKA Yilin Hsu Lee, has been sentenced to 11 years in prison and ordered to pay $5.3 million in restitution to the 20 victims of her $8.1 million Ponzi scheme.  Hsu began her scheme in 2014 while employed at Ameriprise Financial, promising victim investors, including her own relatives, that their funds would go toward low risk municipal bonds when in fact they were going toward homes in affluent neighborhoods, a luxury car, a luxury vacation, and luxury goods for Hsu herself. When Ameriprise discovered the misconduct in 2015, Hsu was fired and then barred by FINRA from working in the investment business, but not before she began her own companies, American Trading Group LLC and American Capital Republic, Inc, where she managed to defraud additional investors.  USAO CDCA

January 29, 2020

Christopher Dillon of New York has been sentenced to over 4 years in prison and ordered to pay over $5 million in restitution for his role in defrauding 27 investors of over $5 million.  Along with co-defendant Gilbert Lynagh, Dillon formed two companies, i2i Capital and i2i Settlement Partners LLC, and made false representations to investors regarding the nature of the investment and possible risks and rates of return.  Dillon and Lynagh then used investor funds to cover personal expenses, causing at least five investors to suffer substantial financial hardship.  USAO WDNY