SEC Charges Morgan Stanley in Connection With Failure to Detect or Prevent Misappropriation of Client Funds

The Securities and Exchange Commission today announced that Morgan Stanley Smith Barney (MSSB) has agreed to pay a $3.6 million penalty and to accept certain undertakings for its failure to protect against its personnel misusing or misappropriating funds from client accounts.

The SEC’s order finds that MSSB failed to have reasonably designed policies and procedures in place to prevent its advisory representatives from misusing or misappropriating funds from client accounts.

According to the SEC’s order, MSSB’s insufficient policies and procedures contributed to its failure to detect or prevent one of its advisory representatives, Barry F. Connell, from misusing or misappropriating approximately $7 million out of four advisory clients’ accounts in approximately 110 unauthorized transactions occurring over a period of nearly a year.   

“Investment advisers must view the safeguarding of client assets from misappropriation or misuse by their personnel as a critical aspect of investor protection,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office.  “Today’s order finds that Morgan Stanley fell short of its obligations in this regard.” read more »

N.J. manufacturer placed soldiers' lives at risk, man says in whistleblower suit

A New Jersey man has filed a whistleblower lawsuit alleging he was fired from his quality assurance job after complaining the company used foreign-made pieces on tanks that placed the lives of U.S. soldiers at risk.

Jeffrey Lechowicz, of Vernon in Sussex County, filed suit earlier this month against AllState Can Corp. of Parsippany, claiming the company "fraudulently and unlawfully" violated its contract with the U.S. Department of Defense.

Lechowicz claims AllState Can used foreign-made parts for filters used for the air purification system inside military tanks. The government contract stipulates the parts must be made in the United States, according to the suit filed June 12 in Essex County Superior Court.

The parts were shipped to HDT Expeditionary Systems, Inc., which had been awarded a U.S. Department of Defense contract to provide thousands of the parts called "Individual Distribution Filtration Systems," the suit states.

The suit claims AllState Can was six months behind on making the parts - also called "ends" - and that the company secretly resorted to buying them from China to fulfill the order. read more »

Payday-Loan Mogul Indicted for Masterminding Phantom Debt Scheme

A one-time payday-loan mogul was indicted on federal charges that he made up millions of fake debts and sold them to bill collectors, victimizing people across the country.

Joel Tucker, 49, was able to pull off the scheme because he already had his victims’ personal information from loan applications, according to an indictment unsealed June 29 in Kansas City, Missouri. But many of those people never took loans, let alone failed to pay them back, and Tucker didn’t own the loans anyway, prosecutors said. From 2014 to 2016, he earned $7.3 million from packaging and selling the information to collectors, they said.

“Tucker defrauded third-party debt collectors and millions of individuals listed as debtors through the sale of falsified debt portfolios,” according to the indictment. “These portfolios were false in that Tucker did not have chain of title to the debt, the loans were not necessarily true debts, and the dates, amounts and lenders were inaccurate and in some case fictional.”

Tucker was charged with interstate transportation of stolen money, bankruptcy fraud and falsifying bankruptcy records, counts that carry sentences of as much as 20 years each. The indictment, dated June 5, was unsealed on Friday after Tucker was arrested in Kansas.

Tucker, who was ordered to be released on bond, didn’t respond to an email seeking comment, and his court-appointed lawyer, Tim Henry, declined to comment. The next hearing in the case is scheduled for July 10. read more »

Florida urogynecology network pays $1.7 million to settle allegation of false claims

Florida urogynecology network has agreed to pay $1.7 million to settle allegations that it billed the government for services it did not provide, federal prosecutors said.

According to the U.S. Attorney’s Office in Orlando, when submitting claims to Medicare for procedures like lavage treatments and pelvic floor therapies, FWC Urogynecology used a billing code indicating it also performed additional services, despite not having done so.

By settling, the company concludes a lawsuit filed by a whistleblower under the False Claims Act, which allows private citizens to sue on behalf of the government for false claims.

The whistleblower will get about $300,000 from the settlement. read more »