Wells Fargo Advisors Settles SEC Charges for Improper Sales of Complex Financial Products

Misconduct Imposed Substantial Costs on Retail Customers

The Securities and Exchange Commission today announced that Wells Fargo Advisors LLC agreed to settle charges of misconduct in the sale of financial products known as market-linked investments, or MLIs, to retail investors. 

According to the order, the SEC found that Wells Fargo generated large fees by improperly encouraging retail customers to actively trade the products, which were intended to be held to maturity.  As described in the SEC’s order, the trading strategy – which involved selling the MLIs before maturity and investing the proceeds in new MLIs – generated substantial fees for Wells Fargo, which reduced the customers’ investment returns. read more »

U.S. top court rejects Nomura and RBS appeal in mortgage-backed securities case

The U.S. Supreme Court declined on Monday to hear an appeal brought by Nomura Holdings Inc and the Royal Bank of Scotland Group PLC seeking to overturn an order requiring them to pay $839 million for making false statements while selling mortgage-backed securities to Fannie Mae and Freddie Mac.

The court left in place a September ruling by the New York-based 2nd U.S. Circuit Court of Appeals that went against the banks, which had challenged the 2015 award on multiple grounds.

Lawyers for Nomura and RBS could not immediately be reached for comment. read more »

Ex-State Street executive pulled 'bait-and-switch' on clients: U.S. prosecutor

A former State Street Corp executive engaged in “bait-and switch” by promising to charge several of the bank’s clients low fees to execute billions of dollars of trades before secretly applying commissions to them, a U.S. prosecutor said on Monday.

Ross McLellan, a former executive vice president, sought to defraud customers including Kuwait’s sovereign wealth fund and European pension funds out of millions of dollars, prosecutor William Johnston told a federal jury in Boston.

In his closing argument following three weeks of trial, Johnston said the evidence showed McLellan from 2010 to 2011 directed employees to charge customers the hidden commissions in order to “secretly pick the pockets of State Street’s clients.”

He said that McLellan, with the help of two other executives who testified against him at trial, overcharged the customers despite the bank promising them low fees and to act in their best interest. read more »

Caris Agrees to Pay $8.5 Million to Settle False Claims Act Lawsuit Alleging That it Billed for Ineligible Hospice Patients

Caris Healthcare, L.P. and its wholly-owned subsidiary, Caris Healthcare, LLC (“Caris Healthcare”), have agreed to resolve allegations that they violated the False Claims Act by knowingly submitting false claims, and knowingly retaining overpayments, for the care of patients who were ineligible for the Medicare hospice benefit because they were not terminally ill, the Department of Justice announced today.  Under the settlement agreement, Caris Healthcare, a for-profit hospice chain that operates in Tennessee, Virginia, and South Carolina, has agreed to pay $8.5 million.

The settlement resolves allegations that Caris Healthcare admitted and recertified patients for hospice care that were ineligible for the hospice benefit.  The government’s complaint alleged that, in an effort to meet the aggressive admissions and census targets set by the company, Caris admitted patients whose medical records did not support a terminal prognosis.  The government’s complaint further alleged that when Caris was alerted to the ineligibility of these patients—via internal audits, concerns raised by its Chief Medical Officer, and recommendations of its nurse employees who actually examined the patients—Caris not only continued to submit hospice claims to Medicare for the patients, but also took no meaningful action to determine whether it had previously received improper payments for these and other patients that should have been returned to Medicare. 

“Today’s settlement is an important reminder that compliance programs and activities cannot exist in name only.  When a healthcare provider is put on notice that a patient is ineligible for a particular Medicare benefit or service, the healthcare provider cannot turn a blind eye to that information but, instead, must take reasonable steps to stop the improper conduct and to determine whether that conduct resulted in prior overpayments,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. read more »