Fort Lauderdale lawyer Scott Rothstein's office was a secured inner sanctum, complete with video cameras, secured entrance and hidden private elevator.
It also was a shrine to himself, plastered with photos showing Rothstein embracing powerful politicians, framed thank-you letters from charities and candidates he lavished with generous donations, grown-up toys like red Ferrari model cars and a Nixon action figure.
Amid a federal investigation into allegations that Rothstein was running a massive Ponzi scheme, his law partners at Rothstein Rosenfeldt Adler invited the media to tour the private office Thursday. A hired PR man and a lawyer portrayed the office's opulence, security and compartmentalized layout as evidence that even the partners were bamboozled by their hard-charging friend and colleague.
"Many people asked how is it possible that the attorneys didn't know about Mr. Rothstein's alleged activities?'' said spokesman Charles Jones. "We attempted to describe how Mr. Rothstein walled himself off from the firm. We believe the only way to get that message through was to show the layout of the office and the security system.''
Investors and law partners have accused Rothstein, 47, of cleaning them out of well over $100 million in a purported side business that he ran under the mantle of the law firm. He has been cooperating with U.S. prosecutors since his return from Morocco on Tuesday, providing details and identifying others who may have been involved.
Rothstein, who has not been charged, is staying at an undisclosed location in South Florida under federal surveillance. On Tuesday, a judge removed him as chief executive officer of the firm and appointed a receiver to unravel its finances.
The tour came just hours after FBI and IRS agents raided the firm at 401 E. Las Olas Blvd. Wednesday night. Agents left at 3:15 a.m. Thursday with 44 boxes of documents, including financial and computer records and the key to Rothstein's Ferrari.
Firm co-founder Stuart Rosenfeldt has said he had no clue about Rothstein's alleged investment scam, and that Rothstein alone handled all firm finances. Some legal observers find that difficult to swallow.
Attorney William Scherer, who represents a dozen investors out some $80 million, said Thursday that lawsuits are in the works against banks, insurance policies and Rothstein's assets.
But Jones and attorney Kendall Coffey ... a former U.S. attorney who was hired to represent the firm just before the scandal broke last weekend ... held the tour to show how other lawyers might not have known what Rothstein was doing.
Anyone entering Rothstein's suite of offices had to use an intercom. If Rothstein wanted to leave without being seen, he could exit through a second door. In the hallway, what appears to be an ordinary looking brown door is actually the elevator door.
Coffey described that elevator as "an extraordinary feature not seen in any law firm.''
Dozens of surveillance cameras and microphones hang from office ceilings. They were turned off a few days ago and federal authorities were given access to whatever had been previously recorded, Coffey said.
Outside Rothstein's personal office: a painting of Al Pacino as his character Michael Corleone in The Godfather.
The walls of Rothstein's office and other hallways, are lined with framed photos of the lawyer with politicians including Gov. Charlie Crist, former U.S. Senator Mel Martinez, U.S. Senator John McCain and Broward Sheriff Al Lamberti.
In one photo, Rothstein and Crist are blowing out the candles together on Crist's birthday cake. In another, they are standing together at the Versace mansion at a Rothstein-hosted fundraiser, where he served Kobe beef carpaccio, imported cheeses and chocolate souffle. Rothstein was part owner of the South Beach mansion.
The photos depict a man about town, sporting a huge grin with his arm around powerful figures, sometimes chomping on a cigar.
On his desk: four computer screens and the five Books of Moses.
"He lived like a high roller, a very flashy lifestyle, the life of the rich and famous ... until it all came crashing down,'' Coffey said.
Coffey and Jones released the FBI's seized-inventory list, which included trust account statements, bank logs, documents about Banyon Investment deposits, records from Toronto Dominion Bank and Gilbraltar Private Bank & Trust, and Rothstein's credit card records.
Fort Lauderdale-based Banyon was one of Rothstein's biggest investors in his "structured settlement'' fund. The alleged investment scheme entailed the sale of fabricated lawsuit settlements at a discount to investors. They fronted reduced payouts to plaintiffs and then collected profitable returns when the settlements were paid in full.
The accounts for Banyon and other Rothstein investors were held at a Toronto Dominion branch in Fort Lauderdale. TD Bank spokeswoman Rebecca Acevedo told The Associated Press that the bank "will work with the authorities to the fullest extent'' and is also conducting its own internal review of Rothstein's accounts.
Coral Gables-based Gibraltar Private Bank issued a statement saying the firm has payroll and other operations accounts with the bank and that officials have been in touch with the court-appointed receiver for the law firm.
Records also was taken from the offices of chief operating officer Debra Villegas and Irene Stay, chief financial officer.
Source
Monday, December 28, 2009
Tuesday, December 15, 2009
Lawyer Scott Rothstein's quick rise to life of a high roller ends even faster
If there was one thing Fort Lauderdale lawyer Scott Rothstein craved, it was attention. And how better to get it than to whip out his checkbook?
Like at Gov. Charlie Crist's 52nd birthday party/GOP fundraiser last year, when, instead of buying a $1,000 candle, Rothstein bought an entire chocolate cake covered with 52 candles. His donation: $52,000.
Like at an Eagles concert in January, when band leader Don Henley stood on stage and dedicated at Rothstein's request Life in the Fast Lane to the lawyer and his wife, Kimberly, for their first anniversary. His donation: $100,000, to a Henley environmental cause.
Like the TV ads showing Rothstein with star athletes Dan Marino and Alonzo Mourning, whose children's charities benefited from his philanthropic largesse.
"Scott wanted attention — he wanted to be the guy," said Roger Stone, a longtime Republican political operative who shared Rothstein's office suite. "Giving big checks and getting his butt kissed in public was the payoff."
But now, facing accusations of massive financial fraud, Rothstein is attracting attention of a different kind — and his life in the fast lane seems to have crashed spectacularly.
The FBI and the IRS are sifting through his computer files, and his Fort Lauderdale law firm is in shambles.
Over six years, Rothstein's net worth soared from at least $160,000 to tens of millions of dollars — including opulent waterfront homes, a fleet of foreign sports cars, flashy watches, a stake in the former Versace mansion in South Beach and a restaurant group, court records show.
Rothstein, 47, personally spent more than $14 million on a half-dozen properties in Broward County since June 2003, property records show. He also owned multimillion-dollar homes in Rhode Island and New York.
With the wealth and philanthropy came well-oiled connections in all the right places.
But the very people who trusted him — investors, law partners and clients — now accuse him of living large on their dime, running an investment scam that was a massive Ponzi scheme and wiping them out for what could be hundreds of millions of dollars.
"The mark of any good con man is the ability to get people to like them," said Steve Geller, a Broward County Commission candidate whose political committee received a $50,000 donation from Rothstein and now plans to return it. "The guy certainly spoke a great game."
Rothstein, who is cooperating with investigators, has not been criminally charged.
"I am sitting here smoking cigars with Marc," Rothstein said in a brief interview Sunday afternoon with the Miami Herald, referring to his attorney Marc Nurik. "Rumors of my demise have been greatly exaggerated. I'm doing pretty good."
Nurik said they had not been smoking cigars. "He is under a lot of pressure," Nurik said. "I don't want anybody to think he is having a good time."
Rothstein is under scrutiny for the alleged sale of employment discrimination settlements at a discount, through an investment tool known as "structured settlements."
He allegedly solicited investors to front reduced payouts to plaintiffs and then collect profitable returns when the settlements were paid off in full. But Rothstein is suspected of concocting lawsuits that investors thought were legitimate. Investors are now planning to sue him and his firm.
Only two years ago, the Florida Bar appointed Rothstein as vice chairman of a grievance committee that hears ethics and other complaints against attorneys.
It was a fast rise from modest beginnings for Rothstein, who grew up in the Bronx.
Rothstein moved to Florida in the late '70s, graduated from the University of Florida in 1984 and from Nova Southeastern University Law School four years later.
For years, he handled routine employment discrimination and other civil cases.
In 1993, Rothstein married Kimberly Hill, another attorney. By 2003, when she filed for divorce, Rothstein was barely prosperous, let alone affluent.
The couple owned about $206,000 in stocks and retirement plans, which they agreed to split in half, according to a marital settlement agreement.
Before the breakup, Rothstein had already gotten to know another lawyer in town: Stuart Rosenfeldt, his future law partner.
Rosenfeldt recruited Rothstein to join the firm he worked for in the late 1990s. Later Rothstein suggested they launch their own firm.
By 2007, the firm's growth was exploding. Rothstein Rosenfeldt Adler grew to 70 lawyers with offices in Fort Lauderdale, Boca Raton, Miami — plus a separate group of lawyers in Venezuela.
Partner Rosenfeldt maintains that he knew nothing about Rothstein's alleged scam, and that Rothstein had control of the firm's finances. A judge removed Rothstein as the firm's chief executive officer and appointed an independent receiver last week.
As his fortunes seemingly grew, the charismatic lawyer gave hundreds of thousands of dollars to the state Republican and Democratic parties and politicians — some of whom, including Crist, are now returning the donations.
Records show that since 1996, Rothstein and his law firm contributed at least $924,000 to 60 state candidates and state political committees and causes. He co-chaired fundraisers for President George W. Bush and several U.S. senators, including John McCain and Mel Martinez.
Though normally a big GOP donor, in the most recent campaign finance reporting period, Rothstein's law firm gave $200,000 to the Florida Democratic Party.
Some of Rothstein's investors became suspicious in late October when he failed to distribute the scheduled payments from their "structured settlements." They started contacting authorities.
Rothstein, it turned out, had flown to Morocco. He texted his law colleagues from there apologizing for "letting you all down,'' and said he was contemplating life in prison — or suicide.
"I am a fool," the message continued. "I thought I could fix it but got trapped by my ego and refusal to fail, and now all I have accomplished is hurting the people I love."
Rothstein did come back — in style — in a chartered private jet that arrived at Fort Lauderdale Executive Airport on Tuesday. He met with federal prosecutors and has been holed up in an undisclosed location since.
Dozens of FBI and IRS agents raided his office Wednesday, seizing 44 boxes of computer files and documents.
Miami Herald staff writers Douglas Hanks, Scott Hiaasen, Beth Reinhard, Jennifer Lebovich and Diana Moskovitz contributed to this report.
Source
Like at Gov. Charlie Crist's 52nd birthday party/GOP fundraiser last year, when, instead of buying a $1,000 candle, Rothstein bought an entire chocolate cake covered with 52 candles. His donation: $52,000.
Like at an Eagles concert in January, when band leader Don Henley stood on stage and dedicated at Rothstein's request Life in the Fast Lane to the lawyer and his wife, Kimberly, for their first anniversary. His donation: $100,000, to a Henley environmental cause.
Like the TV ads showing Rothstein with star athletes Dan Marino and Alonzo Mourning, whose children's charities benefited from his philanthropic largesse.
"Scott wanted attention — he wanted to be the guy," said Roger Stone, a longtime Republican political operative who shared Rothstein's office suite. "Giving big checks and getting his butt kissed in public was the payoff."
But now, facing accusations of massive financial fraud, Rothstein is attracting attention of a different kind — and his life in the fast lane seems to have crashed spectacularly.
The FBI and the IRS are sifting through his computer files, and his Fort Lauderdale law firm is in shambles.
Over six years, Rothstein's net worth soared from at least $160,000 to tens of millions of dollars — including opulent waterfront homes, a fleet of foreign sports cars, flashy watches, a stake in the former Versace mansion in South Beach and a restaurant group, court records show.
Rothstein, 47, personally spent more than $14 million on a half-dozen properties in Broward County since June 2003, property records show. He also owned multimillion-dollar homes in Rhode Island and New York.
With the wealth and philanthropy came well-oiled connections in all the right places.
But the very people who trusted him — investors, law partners and clients — now accuse him of living large on their dime, running an investment scam that was a massive Ponzi scheme and wiping them out for what could be hundreds of millions of dollars.
"The mark of any good con man is the ability to get people to like them," said Steve Geller, a Broward County Commission candidate whose political committee received a $50,000 donation from Rothstein and now plans to return it. "The guy certainly spoke a great game."
Rothstein, who is cooperating with investigators, has not been criminally charged.
"I am sitting here smoking cigars with Marc," Rothstein said in a brief interview Sunday afternoon with the Miami Herald, referring to his attorney Marc Nurik. "Rumors of my demise have been greatly exaggerated. I'm doing pretty good."
Nurik said they had not been smoking cigars. "He is under a lot of pressure," Nurik said. "I don't want anybody to think he is having a good time."
Rothstein is under scrutiny for the alleged sale of employment discrimination settlements at a discount, through an investment tool known as "structured settlements."
He allegedly solicited investors to front reduced payouts to plaintiffs and then collect profitable returns when the settlements were paid off in full. But Rothstein is suspected of concocting lawsuits that investors thought were legitimate. Investors are now planning to sue him and his firm.
Only two years ago, the Florida Bar appointed Rothstein as vice chairman of a grievance committee that hears ethics and other complaints against attorneys.
It was a fast rise from modest beginnings for Rothstein, who grew up in the Bronx.
Rothstein moved to Florida in the late '70s, graduated from the University of Florida in 1984 and from Nova Southeastern University Law School four years later.
For years, he handled routine employment discrimination and other civil cases.
In 1993, Rothstein married Kimberly Hill, another attorney. By 2003, when she filed for divorce, Rothstein was barely prosperous, let alone affluent.
The couple owned about $206,000 in stocks and retirement plans, which they agreed to split in half, according to a marital settlement agreement.
Before the breakup, Rothstein had already gotten to know another lawyer in town: Stuart Rosenfeldt, his future law partner.
Rosenfeldt recruited Rothstein to join the firm he worked for in the late 1990s. Later Rothstein suggested they launch their own firm.
By 2007, the firm's growth was exploding. Rothstein Rosenfeldt Adler grew to 70 lawyers with offices in Fort Lauderdale, Boca Raton, Miami — plus a separate group of lawyers in Venezuela.
Partner Rosenfeldt maintains that he knew nothing about Rothstein's alleged scam, and that Rothstein had control of the firm's finances. A judge removed Rothstein as the firm's chief executive officer and appointed an independent receiver last week.
As his fortunes seemingly grew, the charismatic lawyer gave hundreds of thousands of dollars to the state Republican and Democratic parties and politicians — some of whom, including Crist, are now returning the donations.
Records show that since 1996, Rothstein and his law firm contributed at least $924,000 to 60 state candidates and state political committees and causes. He co-chaired fundraisers for President George W. Bush and several U.S. senators, including John McCain and Mel Martinez.
Though normally a big GOP donor, in the most recent campaign finance reporting period, Rothstein's law firm gave $200,000 to the Florida Democratic Party.
Some of Rothstein's investors became suspicious in late October when he failed to distribute the scheduled payments from their "structured settlements." They started contacting authorities.
Rothstein, it turned out, had flown to Morocco. He texted his law colleagues from there apologizing for "letting you all down,'' and said he was contemplating life in prison — or suicide.
"I am a fool," the message continued. "I thought I could fix it but got trapped by my ego and refusal to fail, and now all I have accomplished is hurting the people I love."
Rothstein did come back — in style — in a chartered private jet that arrived at Fort Lauderdale Executive Airport on Tuesday. He met with federal prosecutors and has been holed up in an undisclosed location since.
Dozens of FBI and IRS agents raided his office Wednesday, seizing 44 boxes of computer files and documents.
Miami Herald staff writers Douglas Hanks, Scott Hiaasen, Beth Reinhard, Jennifer Lebovich and Diana Moskovitz contributed to this report.
Source
Sunday, November 15, 2009
Structured Settlement Company Fairfield Funding Employees and Customers Agree: Workshop A Huge Success
Fairfield Funding, Georgia’s leading provider of structured settlement and annuity purchasing services, expressed a great deal of pride in their customer service staff for their role in leading a week-long series that provided the public with free information on a variety of topics concerning selling structured settlements and annuity payments. With the recent economic turmoil, especially in the housing market, many people are choosing to sell their structured settlements in order to raise instant capital that they can use to stay ahead on their property payments. Also, raising liquid assets when the economy is depressed may allow individuals to capitalize on the current buyer’s market. However, being educated about both the promising opportunities and potential pitfalls of selling a structured settlement is a must for consumers anywhere. Fairfield Funding's main goal was to provide the most up-to-date news and specialized information.Fairfield Funding senior account executive Robert Thomas noted, “Our company’s tradition is not only to serve our customers with speed and attentiveness, but also to educate them about what is best for their specific settlement situation.” According to company executives, the training was such a success that they are planning to expand the educational aspect of their operations to include additional online chat forums and webinars that can be easily accessed on their website.
They were also a big hit with those who attended. One attendee said that she was extremely impressed with the friendly professionalism of the Fairfield Funding staff and the quality of the information that they shared. She was interested in finding out options about selling structured settlements, but learned so much more. A lot of her friends have questions about these things, and now she feels she can give them some answers. She said she would recommend Fairfield Funding to any one of them.
The topics included an overall outlook for the structured settlement industry, practices to avoid when seeking to turn settlements into cash, and advice on how to tailor settlement plans to specific goals. Also, they provided information on the services provided by Fairfield Funding, which include cash for annuity, cash for settlement, cash for structured settlement payments, cash for lottery, pre-settlement, life settlement, and other annuities.
Fairfield Funding (a Division of APIS) is a full service funding company specializing in the purchasing and funding of structured settlements, life settlements, pre-settlement, lottery, and other annuities. Collectively, Fairfield Funding management has over fifty years of experience in the financial services arena. The Atlanta-based company specializes in meeting the short-term financial needs of its clients through low-cost funding transactions.
Source
They were also a big hit with those who attended. One attendee said that she was extremely impressed with the friendly professionalism of the Fairfield Funding staff and the quality of the information that they shared. She was interested in finding out options about selling structured settlements, but learned so much more. A lot of her friends have questions about these things, and now she feels she can give them some answers. She said she would recommend Fairfield Funding to any one of them.
The topics included an overall outlook for the structured settlement industry, practices to avoid when seeking to turn settlements into cash, and advice on how to tailor settlement plans to specific goals. Also, they provided information on the services provided by Fairfield Funding, which include cash for annuity, cash for settlement, cash for structured settlement payments, cash for lottery, pre-settlement, life settlement, and other annuities.
Fairfield Funding (a Division of APIS) is a full service funding company specializing in the purchasing and funding of structured settlements, life settlements, pre-settlement, lottery, and other annuities. Collectively, Fairfield Funding management has over fifty years of experience in the financial services arena. The Atlanta-based company specializes in meeting the short-term financial needs of its clients through low-cost funding transactions.
Source
Wednesday, October 28, 2009
Settlement deal for HK Lehman investors questioned
HONG KONG -- Hong Kong legislators questioned Monday if a settlement deal returns enough money to investors who bought $1.8 billion in failed Lehman Brothers-backed derivatives and whether it punishes the banks that sold them.
The investors - some of them retirees - were outraged when Lehman collapsed in September, staging protests and accusing banks of peddling risky financial products without explaining them properly. The Lehman-backed products were labeled "mini-bonds," giving the impression of a safe, conservative investment.
Under a settlement deal negotiated by Hong Kong's Securities and Futures Commission announced on July 23, 16 local banks agreed to return 60 or 70 percent of the principal to thousands of investors, with those over 65 getting the highest amount. The payout amounts to $6.3 billion Hong Kong dollars ($813 million).
But in a legislative hearing Monday, lawmakers questioned why regulators didn't pressure the banks to return the principals in full. Several dozen investors chanting "100 percent compensation" protested outside the legislature building in Hong Kong's financial district before Securities and Futures Commission Chief Executive Martin Wheatley testified.
Wheatley said the commission doesn't have the legal power to order banks to return a certain amount and had to accept what the banks offered. He added the deal offers the certainty of some compensation soon, instead of relying on litigation.
"We have all along sought to reach an agreement that can see rapid return of a significant part of investors' capital, rather than a very complex and drawn-out set of procedures through the courts with no certainty as to the ultimate outcome," he said.
Thursday, October 15, 2009
Structured Settlement Company, Fairfield Funding Expands Atlanta Georgia Headquarters
The move accommodates recent growth and enables Fairfield Funding to provide the best services to its clients. Buckhead is the major Atlanta financial and commercial district, often referred to as the Beverly Hills of the South.
“The expansion is attributed to our entire team that is working so hard to make Fairfield Funding one of the leaders in the structured settlement industry,” states James Shaw, Principal at Fairfield Funding.
Fairfield Funding offers a suite of funding services to its clients including purchasing structured settlement, pre-settlement, life settlement, lottery, and other annuities. The experienced funding services team delivers a targeted solution to its clients’ individual needs and circumstances in the most cost effective way. Fairfield Funding’s clients get the most cash for structured settlement. A structured settlement can be sold either in full or in part. The flexibility of a lump sum option is what makes this financial resource so useful. By selling portions of a structured settlement, the transaction can be customized so that both a lump sum of cash is received while the steady cash flow provided by the annuity payments continues. In fact, Fairfield Funding recommends its clients to keep as much as possible of their payments and only use the minimal amount to reach their financial needs.
“I would recommend Fairfield Funding to anyone thinking about selling their payments! After shopping around it was obvious to me that they had the best rates. The process was smooth and easy and my Sales Consultant Rick was very nice.” Amy S. Lake Placid, FL
Fairfield Funding (a Division of APIS) established in 2008 is a full service funding company specializing in the purchasing and funding of structured settlements and life settlements. Collectively, Fairfield Funding management has over 50 years of experience in the financial services arena. The Atlanta based company is specialized in meeting the short-term financial needs of its clients through low cost funding transactions. Savings from low operating costs are passed on to its clients
Source
“The expansion is attributed to our entire team that is working so hard to make Fairfield Funding one of the leaders in the structured settlement industry,” states James Shaw, Principal at Fairfield Funding.
Fairfield Funding offers a suite of funding services to its clients including purchasing structured settlement, pre-settlement, life settlement, lottery, and other annuities. The experienced funding services team delivers a targeted solution to its clients’ individual needs and circumstances in the most cost effective way. Fairfield Funding’s clients get the most cash for structured settlement. A structured settlement can be sold either in full or in part. The flexibility of a lump sum option is what makes this financial resource so useful. By selling portions of a structured settlement, the transaction can be customized so that both a lump sum of cash is received while the steady cash flow provided by the annuity payments continues. In fact, Fairfield Funding recommends its clients to keep as much as possible of their payments and only use the minimal amount to reach their financial needs.
“I would recommend Fairfield Funding to anyone thinking about selling their payments! After shopping around it was obvious to me that they had the best rates. The process was smooth and easy and my Sales Consultant Rick was very nice.” Amy S. Lake Placid, FL
Fairfield Funding (a Division of APIS) established in 2008 is a full service funding company specializing in the purchasing and funding of structured settlements and life settlements. Collectively, Fairfield Funding management has over 50 years of experience in the financial services arena. The Atlanta based company is specialized in meeting the short-term financial needs of its clients through low cost funding transactions. Savings from low operating costs are passed on to its clients
Source
Monday, September 28, 2009
TD Ameritrade's ARS settlement excludes RIAs
TD Ameritrade Holding Corp.'s agreement with regulators last week to buy back $456 million of auction rate securities from individual investors, charities and small- business clients leaves registered investment advisers out in the cold.
The pact with the Securities and Exchange Commission and state regulators in New York and Pennsylvania doesn't extend to clients who bought the securities through independent RIAs or who transferred auction rate securities to TD Ameritrade for custody after buying them from another firm.
That is be-cause regulators focused on sales practice violations committed directly by TD Ameritrade brokers, who marketed the securities as liquid alternatives to money markets funds, with slightly higher yields, according to regulators.
“At the end of the day, our view— and all the federal and state regulators agreed with us — was that it applies to the retail clients only, be-cause there was no intermediary between us and them,” said Fred Tomczyk, president and chief executive of the Omaha, Neb.-based firm. “The regulators realize that the independent RIAs were themselves acting as fiduciaries, and we were acting as custodians.”
TD Ameritrade's settlement is being closely monitored because it could be a precedent for future settlements as regulators press auction rate cases against other brokers, including some RIA custodians, whose clients are stuck with the flawed securities. When Boston-based Fidelity Investments last year agreed to repurchase some ARS, it similarly excluded clients of RIAs from the offer.
Mr. Tomczyk conceded that the distinction might irritate RIAs who keep their customers' assets with TD Ameritrade and who conduct much of their trading through the firm. The advisers may be especially irked because the firm has been pushing hard in recent years to develop its institutional arm for RIAs as part of its plan to diversify from a largely commission-based revenue model.
Advisers who purchased ARS for clients are in some ways in the same boat as TD Ameritrade and other “downstream” brokers who initially argued that they were so far removed from the underwriting of the securities and the operations of the auctions that they weren't responsible for failing to anticipate the market's collapse.
That collapse left investors stuck with more than $300 billion of the long-term debt, which was sold with promises that it could be redeemed at weekly or, approximately, monthly intervals.
“We totally understand those points, and in our hearts we agree with them,” Mr. Tomczyk said of aggrieved advisers. “But as an organization you have to stand back and do what's right for the organization.”
Source
The pact with the Securities and Exchange Commission and state regulators in New York and Pennsylvania doesn't extend to clients who bought the securities through independent RIAs or who transferred auction rate securities to TD Ameritrade for custody after buying them from another firm.
That is be-cause regulators focused on sales practice violations committed directly by TD Ameritrade brokers, who marketed the securities as liquid alternatives to money markets funds, with slightly higher yields, according to regulators.
“At the end of the day, our view— and all the federal and state regulators agreed with us — was that it applies to the retail clients only, be-cause there was no intermediary between us and them,” said Fred Tomczyk, president and chief executive of the Omaha, Neb.-based firm. “The regulators realize that the independent RIAs were themselves acting as fiduciaries, and we were acting as custodians.”
TD Ameritrade's settlement is being closely monitored because it could be a precedent for future settlements as regulators press auction rate cases against other brokers, including some RIA custodians, whose clients are stuck with the flawed securities. When Boston-based Fidelity Investments last year agreed to repurchase some ARS, it similarly excluded clients of RIAs from the offer.
Mr. Tomczyk conceded that the distinction might irritate RIAs who keep their customers' assets with TD Ameritrade and who conduct much of their trading through the firm. The advisers may be especially irked because the firm has been pushing hard in recent years to develop its institutional arm for RIAs as part of its plan to diversify from a largely commission-based revenue model.
Advisers who purchased ARS for clients are in some ways in the same boat as TD Ameritrade and other “downstream” brokers who initially argued that they were so far removed from the underwriting of the securities and the operations of the auctions that they weren't responsible for failing to anticipate the market's collapse.
That collapse left investors stuck with more than $300 billion of the long-term debt, which was sold with promises that it could be redeemed at weekly or, approximately, monthly intervals.
“We totally understand those points, and in our hearts we agree with them,” Mr. Tomczyk said of aggrieved advisers. “But as an organization you have to stand back and do what's right for the organization.”
Source
Tuesday, September 15, 2009
TEXT-Fitch says APAC CDOs lead structured finance Q209 dwngrades
Fitch Ratings has today commented that a total of 101 tranches (including public, private, international and national ratings) were downgraded during the second quarter of 2009 (Q209), while seven were upgraded. Additionally, 139 tranches were affirmed, accounting for nearly 11% of all outstanding tranches rated by Fitch in the region.
"CDOs accounted for the majority of downgrades this quarter as the first Asia-Pacific tranches defaulted, as tranche credit enhancements were permanently eroded following final settlements on several high profile investment grade corporate credit events triggered in previous quarters. Tranche defaults, as a result of the final settlements, led to the downgrades of 8 corporate CDO tranches to 'D' during the quarter," notes Alison Ho, Director and Head of Performance Analytics in the agency's Asia Pacific Structured Finance team. "Three tranches from the troubled Mobius ELR-01 transaction were also downgraded to 'D' during the quarter, although this was due to circumstances specific to this transaction, and is not indicative of wider credit issues in Australian ABS," adds Ms. Ho.
There were a total of 58 CDO downgrades, 12 of which were simultaneously withdrawn, following tranche defaults and subsequent note cancellations by issuers. Two Indian corporate entities were also downgraded in Q209, resulting in the downgrades of 24 series from 20 single loan sell down transactions. In Japan, seven ABS tranches were downgraded as a result of similar rating actions on life insurers, to which the ratings are linked.
All of the tranches whose ratings were placed on Rating Watch Negative (RWN) in the second quarter are from Japanese CMBS transactions, predominantly as a result of Fitch's review of transactions exposed to liquidation type loans. The performance of these transactions depends on the ability of the borrowers to dispose of properties, which in the current market has proved challenging.
Source
"CDOs accounted for the majority of downgrades this quarter as the first Asia-Pacific tranches defaulted, as tranche credit enhancements were permanently eroded following final settlements on several high profile investment grade corporate credit events triggered in previous quarters. Tranche defaults, as a result of the final settlements, led to the downgrades of 8 corporate CDO tranches to 'D' during the quarter," notes Alison Ho, Director and Head of Performance Analytics in the agency's Asia Pacific Structured Finance team. "Three tranches from the troubled Mobius ELR-01 transaction were also downgraded to 'D' during the quarter, although this was due to circumstances specific to this transaction, and is not indicative of wider credit issues in Australian ABS," adds Ms. Ho.
There were a total of 58 CDO downgrades, 12 of which were simultaneously withdrawn, following tranche defaults and subsequent note cancellations by issuers. Two Indian corporate entities were also downgraded in Q209, resulting in the downgrades of 24 series from 20 single loan sell down transactions. In Japan, seven ABS tranches were downgraded as a result of similar rating actions on life insurers, to which the ratings are linked.
All of the tranches whose ratings were placed on Rating Watch Negative (RWN) in the second quarter are from Japanese CMBS transactions, predominantly as a result of Fitch's review of transactions exposed to liquidation type loans. The performance of these transactions depends on the ability of the borrowers to dispose of properties, which in the current market has proved challenging.
Source
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