Securities Arbitrations

Charles Schwab YieldPlus Fund

The Firm has recently filed arbitration claims on behalf of individual and institutional investors in California who suffered losses in the Schwab YieldPlus Fund (Ticker symbols: SWYSX, SWYPX). The arbitration claims allege that Charles Schwab & Co., Inc. ("Schwab") and the manager of the YieldPlus Fund misrepresented or failed to disclose material facts pertaining to the Fund, namely, that this was an ultra-short bond fund that was safe, liquid, and similar to a CD or money market fund but with a slightly higher return.

Based on Schwab's marketing, the Fund attracted many conservative investors, including retirees, businesses, and others seeking a safe alternative to cash. As the Fund grew it became highly concentrated toward mortgage-backed securities, and when the market for these securities deteriorated, their price and their liquidity did as well. Schwab subsequently made continuing misrepresentations to its existing YieldPlus Fund investors intended to persuade them not to liquidate their holdings.

The Fund held assets of $13.5 billion on July 31, 2007, but the fund went into a spectacular free fall that saw assets dwindle to just $.507 billion as of May 31, 2008.

If you purchased shares in the Schwab YieldPlus Fund and sustained losses in this investment, you may have legal claims based on the above misrepresentations and omissions to disclose material facts. Please contact us to discuss your potential claims and options.

Cruz v. Citigroup, FINRA Arb. No. 07-00350, San Francisco, CA, December 2008

After a four day arbitration hearing in San Francisco, Thomas Mauriello obtained an arbitration award of $88,750 for a retiree who had turned over his retirement account to Citigroup Global Markets, Inc., formerly Salomon Smith Barney. The client was a Mexican immigrant who had invested his 401K retirement savings after 30 years working as a bookkeeper at the same company. He was a conservative investor with no prior brokerage firm accounts. He also had a serious disability and a grown child (dependent) with a serious disability. At the outset of the account, the advisor invested the client's assets 45% into technology and telecommunications stocks. The account was invested through Citigroup's Portfolio Management Group ("PMG"), through which purportedly elite Citigroup financial advisors handle client accounts on a discretionary account basis, charging a percentage fee based on asserts under management. In an arbitration award issued on December 22, 2008, the arbitration panel specifically found that the Citigroup financial advisor had breached his fiduciary duty to the client, had recommended unsuitable investments, and had acted negligently.

1991 Francis C. Bourne Sr. Trust v. A.G.Edwards, NASD Arb. 04-01964, April 2005, Hartford, CT

Claimant was the trustee and beneficiary of a trust created by her grandfather to support her and her children. She opened an account with A.G. Edwards in 1999 with assets of $343,907.46, consisting of approximately $290,000 in money market funds and $50,000 in Georgia Power Capital Trust bonds. She indicated that these funds were important to her retirement and that she could not afford to subject them to significant risk. A new account form listed the investment objective as "conservative growth." At the broker's recommendation, the trust sold all of the money market fund and all of the bonds and invested the proceeds into individual equities, largely technology stocks. The trust lost $138,000. The arbitration claim alleged unsuitable recommendations, negligence, breach of contract, breach of fiduciary duty, and negligent supervision. After a hearing in Hartford, CT, claimant was awarded $138,000. The award was achieved under very difficult circumstances at the hearing, due to the conduct of the arbitration chairperson. The chairperson, among other things: disparaged and belittled the claimant's testimony, overtly through comments and also through gestures with respondent's counsel; repeatedly arbitrarily objected to and cut off questioning and testimony; and, during testimony of witnesses, checked and responded to his emails on his Blackberry, several times missing testimony and objections that had to be repeated. Despite these unusual obstacles, claimant achieved an award of 100% of her net out of pocket losses.

Harris v. First Securities USA, Inc., NASD Arbitration, San Francisco, CA, February 2002

Retired corporate executive and sophisticated investor sued brokerage firm and registered representative for fraud, unsuitability, and negligence in recommending unrated municipal bonds and failing to advise of ongoing problems with bond issues. Claimant sought damages of approximately $500,000. Award: Claimant granted $333,000 in damages.

Long v. La Jolla Securities Corporation, NASD Arbitration, San Diego, CA, October 1998

Represented broker-dealer in defense of claim by sophisticated public customer for fraud in connection with securities purchase, seeking recovery of $200,000 in compensatory and punitive damages; and prosecuted counter claim by broker dealer seeking $48,000.00 in compensatory damages for reneged trade. Award: customer claim denied in entirety; broker-dealer counterclaim granted in amount of $43,000.00.

Cruttenden Roth, Inc. v. Choi, NASD Arbitration, New York, NY, July 1997, February 1998

Represented sophisticated public customer (manager of day trading company) in defense of claim by broker dealer for reneged trade; claim that customer ordered 5,000 shares of stock; customer maintained she placed trade for 2,000 shares of stock, offered to pay for such shares, but was never presented with that trade. Stock dropped 6-1/2 points in one day before being sold. Award: claim granted for 2,000 shares.

Guidish v. Scheman, AAA Arbitration, San Diego, CA, October 1996

Represented registered representative in claim by public customer against representative, broker-dealer (Marketing One Securities), and bank (Wells Fargo Bank) for open book account, fraud, elder abuse, punitive damages, and attorneys fees in connection with a loan made by customer to representative. Registered representative admitted loan and debt but denied fraud and other claims. Award: claim granted against representative for (undisputed) amount owed on loan; all other claims against representative (and other parties) denied.