Securities Lawyer Blog

Earlier this week, the Securities and Exchange Commission (SEC) filed a complaint against a former UBS financial adviser in an allegedly fraudulent scheme that began in 2006. The defendant has agreed to settle the matter without admitting or denying the charges.

According to the SEC's complaint, between 2006 and 2009, the broker who held Series 7, 63 and 65 licenses and worked for UBS Financial Services LLC in the Walnut Creek, California office, established a private pooled investment fund to be comprised of life settlement policies.

After advising his clients that this was a sound investment, he raised $1.4 million for the investments from his UBS clients. However, rather than investing it as agreed, he used the funds for his own personal use, spending it on a lavish lifestyle. He allegedly did so by "liquidating his customers' securities and funneling the money back to the fund and its investors."

As an attempt to avoid the theft being discovered, the broker is said to have convinced some of his other UBS customers to liquidate their securities in the amount of $1.9 million. In some instances, the broker asked customers to provide their liquidated securities to him as loans on which they would make a quick return. He then allegedly took the proceeds of those sales and loans to replenish the original fund.

Criminal charges have been filed against the former UBS adviser for conduct involved in the scheme alleged by the SEC.

The adviser has been permanently enjoined from further violations of Sections 10(b) and 15(a) of the Securities Exchange Act and Rule 10b-5. He is also forever barred from the securities industry.

New York City's Gusrae Kaplan Nusbaum PLLC, represents brokers before all regulatory agencies. Please contact our law firm for a confidential consultation with one our lawyers regarding representation and our litigation and advisory practice. Our highly-respected, preeminent lawyers have decades of experience and expertise representing broker-dealers.

It's hard to imagine a better holiday gift than those handed out earlier this week to Broadcom's former executives. The National Law Journal reports that the stock options backdating shareholder suits against Broadcom Corp. could be less viable now that the criminal case against former executives has been dismissed. The Securities Lawyer Blog discussed these cases in an earlier posting.

The defendants are bound to have a more happy holiday season after the rulings from United States District Court Judge Cormac Carney. He had some very harsh words for the government, saying they had "distorted the truth-finding process."

Entering an acquittal after two months of trial for William Ruehle, former Chief Financial Officer, the judge stated that "[f]or these constitutional rights to have true meaning, the government must not do anything to intimidate and improperly influence witnesses. Sadly, they did so in this case." 
The judge also noted evidentiary issues stating that there was "considerable debate" about accounting practices used by Broadcom and many other companies.

Judge Carney also handed down dismissals of the backdating charges against Broadcom co-founder and former CEO, Henry Nicholas and then ordered the government to show cause why an indictment alleging narcotics crimes against Nicholas, should not also be dismissed.

The Securities and Exchange Commission's backdating case against Ruehle, Nicholas, Henry Samueli and David Dull, Broadcom's former general counsel was dismissed without prejudice.


All of this has now put the civil claims against Broadcom co-founders Henry Nicholas and Henry Samueli, former Chief Financial Officer William Ruehle and former General Counsel David Dull in a new light. These cases, a derivative lawsuit and a class action, are currently pending before Judge Manuel Real and are related to the backdating of stock options.

According to the NLJ, the defense attorneys for Ruehle say they " 'are hopeful that the civil plaintiffs revisit their decision to charge Mr. Ruehle in light of the results of the criminal case ... since " '[i]t was clear, following two months of trial, that there was no fraud committed in connection with Broadcom's stock option program.' "

Plaintiffs' counsel appear undeterred, while defense counsel caution that the civil case will be more difficult to prove given Judge Carney's finding of no wrongful intent in the options granting process at Broadcom, among other issues that could make the showing of materiality and scienter very difficult to prove.

Only recently, U.S. District Court Judge Manuel Real granted final approval of a $118 million partial settlement in the derivative action. Judge Real previously issued a stay in the class action pending resolution of the criminal case against Ruehle and Nicholas.