Posts tagged ‘Provident Royalties investigation’
Milkie/Ferguson Investments shuts down.
According to reports, Milkie/Ferguson Investments Inc., a small broker-dealer that was a big seller of fraudulent Provident Royalties LLC private placements, has shut down.
Apparently, the vast majority of the registered representatives with Milkie/Ferguson will transfer to Berthel Fisher & Co. Financial Services Inc.
Milkie/Ferguson filed its broker-dealer withdrawal request with the Financial Industry Regulatory Authority Inc. on July 26.
According to U.S. Bankruptcy Court filings, Milkie/Ferguson reps sold at least $4.1 million of Provident Royalties preferred shares. That made it the eleventh largest firm that sold those shares.
The figure may be incomplete, however, as the bankruptcy filing counted only about half of the $485 million in Provident Royalties shares sold by independent broker-dealers to investors.
Selling Provident Royalties preferred shares from 2006 to 2009 turned into a death warrant for dozens of independent broker-dealers. At least 23 of the 60 broker-dealers that sold Provident Royalties shares are out of business, many of them swamped by the cost of fighting clients’ lawsuits related to the fraud.
With about 40 brokers and $6.6 million in revenue last year, Milkie/Ferguson was a small firm. Such firms are having a difficult time staying in business due to several factors: equity markets that scare retail investors, rising costs of technology, increased fees from regulators such as Finra and the fallout from failed investments such as Provident Royalties, Medical Capital, Desert Capital REIT, and Behringer Harvard.
The foregoing information, which is publicly available, is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
Two Provident Royalties founders fined by FINRA
It is being reported that Brendan Coughlin and Henry Harrison, two co-founders of Provident Royalties LLC, have been fined $50,000 each and suspended from the securities industry for two years, according to a settlement with the Financial Industry Regulatory Authority Inc.
According to the Finra order of settlement, which was submitted by Mr. Coughlin and Mr. Harrison in April and accepted by Finra’s National Adjudicatory Council and Office of Disciplinary Affairs, the two executives failed to make various disclosures regarding where the money came from for payments and distributions to investors in the private placements. They also failed to disclose the extent of the involvement of Provident co-founder Joseph Blimline, who was convicted of running two oil-and-gas Ponzi schemes, including Provident, between 2003 and 2009, according to the Justice Department.
Under the settlement, Mr. Coughlin and Harrison did not admit or deny any Finra allegations.
The money raised for the offerings between 2006 and 2009 was purportedly to purchase oil-and-gas interests such as real estate, leases and mineral rights. However, Provident Royalties turned out to be nothing more than a giant Ponzi scheme.
Dozens of the brokerage firms that sold Provident private placements have since shut down, many failing because of the cost of investor lawsuits and complaints stemming from the failed Provident private placements.
The White Law Group continues to represent Provident Royalties investors in claims against the remaining brokerage firm that sold the investment. Brokerage firms have a fiduciary duty to perform due diligence on any investment before offering it for sale to their clients. Given what is known about Provident Royalties, it is clear that the investment never should have been approved to be sold by any brokerage firm.
To discuss your legal options with a securities attorney, please call The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
Expert Says Some Brokerage Firms Performed Poor Private Placement Due Diligence
A recent article by Bruce Kelly of the investmentnews.com reported the opinion of Gordon Yale, a forensic accountant, who has served as an expert for dozens of investors who have brought claims against brokerage firms related to the sale of failed private placement investments issued by companies like DBSI, Inc., Medical Capital Financial Corp., and Shale (Provident) Royalties. In Mr. Yale’s expert opinion, “Broker-dealers that sold billions of dollars in allegedly fraudulent private placements failed massively in their due-diligence responsibilities to investors.”
Yale likened the due diligence failures of firms that sold these private placements to the failures of large banks to perform due diligence on bad mortgage backed securities that led to the mortgage crisis. He said, “It was basically the same recklessness…but it was done by middle- or lower-tier firms and [with] a different set of products.”
Certainly, firms that sold these investments contend that they did do adequate due diligence. However, recent arbitration awards as well as fines and sanctions issued by securities regulators like the Financial Industry Regulatory Association (FINRA) indicate that they are at least skeptical of the due diligence work performed. Kelly notes that FINRA recently fined the former president of Capital Financial Services $10,000 related to the sale of Medical Capital and Provident Royalties. He also noted that only one of the cases that Yale has worked on necessitated his testimony in arbitration (many settled in advance of arbitration) and in that case a $1.2 million award was ordered to be given to an investor by Securities America Inc. and a broker.
In the investmentnews.com piece Yale indicated his opinion that firms too often relied on 3rd party due diligence reports, he said, “They viewed those reports as the end of the process, rather than the beginning. There’s a notice to [Finra] members, 05-48, that basically says you can outsource any function, but you can’t outsource your responsibility for compliance with federal securities laws or regulations.” Yale feels like firms, especially one’s like Securities America who sold $700 million in Medical Capital notes, should have hired an independent CPA to conduct financial due diligence on the investments.
The White Law Group is all too familiar with the difficulties investors have had over the last several years with failed private placements. The firm has represented and currently represents many investors who have suffered damages as a result of the recommendation of their financial professional to purchase private placement investments from companies like DBSI, Medical Capital, and Shale (Provident) Royalties. We have found that in many cases the FINRA registered firms failed in their fiduciary duty to perform adequate due diligence and to disclose the risks involved with these investments. Brokerage firms that fail in this fiduciary duty may be liable in FINRA dispute resolution claims to recover investment losses.
If you are concerned about an investment you made in a private placement like those from DBSI, Medical Capital, and Shale (Provident) Royalties and would like to speak to an attorney about your potential to recover investment losses through a FINRA claim please call out Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
Claims to Recover Provident Royalties LLC Investment Losses Continue
Have you suffered losses due to your investment in Provident Royalties LLC and/or their affiliates like Provident Resources, Provident Energy, and Shale Royalties? If you did, the attorneys of The White Law Group may be able to help you recover your investment losses through FINRA arbitration.
Provident Royalties LLC and its related entities are alleged to have perpetrated a $485 million fraudulent offering and Ponzi scheme.
A July 2009 release from the SEC announced the first move by the SEC to take serious action against Provident Royalties. The release stated the full list of defendants in the case; the case number 3-09CV1238-L is the Securities and Exchange Commission v. Provident Royalties, LLC, Provident Asset Management, LLC, Provident Energy 1, LP, Provident Resources 1, LP, Provident Energy 2, LP, Provident Energy 3, LP, Shale Royalties II, Inc., Shale Royalties 3, LLC, Shale Royalties 4, Inc., Shale Royalties 5, Inc., Shale Royalties 6, Inc., Shale Royalties 7, Inc., Shale Royalties 8, Inc., Shale Royalties 9, Inc., Shale Royalties 10, Inc., Shale Royalties 12, Inc., Shale Royalties 14, Inc., Shale Royalties 15, Inc., Shale Royalties 16, Inc., Shale Royalties 17, Inc., Shale Royalties 18, Inc., Shale Royalties 19, Inc., Shale Royalties 20, Inc., Paul R. Melbye, Brendan W. Coughlin, and Henry D. Harrison, defendants and Shale Royalties 21, Inc., Shale Royalties 22, Inc., Provident Operating Company, LLC, Somerset Lease Holdings, Inc., and Somerset Development, Inc.
In that release the SEC stated that they “obtained a temporary restraining order and emergency asset freeze” related to the “scheme orchestrated by Paul R. Melbye, Brendan W. Coughlin and Henry D. Harrison through a company they owned and controlled, Provident Royalties LLC. In addition to the asset freeze, the court has appointed a receiver to preserve and marshal assets for the benefit of investors.”
The SEC “alleges that from at least June 2006 through January 2009, Provident made a series of fraudulent offerings of preferred stock and limited partnership interests for the purpose of generating promised returns through investments in oil and gas assets.” Further, “the sales were made through 21 affiliated entities to more than 7,700 investors throughout the United States.” Court documents indicate that the SEC believes that “Provident falsely promised yearly returns of up to 18 percent and misrepresented to investors that 85 percent of the funds raised through the offerings would be used to purchase interests in oil and gas real estate, leases, mineral rights, and interests, exploration and development. The Commission alleges that, in fact, less than 50 percent of investor funds were used for their stated purpose, and the proceeds from later offerings were used to pay expenses related to earlier offerings and returns to investors in those offerings.”
As indicated, many registered broker-dealers across the country sold these fraudulent investments to their clients. According to the investmentnews.com, 52 broker-dealers in all sold Provident Royalties related investments.
Many of the firms that sold Provident investment have folded as a result of the litigation deluge. In fact, the investmentnews.com is reporting that 20 of those broker-dealers have gone out of business or are in the process of going out of business largely due to awards to clients related to the Provident investments.
Although some of the firms that sold these investments have gone out of business, many of these firms remain. If you have lost money in a Provident Royalties related investment and you invested with a broker-dealer that is still in business you may have an excellent opportunity to recover your losses.
If you have suffered losses in in Provident Royalties LLC and/or their affiliates like Provident Resources, Provident Energy, and Shale Royalties and would like to speak to a FINRA arbitration attorney that may be able to help guide you through the recovery process please call out Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.