Are You the Victim of Private Placement Fraud by a Stockbroker or Other Financial Professional? We Can Help

Private placements are investments not offered to the general public. The SEC says that certain financial products can only be offered to so-called “sophisticated” or “accredited” investors. That’s because the risks of these investments can be quite high. Examples of opportunities restricted to sophisticated investors include pre-offering securities and some hedge fund investments. Within the industry these investments are commonly called “private placements.”

Private placement fraud can occur in different ways. It can happen when the company offering the investment lies about the investment. According to the SEC, those schemes are relatively rare. It also happens when a stockbroker sells unsuitable private placements or sells them to investors that don’t qualify. That is the topic of this post.

To understand how this happens, one must first understand the terms used by the SEC in determining whether someone is qualified to purchase a private placement. The SEC says that these investments can be offered only to accredited investors or sophisticated investors.

In simple terms, a sophisticated investor is someone with sufficient capital, net worth and experience.  An “accredited investor” is someone that has a net worth of at least $1 million (excluding one’s home) and income of at least $200,000 for the prior two years ($300,000 if joint income) and an expectation to keep making the same amount.

SEC Rule 506 of Regulation D

According to the SEC, a company wishing to raise money but does not want to go through a formal public offering can do so if it follows some basic rules:

First, it cannot use general advertising or solicitation.

Second, it can sell its securities to an unlimited number of accredited investors.

Third, it can sell securities to up to 35 non-accredited investors if they are sophisticated. According to the SEC, that means “they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.”

Companies like the safe harbor provisions of Regulation D because they can quickly raise money without a lot of red tape. Stockbrokers love these offerings because they pay higher commissions. Sometimes brokers will entice customers by telling them they are getting an opportunity to get in on the ground floor, something that the general public can’t buy.

There are also other times when investments are only offered to sophisticated or accredited investors.

Private Placement Fraud – Nonqualified Investors

Over $1 trillion in capital is raised each year through private placements. Although not at all the investments are sound, fraud is relatively low. Because there is less vetting of private placement deals and far less disclosures, theoretically the people buying into these deals have the experience and knowledge to evaluate the offering and good income and net worth in case the investment fails.

Private placements don’t register with the SEC meaning they operate outside of SEC regulations. That is why the SEC wants to insure that investors know what they are doing and can financially survive if the investments fails.

Because the commissions are generally much higher, some rogue brokerage firms and brokers push these investments on unsuitable clients.

We have also seen many cases where brokers provide inaccurate financial information. Remember, the offering memorandum and materials presented to investors have never been filled or reviewed by the SEC.

Avoiding Private Placement Fraud – Tips for Investors

The Financial Industry Regulatory Authority (FINRA) published an investment alert for potential private placement investors. The alert contains several important tips for investors:

• “Find out as much as you can about the company’s business, including the industry in which it operates to make an informed decision. Also ask yourself whether you are comfortable getting limited information for the duration of the investment. Most importantly, understand if, how and when you might liquidate your private placement securities.” [Editor’s note: Private placement securities are typically “restricted” meaning they can’t be readily sold. Even if there are no such restrictions, there is no secondary market for these securities meaning they can’t easily be sold. That is why they are not a good fit for anyone who needs access to their money or who is nearing retirement. Brokers have an obligation to explain these restrictions to prospective investors.]
• “Ask your broker what information he or she was able to review about the issuing company and this private placement. Expect your broker to be knowledgeable about any risk factors associated with the company’s business, such as other competitors in the company’s space, or economic risks specific to the company’s business. Risk factors might also include risks associated with the issuing company itself, such as a weak balance sheet, use of leverage or a limited operating history. In addition, your broker should also be familiar with the risks and features of the private placement.” [Editor’s note: Brokers are not relieved of their due diligence obligations simply because the investment is a private placement or because you qualify as a sophisticated investor.]
• “Ask your broker how this investment fits in with the mix of other investments you hold. How does it align with your risk profile? Be extremely wary if you receive paperwork to sign about a private placement without having a personalized discussion with your broker about why such an investment is right for you.” [Brokers have an obligation to only make investment recommendations that are suitable to your needs. That means stockbrokers also have an obligation to understand your financial goals and risk tolerance.]
• “If you are provided with a private placement memorandum or other offering document, carefully review it. Make sure that statements by your broker or in other sale materials are consistent with it. The offering document—and any sales materials associated with the private placement—should be detailed and balanced. If you don’t understand them, don’t invest. Ask for a copy of the offering document, if one has not been provided to you.”
• “Read the issuing company’s Form D, if available on the SEC’s EDGAR database. While it contains only limited financial information, it identifies the company’s executives and describes other matters that can be valuable. Also contact your state securities regulator for information.” [Simply because your broker has a due diligence obligation doesn’t mean you shouldn’t do some checking yourself.]
• “For real estate private placements, ask about the schedule and source of investor distributions. Specifically, find out if the company’s income is able to cover those distributions, or if distributions may be made from proceeds from sales of additional shares or borrowings.” [If the offering is a nontraded REIT, make sure you fully understand how long you must hold on to the investment. Many REITs have no secondary market. That means you may not be able to sell if you need emergency access to your money.]
• “For oil and gas private placements, ask what you can expect to receive in return for your investment, and the circumstances that would result in a loss of some or all of your investment. Ask if the issuer has entered into any operational or services agreements with affiliates, since this can add additional costs that may dilute your return. Also ask about the issuer’s past performance in prior offerings, and review the map of the proposed well locations for drilling activity, whether successful or not, in the vicinity. Lastly, ask how—and when—you will be informed of the status of the drilling efforts and whether or not audited financials of the issuer or the specific offering will be provided.”
• “Be extremely wary of private placements you hear about through spam emails or cold calling. They are very often fraudulent. A legitimate broker must be properly licensed, and his or her firm must be registered with FINRA, the SEC and a state securities regulator—depending on the type of business the firm conducts. To check the background of a broker or investment adviser, use FINRA’s BrokerCheck. Officers, directors and other persons associated with an issuer may sell securities of that issuer without being licensed, so long as they are not compensated for the transaction and meet other conditions.” [If you suspect fraud or believe you are being treated unfairly by a securities professional or firm, contact us immediately.]
• “Ask if the investment professional selling the private placement is registered with FINRA or the SEC. Then check to see if this is in fact the case.” [See the BrokerCheck link above. Even if the private placement isn’t registered, you want to make sure the investment advisor selling you the investment is properly along with their employer. Registered brokerage firms are regulated, have minimum capital requirements and often have insurance.]

Scottsdale Broker Faces Private Placement Fraud Charges

In January 2020, a Glendale, Arizona filed a claim against Newbridge Securities and his former broker, Larry Labine. The customer says Labine was recommending investments that were both highly risky and non-liquid. While that might be okay if properly explained, the customer further alleged that he was not properly informed.

While anyone can have a dispute with his or her broker, the average broker has zero reportable events on his record. Larry Labine? Thirty-nine which puts him the bottom 99.9 percentile of brokers.

While everyone is presumed innocent until proven guilty, Labine has been guilty many times over.

His Arizona state securities license was revoked in 2017.

In 2015, FINRA said that while associated with Newbridge, Labine was selling senior corporate debentures to customers. Despite knowing of the company’s failing financial commission, Labine withheld that information from investors. He also didn’t disclose his cozy financial arrangements with the company including a promised seat on the board of directors if he met certain sales goals.  In other words, Labine had more of incentive to operate for his own best interest instead of his clients.

FINRA barred him from the industry.

The SEC barred him for the same conduct in April 2016.

In 2004 he was suspended from the securities industry for a full year. He was accused of recommending investments that were unsuitable based on the “customer’s investment objectives, financial situation and needs.”

He has 28 customer disputes.

Broker Suspended for Inflating Investor’s New Worth

Last week, a former LPL broker was fined and suspended from the industry for 6 months. FINRA says Donald Woods inflated the net worth figures of retirees so they could qualify for non-traded REIT investments.

Like Larry Labine, Woods has a horrible record. 11 customer complaints and one regulatory action. He is currently suspended.

FINRA says, “Woods Without admitting or denying the findings, Woods consented to the sanctions and to the entry of findings that he submitted applications to purchase real estate investment trusts (REITs) that overstated the customers’ liquid net worth in order to circumvent his member firm’s restrictions. The findings stated that Woods did not have a reasonable basis for recommending that the customers purchase the REITs, which were inconsistent with the customers’ investment profiles. Woods received $5,600.70 in commissions in connection with these recommendations.”

Although he is suspended, Woods still has 4 pending customer complaints.

New York Broker Barred for Improper Private Placement Solicitation

When this post was first written in 2014, we discussed charges against New York broker Bruce Meyers. The lessons from that case are still relevant today.

FINRA claimed Meyers and the brokerage firm tht employed him engaged in the improper public offering of securities. They say, “Meyer and his firm marked a private placement offering to more than 1000 recipients of boiler-plate emails, without first establishing a substantive relationship with each recipient.” The firm and Meyers also made “exaggerated and unbalanced predictions of price performance.” If that wasn’t enough neither Meyers or his employer disclosed their ownership interest in the company’s whose securities were being offered.

Not only was Bruce Meyers banned from the industry, in 2018 his company was expelled from the financial industry.

How Do I Sue my Broker for Private Placement Fraud?

As noted above, simply because an investment or security is exempt from registration doesn’t mean that brokers aren’t responsible for your losses.

Investment advisors and their employers have many duties when making investment recommendations, particularly with private placements. Some of those duties include:

• Ensuring the investors qualifies as a sophisticated or accredited investor
• Ensuring the investor fully understands the investment including its risks and the lack of liquidity
• Understanding the customer’s needs and only recommending investments that are suitable.
• Performing due diligence on the investments being offered
• Making full disclosures of how the broker is compensated

We also warn investors about the prohibitions on solicitation and advertising of private placements. While we are skeptical of most boiler room operations that cold call investors, private placements have severe limits on how they can be marketed. Our advice is that if you receive an unsolicited email or phone calling offering you a special opportunity to get on the ground floor of the next great thing, hang up!

If you believe you’re a victim of a private placement fraud, contact us. This includes an abrupt loss in value or the inability to sell or liquidate your investment.  With more decades of experience, we know how to recognize securities fraud and can help you get back your hard earned money.

To learn more, contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. We accept cases in all 50 states. Cases are handled on a contingency or “success” fee basis meaning you never pay unless we first collect an award on your behalf. We also invite you to check out our cornerstone content on a variety of specific alternative investments.

All inquiries are protected by the attorney – client privilege and kept confidential. Never a charge for initial consultations.

The post Private Placement Fraud – Sophisticated and Accredited Investors appeared first on Mahany Law.

CMBS Fraud Allegations Met With Skepticism From Market Players

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At a time when the coronavirus pandemic is derailing the commercial mortgage-backed securities landscape, a whistleblower in Seattle has thrown another wrench into the CMBS market.

But financial services experts said there isn’t enough information to draw definitive conclusions about whether the complaint is credible or if it is, whether it would have broad implications for the CMBS market.

On Friday, a report from ProPublica detailed a complaint by John Flynn, a mortgage insider who runs CRE Loan Advisors and an advocate for CMBS reform, alleging that 14 lenders and CMBS servicers inflated property values on real estate collateralizing CMBS loans.

Flynn filed the complaint with the Securities and Exchange Commission, which declined to comment. In the complaint, he claims billions of dollars worth of CMBS loans remain linked to CRE collateral with overinflated net operating incomes, and that property addresses and names were changed from one financing to the next.

When Bisnow contacted Flynn, he declined to discuss the exact contents of his SEC complaint, but he did detail some of the alleged fraud he said he found while studying data on collateral tied to CMBS. Attorneys for Flynn confirmed the report’s existence and the accuracy of ProPublica’s reporting on its details.

“It is a pattern where the loan seller is inflating the NOI (net operating income),” Flynn said. “It’s quite simple. The loan seller is inflating the NOI on a loan, and it appears to be in order to inflate the property value so that a higher loan amount can be obtained.”

The impact inflated values might have on an already shaky market trying to price risk is substantial. CMBS suffered in the wake of the last recession, but experienced its most successful year within the past decade in 2019, according to Trepp Analytics. Last year alone, Trepp Analytics found that private U.S. CMBS lenders issued about $96.7B in CMBS, a 27% increase from 2018, according to Trepp data cited by ProPublica.

Flynn said he found other discrepancies when analyzing loan level data. He said one of his main concerns involves the discovery of different NOI figures reported on the same properties, including instances where properties underwent name and address changes soon after an initial loan issuance.

In some cases, the buildings allegedly underwent these changes right before serving as collateral in new refinancing transactions, with some buildings reporting higher NOIs than before. In some cases, the NOI and cash flow reported on the same buildings changed within only a few months, Flynn said.

“You are talking about the same time period for the same collateral,” Flynn said, adding that other issues caught his attention before he made his SEC complaint.

“Many times, a half-full building would be represented as fully occupied,” he told Bisnow. “Other times a halfway constructed building would be represented as fully constructed. The NOI represents the overreaching theme of misrepresentations that I found.”

Multiple sectors have engaged heavily in CMBS-related financing, a trend that fell after the Great Recession and picked up again as the financial recovery created more liquidity options for borrowers. A recent report from Trepp Analytics found roughly 20% of lodging properties financed by CMBS or CRE collateralized loan obligations did not make their April mortgage payments.

“This is in comparison to the previous months where that percentage hovered around 2%,” Trepp reported. About 10% of retail properties tied to the same types of financing failed to make their April payments, Trepp added.

Trepp confirmed the veracity of the above data when responding to the ProPublica piece, but said other ProPublica claims related to specific loan research tied to Trepp data cannot be confirmed without knowing more specifically what loans ProPublica is referencing.

ProPublica reports that it has verified data alleged in the SEC complaint detailing six of the loans Flynn cites as having inflated NOIs. The report also named banks tied to some of the loans in question, including Deutsche Bank, Wells Fargo and Ladder Capital.

Both Deutsche Bank and Wells Fargo declined to comment to Bisnow, while Ladder Capital did not return multiple requests for comments. The Mortgage Bankers Association told Bisnow it has not been made aware of any issues related to Flynn’s claims.

When asked if Flynn could receive a financial reward as a whistleblower, Flynn’s legal team said if the SEC recovers more than $1M, Flynn could be eligible for an award if the SEC recommends. That reward could possibly be as high as 20% of any amounts recovered.

One of the loan’s ProPublica scrutinized is collateralized by a Doubletree San Diego hotel property in California. The original $36.7M loan was issued by Ladder Capital, ProPublica reported. The hotel property struggled for years to deliver enough net operating income, but was later part of another CMBS, it reports.

ProPublica’sreporting also found data tied to the new loan on the same property ended up showing higher NOI figures for past years than what was initially reported during those same years.

The Doubletree loan mentioned has a high loan-to-value ratio placed on it by Moody’s Investors Service. Moody’s Vice President of Communications Tom Lemmon said the ratings agency does have analysts reviewing the ProPublica report.

But Lemmon said that the article only mentions Moody’s in the context of its assessment of a high LTV ratio estimate placed by Moody’s on one of the analyzed loans. This is within Moody’s ongoing conservative LTV assessments, Lemmon said, and it’s not viewed as a negative by the firm.

“I think we have been consistent in our loan-to-value calculations over the years,” Lemmon told Bisnow. “If you look at when we calculate LTV for purposes of feeding into our ratings analysis, we look at it over the long-term. Frankly, I have tons of reports that [show] we consistently have a higher LTV than whatever the appraisers might come in with under the loan.”

ProPublica’s analysis of the SEC complaint and Flynn’s filing drew mixed reactions from the already shaken CMBS market on Friday.

Financial services experts warned that there’s not enough data contained within the news report to draw definitive conclusions about whether the complaint is credible or a even a market concern for CMBS.

“While the complaint filed with the SEC and the ProPublica article might turn out to be true, we can’t know at this point,” University of Houston Law Professor Jim Hawkins said in a statement to Bisnow. “A complaint is just a series of unproven allegations that someone has made.”

It’s also important to put the legal significance of an SEC complaint into context in this situation, Hawkins said.

“It doesn’t represent the SEC’s findings about the situation,” he said.

“ProPublica’s investigation was really limited, it only looked at ‘six loans among the thousands Flynn identified as having inflated net operating income,'” he said. “It is possible that those six loans are not representative of the thousands of other loans, and we can’t know without more research.”

While skepticism abounded among the experts Bisnow talked to about the report, the CMBS market still took notice.  In addition to the analysts and legal experts who commented in this article, Bisnow reached out to 11 other experts and received either no response or the parties declined to comment on the ProPublica article.

“The allegations are certainly troubling,” said Brian Mahany, with Mahany Law, an attorney who specializes in dealing with CMBS loans and whistleblower lawsuits. “We deal with CMBS loans every day, and I haven’t seen this.”

Alhough he represents CMBS borrowers, Mahany said this is not something he’s personally witnessed.

“All of these CMBS loans are rated and presumably, until this article came out, I never knew there was a problem. I am still not sure there was a problem,” Mahany said.

Mahany said that he has already heard multiple sources involved with CMBS taking a great interest in Flynn’s allegations, but with few details to go on and not having viewed the complaint himself, he remains unswayed.

But in the marketplace, particularly with coronavirus disrupting every asset class, the significance of the SEC complaint remains ambiguous at best.

Mahany says if he takes the whistleblower allegations in ProPublica at face value, he’s not sure how anyone can make a case about losses on misrepresented NOI, when appraisals across the commercial property landscape are in flux after the coronavirus.

“I don’t even know what these properties are worth anymore,” he said. “So I don’t know how you separate any losses tied to the alleged fraud from just the bottom of the market, or from the market collapsing.”

With or without these allegations, experts said that CMBS continues to experience a challenging climate in whipsawing markets adjusting to skyrocketing unemployment claims and a post-coronavirus world.

“[Saying] the market is shaky is an understatement,” Mahany said. “There has already been $100B CMBS-financed properties that have asked their special servicer for relief, help or assistance, and I think it’s only going to get worse.”

The post Bisnow May 18, 2020 appeared first on Mahany Law.

Florida Nursing Home Residents at Risk as Operators Demand Coronavirus Immunity

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The COVID-19 pandemic has taken a tremendous toll on America’s elderly population. Nursing home residents have been hit the hardest, with 20,000 dead across the country as of mid-May. Many of those people have died due to negligence from staff and administrators. Naturally, families want to sue the culprits. Meanwhile nursing home operators are demanding immunity, often with success.

Prominent Elder Law attorney Brian Mahany explains, “If you live in Florida and watch the news, nursing home administrators are demanding immunity from lawsuits and even criminal prosecution. So far, 16 states have already caved to pressure from well-paid healthcare lobbyists.”

Mahany has it right. States that have passed COVID-19 immunity laws for nursing homes include some of the hardest hit by the pandemic. New York is one of them. As residents get infected and die en masse at facilities all over NYS, legal liability for inadequate care has become a thing of the past. When residents need the highest quality of care to prevent Coronavirus infection, nursing home administrators get a free pass to disregard mandatory care standards.

Immunity Laws and Nursing Home Horror Stories

New York’s Emergency or Disaster Treatment Protection Act was quietly passed on April 6, along with the state budget. While its champions claim it was meant to protect physicians and staff from frivolous lawsuits, the Act has provided unprecedented legal immunity for nursing homes,  for as long as the state of emergency lasts.

Another state that has granted blanket immunity to nursing homes in Connecticut. Last March, Governor Ned Lamont signed an executive order to that effect. Out of 216 nursing homes in the state, 194 have had at least one resident or caregiver infected. About half of the people killed by COVID-19 in Connecticut were nursing home residents.

Other states have not fared much better. In New Hampshire, 66 out of a total of 114 fatal victims were living in nursing homes. Lobbyists haven’t as yet had their way with New Hampshire. Still, Illinois, Alabama, Arizona, Georgia, Kentucky, Michigan, Mississippi, New Jersey, Nevada, Rhode Island, Vermont, Wisconsin, Massachusetts, and Louisiana, where immunity is automatic in the cases of natural disasters, have all shielded nursing home operators from litigation.

Trade organizations are currently pressuring Florida, Pennsylvania and California to grant immunity to long-term care facilities. It is outrageous that these efforts should continue, as sinister tales of bodies piling up outside nursing homes make headlines around the country. The Life Care Center in Washington, an early North American epicenter of the pandemic, reported no less than 37 deaths.

Seventy residents died of COVID-19 at the Andover Subacute and Rehab Center in New Jersey, where 17 bodies were found in a horrific and unsanitary makeshift morgue. At California’s Gateway Rehabilitation and Care Center, 33 caregivers and 69 residents got infected, and a total of 17 people died. These stories are, sadly, replicated all over the country.

According to Richard Mollot, an advocate for nursing home residents who heads New York’s Long-Term Care Community Coalition, “to not have [the possibility of lawsuits] hanging over a nursing home’s head,” is akin to going down a very slippery slope.

Here in Florida, like elsewhere in the country, limited testing capacity, insufficient protective equipment, and sheer negligence have hampered efforts to curb the spread of the virus through local nursing homes.

Coronavirus infection is fast and relentless when large numbers of people share common living areas. Having successfully sued numerous nursing homes over neglect and abuse, lawyer Brian Mahany is in an ideal position to offer counsel during these difficult times. “Giving nursing homes immunity from their poor decisions shouldn’t even be up for discussion. . . Existing laws and negligence standards are more than adequate to protect nursing homes who are sued if they can show they followed all safety protocols,” he explains.

Staffing shortages and inadequate hygiene at nursing homes are nothing new. But COVID-19 has exposed those issues, by making them deadlier than ever before. The companies that operate nursing homes are primarily for-profit and often owned by private-equity firms. These companies have cleverly disguised their quest for immunity as a move to protect nursing home staff from lawsuits.

The reality is that healthcare trade associations have contributed millions of dollars to political campaigns over the last few years, and now, they are coming to collect. The Greater New York Hospital Association, for example, spent $7 million on various lobbying efforts in the state over the last three years, while the American Health Care Association, a national organization, spent $23 million since 2014.

Florida Imposes Sanctions on Nursing Homes with COVID-19 Outbreaks

Recently, Florida has found gross negligence and preventable infection at several nursing homes. The state has imposed stringent sanctions on at least three of them, prohibiting new patient admissions and ordering one of the facilities closed. These are healthy signs that Florida is still strong in the face of aggressive lobbying groups, and that the families of nursing home residents in our state can still initiate legal battles to hold negligent staff and administrators accountable.

Fair Havens Center’s One-Star COVID-19 Response

Located in Miami Springs, Fair Haven Springs is a nursing home with 269 licensed beds. On May 8, the State of Florida prohibited the facility from taking in new patients. Regulators stated that there was a serious threat to residents’ “health, safety, or welfare” and “immediate serious danger to the public health.”

According to the state’s order, Fair Havens staff failed to adhere to COVID-19 prevention standards, failing to remove PPE after exiting a dedicated COVID-19 isolation area, and often using only a mask and gloves to feed COVID-19 patients, instead of full-body PPE.

Upon inspection, state regulators found that “eleven (11) COVID-19 positive residents were placed in two-bed rooms with residents who were not positive for the Coronavirus. . . At least fifteen (15) COVID-19 negative residents were exposed to COVID-19 due to the placement of the eleven (11) residents.”

Other risky practices at the facility included not placing patients on quarantine after having had contact with someone who tested positive and failing to identify lunch trays coming from the COVID-19 isolation area.

Fair Havens Center has the lowest available overall rating on Medicare’s Nursing Home Compare platform. The facility also has a one-star rating for health inspections. These ratings go from one star, which means “much below average,” to five stars, which equates to “much above average.” The platform is a great place to evaluate the quality of care provided by nursing homes across the U.S. Information can be found by entering the name, city or state of the facility.

Cross Landings Health and Rehabilitation Center Loses Its Good Star

Located in Monticello, in the vicinity of Tallahassee, Cross Landings is home to 60 residents. On April 17, 2020, the State of Florida issued an order prohibiting the admission of new patients at the facility.

Cross Landings, the authorities found, had admitted patients who were under investigation for COVID-19 infection but failed to place them in isolation. When caregivers started showing potential symptoms of the disease, they continued to provide care to residents. Health inspectors also noticed that staff failed to sanitize their hands and appropriately remove PPE after exiting COVID-19 isolation areas. Uninfected patients circulated freely through isolation areas, and infected ones were seen chatting with them, without protective masks.

Not surprisingly, many Cross Landings residents contracted the new Coronavirus. The CMS had given the facility a four-star rating on its last evaluation, perhaps a testimony to the importance of strict adherence to COVID-19 prevention guidelines. Cross Landings has a three-star rating on various consumer review sites.

Sara Home Care Under Lock and Key

Hamstead-based Sara Home Care is an assisted living facility with 16 licensed beds. On May 8, 2020, state regulators shut down the facility until further notice.

Health inspectors observed numerous violations when they visited Sara Home Care. On the one hand, they were let in without any screening for COVID-19. In fact, no one was screened for high fever or other symptoms when entering the facility.

A patient with a high fever and respiratory distress was not tested for COVID-19, there was scarce social distancing in common rooms, and patients who attended offsite activities were seen getting on buses without any protective equipment. Based on Sara Home Care’s lengthy track record of violations, the authorities took the extreme measure of shutting it down.

Despite COVID-19 Immunity Lobby, Regulators Crack Down on Bad Long-term Care Providers

You can still sue nursing homes in Florida even if the government has declared a state of emergency. We don’t know how long this will last or if the lobbyists will prevail. But there are some positive signs for victims and their families, even from states that have passed immunity legislation.

In New York, the State Health Department warned numerous facilities about their lengthy track records of unsanitary practices. The files of at least 13 facilities with more than 10 reported COVID-19 deaths contained recent citations for insufficient hand sanitation, lack of PPE, and exposure of patients’ wounds to germs.

Some of these previous violations included nurse assistants who failed to wash their hands “after providing incontinent care and disposing of the soiled linen,” according to one Health Department inspector’s notes.

If you or a loved one have become infected with COVID-19 at a nursing home, and you suspect negligent behavior was involved, you can sue for compensation. It is important to act now because lobbying efforts to secure immunity are becoming increasingly aggressive all over the country. To learn more about coronavirus and the law, visit chony.org.

The post Whistleblower News Review May 18, 2020 appeared first on Mahany Law.

You Tried Suing Insurance Company. Nothing. Can You Sue Your Insurance Agent for Not Obtaining the Proper Coverage? Yes!

[Editor’s Note: This post is being written in the midst of the coronavirus pandemic. That means today, most of the litigation we see relates to business interruption insurance. Not matter what your claim or loss involves, however, this post contains important information about when and how to sue an insurance agent.]

Over the last three months we have written several posts on business interruption insurance. As a result of the global pandemic, it seems that virtually every business in the country is struggling. Many businesses thought they were prepared for a disaster because they purchased business interruption insurance. Now they are finding their claims denied.

In our cornerstone business interruption claims post, we explain the ins and outs of getting your claim paid. If your problem involves business interruption insurance, start there.

Across the nation, insurance companies are improperly denying tens of thousands of claims. They simply don’t want to pay and figure the average small business can’t find a lawyer willing to sue for a couple hundred thousand bucks. (We will.) In many cases we can pursue a viable claim despite the insurance company pointing to a pollution exclusion or arguing that their was no physical damage. Sometimes, however, the policy truly is written in such a way that the insurance company gets the upper hand.

Let’s look at one such example. Policies with an ISO 2006 virus exclusion. This little gem says, “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”

Let’s say your business interruption claim is denied and your policy contains a virus exclusion or some other language that your lawyer says kills your chances of winning a lawsuit. Now what?

Depending on what conversations you had with your agent, you might have a claim against the agent who sold you the policy. Because they are in the insurance business, most agents have errors and omissions coverage in case they screw up. That means if you win, there is still a deep pocket to pay your claim.

To prevail against your agent you must demonstrate that you were explicit in instructing your agent as to what type of coverage you wanted and that the agent failed to deliver and didn’t tell you that the policy he or she sold you was missing that coverage.

Winning a claim against an agent won’t be easy. Until December, COVID-19 didn’t even exist. Until sometime in February, no one knew it would devastate our economy and cause hundreds of millions of Americans to stay home.

One business in Philadelphia is suing its agent, Nottingham Agency Inc, of failing to obtain virus protection. The insured said it asked the agency for “all appropriate insurance coverage” including for viruses and pandemics.

Does that seem farfetched? Why would a business want pandemic coverage? It’s not as farfetched as you think. We know of several possible scenarios, although there are likely others.

Perhaps the business is particularly risk averse. Think of auto insurance. Some drivers just buy the bare minimum. Others get maximum coverage, gap insurance, new vehicle replacement, roadside assistance, towing assistance, liability umbrella policies, etc.

Another reason could be a business that suffered as the result of the SARS scare several years ago. There were very few cases in the United States but it did affect some travel businesses.

Probably the most likely explanation is that the insured’s policy came up for renewal in December 2019 or early 2020. By then, we knew about COVID-19 but most people (and insurance companies) weren’t worried about it becoming a pandemic. While most didn’t think about, some savvy business owners probably did. If the agent failed to listen or failed to tell their client that the policy didn’t contain the requested coverages, the agent could be liable. (We wrote our first coronavirus business interruption story in early February long before COVID-19 was impacting US businesses. We were worried back then and no other businesses that were as well.)

While it’s probably not enough to claim you told your agent you wanted “full coverage,” we expect to see some cases where the insured business went into enough detail about its coverage needs that the agent becomes liable.

Duties of Insurance Agents

Insurance agents owe a legal duty to their clients (customers). Specific duties include:

• Understanding their customer’s insurance needs
• Letting the customer know if the desired coverage isn’t available
• Placing insurance with a financially sound company
• Explaining the policy and exclusions to customers
• Explaining any differences in coverage when policies renew
• Properly communicate claims to the insurance company
• Forwarding premium payments to the insurance company

If you think claims against insurance agents are rare, you are wrong. As many as one in 3 agents face a claim each year.

To prove your claim, you must prove three things:

1. The agent owed you a legal duty;
2. The agent breached that duty; and
3. the damages you suffered were proximately caused by the breach of duty.

In some states such as Texas, the courts place a high degree of responsibility on agents. “An agent owes his clients the greatest possible duty. He is the one the insured looks to and relies upon. The insured looks to the agent he deals with to get the coverage he seeks, with a sound company who can and will promptly pay claims when they are due. It is his duty to keep his clients fully informed so that they can remain safely insured at all times.”

Other states that place a higher duty of care on insurance agents include Missouri, New Jersey, Louisiana, Illinois and Idaho.

To keep this post simple, we have been using the term insurance agent. There is a difference, however, between an agent and a broker even though the public uses the term “agent” for both.

A true agent works for the insurance company he represents. He is considered to be acting for the company. That means his actions bind the company. Think of State Farm. Their agents just work for State Farm and not other insurance companies.

If one of these agents fails to obtain specific coverage that the insured requested, both the agent and insurance company can be sued.

In contrast to an insurance agent, an insurance broker typically works with many insurance companies and is considered to be acting for the insured. These brokers are commonly called independent agents. If an independent agent failed to obtain virus insurance, he or she would be liable and not the insurance company.

Suing insurance agents is tough. Depending on your date of renewal or first obtaining insurance, it will be particularly tough to claim an agent failed to procure insurance for a virus if  that virus wasn’t even known to man at the time the policy was written.

How Do I Sue My Insurance Agent?

If your business interruption, civil authority insurance claim or other type of claim is denied, you need professional assistance. Our first line of attack is against the insurance company itself but in some cases, you may not have a winnable claim. If you don’t have the coverage you wanted or the policy language has exclusions that leave you without coverage, it may be possible to sue your agent.

All your communications with your agent become critical if you sue the agent. Did the agent know your needs? What did you tell the agent? Did she explain the exclusions in the policy?

Perhaps the coverage you sought wasn’t available? Did the agent let you know? Did she really shop around and try to find the coverage you wanted?

It can be tough to find a lawyer that handles insurance bad faith claims in good times. As a result of the pandemic, finding a lawyer could be even more difficult. Depending on the coverage and wording of the policy, you may have a better claim against the insurance agent who sold you the policy.

We invite you to first visit our coronavirus business interruption claims information page. Ready to see if you have a case against your insurance company or agent? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. We have attorneys and law firm partners across the United States. We fight for the maximum coverage and benefits due our clients and maximum damages when the carrier has wrongfully failed to pay.

Cases can be handled on a contingent fee basis meaning no fees or out-of-pocket costs unless we win. All inquiries are confidential.

The post Business Interruption Insurance – Suing Your Agent appeared first on Mahany Law.

Alienware Area 51 False Upgrade Promises – Class Action Investigation

Did You Buy an Alienware Area 51 R1 Gaming Laptop Thinking It Was Upgradeable? Join Our Alienware Class Action Investigation

Mahany Law in cooperation with our partners at Hochfelsen Kani are investigating a possible class action against Dell Computers. Dell’s Alienware brand represents the industry’s top-of-the line gaming laptops.

Dell launched the Alienware Area 51m R1 gaming laptop in January of 2019. These machines cost thousands of dollars but many gamers were attracted to Alienware’s top performance and the promise of what Dell called “unprecedented upgradability.” Dell’s advertisements suggested its its core components – the CPU and the GPU – were fully upgradable.

Dell marketed this unprecedented upgradability as a ground-breaking feature because the ability to upgrade these components was previously limited to just desktops.

Recently Dell announced the June 2020 release of a 2nd Generation, upgradable, gaming laptop known as the Alienware Area-51m R2.  As expected, it the new machines are packed with the latest hardware available including the 10th Generation Intel CPU.  Unfortunately, owners of the prior generation Area 51m R1 systems learned they were not able to upgrade their machines with the newest CPU and graphics processor. This has caused widespread anger and confusion among owners of these 1st Generation machines.

A recent article from Extreme Tech says it best,

“Dell demonstrated an astonishing amount of chutzpah today when it unveiled a second-generation Alienware Area-51m — and declared that whoops, the first-generation of the ‘upgradeable’ laptop isn’t actually going to be upgradeable after all. The company has officially stated that: ‘Area-51m R1 only supports GPU upgrades within its current generation of graphics cards…

“I refuse to let Dell even a little off the hook for this. The company communicated that it would provide further upgrades, and it knew damn well that ‘upgrade’ is generally read to mean ‘components introduced after the laptop’s purchase date,’ not ‘alternate hardware I could have bought at the time, but didn’t.’ This was a laptop specifically and directly sold on the promise of offering a compatible platform for future hardware.”

Gamers who prefer to game on a Notebook and purchased the Alienware Area 51 m R1 are essentially locked into the device’s original configurations.  They can’t upgrade their CPU or the GPU and have no choice but to purchase to shell out thousands of dollars for an entirely new device with the newer, more advanced components if they wish to play the newest titles.

Customers that paid well over $3,000 and even $5,000 for the Alienware-Area 51m R1 just months ago are finding their machines are obsolete and not upgradeable as advertised.

With the upcoming June 2020 release of the Area-51 R2, Dell Alienware has confirmed that the prior generation R1 is not upgradable.

We believe that Dell has falsely represented  that their Alienware M17 R1 gaming laptop is upgradeable. Dell may be liable for a breach of warranty.  We also believe they have engaged in deceptive business practices which are illegal in many states. Purchasers who relied on these upgradeability claims and on Dell’s advertising campaign may be entitled to significant cash damages.

One Dell Alienware ad that we saw says,

“Unprecedented Upgradeability – Gamers have made it clear that they have noticed a lack of CPU and GPU upgradability in gaming laptops. The area 51m was designed with this in mind… CPU upgrades can be done using standard. Desktop-class processors, while GPU upgrades can be done with GPU upgrade kits available on Dell.com…”

Alienware isn’t the first company to mislead gamers. In 2017 a class action was filed against Micro-Star International and MSI Computer Corp. for misleading ads. The company claimed its gaming laptops were advertised as having upgradeable GPUs. Two men who had each purchased an MSI laptop learned that when a new model was released, their machines were not upgradeable.

Like in our Dell Alienware Area 51 investigation, the two men who purchased MSI gaming laptops did so because of advertising claims. MSI alleged produced promotional materials that falsely claimed,

“MSI is the first and the only one in the market to offer MXM Graphics Card Upgrade Kit, making the dream of future updates come true. Whenever the next generation GPU is out in the market, you get to experience the most up to-date gaming effects by simply replacing the GPU module.”

Sadly, the gaming industry has had a long tradition of taking advantage of consumers by advertising and selling products that don’t do what the sellers claim they can do. We are investigating Dell in connection with the sale and marketing of the Alienware Area-51M R1 product line, and specifically for the company’s refusal to offer refunds, credits, exchanges, or to do anything at all to help those who spent several thousand dollars to purchase a laptop that Dell told them was upgradable.

If you have tried to receive a refund and were denied or have any information regarding Dell’s sales and marketing practices regarding the Area-51M R1 product line, please contact us online, by email brian@mahanylaw.com. We cannot accept phone calls on consumer class action cases.

When writing us, please let us know the following information:

• Your name
• Address
• Phone
• Email
• Preferred method of contact (email or phone)
• Model of Alienware product purchased
• Date of purchase (approximate)
• Price paid if known
• Please describe any conversations or correspondence you may have had with Dell regarding upgrades, refunds or warranty issues

Presently we intend to bring Alienware class actions in those jurisdictions where state unfair and deceptive trade practices laws permit. We intend to seek damages or an order requiring Dell to replace the R1 laptops with the newer Alienware Area 51m R2 2^nd generation machines.

The post Dell Alienware Area 51 Class Action Investigation appeared first on Mahany Law.

FBI Arrests Ex- Cleveland Clinic Doc and Says He Aided Chinese – Learn How You Can Obtain a Cash Reward for Reporting Grant Fraud

A former employee of the Cleveland Clinic was arrested by the FBI and charged with obtaining a $3.6 million federal grant without disclosing that he had an affiliation with and held the position of Dean of the College of Life Sciences and Technology at the Huazhong University of Science and Technology (HUST), a university affiliated with the People’s republic of China. He has been charged with false claims and wire fraud.

The feds say Dr. Qing Wang participated in the “Thousand Talents Program”, a program established by the Chinese government to recruit individuals with access to or knowledge of foreign technology and intellectual property. In the United States, Dr. Qing Wang is also known as Kenneth Wang.

The National Institute of Health (“NIH”) is our nation’s primary medical research agency, with an annual operating budget of $39 billion. Most of that money – $32 billion – is awarded each year to American universities and research professors via federal grants for medical research.

Dr. Wang was born in the People’s Republic of China. He later moved to the United States and accepted a research position with the Cleveland Clinic in 1997. At the time of his arrest last week Dr. Wang was a professor at the Lerner Research Institute and a Professor of Molecular Medicine at Case Western Reserve University. His areas of interest are Genetics and Cardiovascular disease.

Wang became a United States citizen through naturalization on November 5, 2005.

In the past few years, the NIH has recognized that research funded by the United States is often illegally shared with the People’s Republic of China. As a result, investigators have heightened their interest in vetting the recipients.

To receive a grant, applicants must disclose any foreign ties they may have. Those ties must be approved by the government before any grant monies are released.

By signing the grant application, Wang certified that he had complied with all requirements of the program including the disclosure requirements. The certification says,

“I certify that the statements herein are true, complete, and accurate to the best of my knowledge, and accept the obligation to comply with Public Health Services terms and conditions if a grant is awarded as a result of this application. I am aware that any false, fictitious, or fraudulent statements or claims may subject me to criminal, civil, or administrative penalties.”

The FBI says that on last four different occasions, Wang had the opportunity and obligation to report his affiliation with the Chinese government funded Huazhong University of Science and Technology. He didn’t.

The Cleveland Clinic conducted its own investigation. They say Wang and other researchers received “extensive training” on reporting obligations and were also obligated to complete a conflicts of interest disclosure form. The clinic’s investigation reached the same conclusions as the NIH’s investigation and found that Dr. Wang failed to disclose his ties to Chinese government.

It wasn’t until March that Wang admitted that his affiliation with HUST. In fact, he admitted recruiting 40 to 50 researchers for the Chinese university. He conducted some of his recruiting sessions in the United States. He recalled hosting events at Harvard Medical School in Boston, University of California at San Francisco, and University of Texas Southwestern.

Wang said the package he offered on behalf of HUST included personal compensation to each recruited person was around $200,000 to $300,00. He also had the ability to offer research funding, access to graduate students, and lab space. This apparently went on for several years between 2014 and 2018.

Chinese Thousand Talents Program

The FBI says the Chinese Talent Plans are programs established by the Chinese government to recruit individuals with access to or knowledge of foreign technology and intellectual property. The importance of the Thousand Talent program was memorialized in 2007, when “talent development” was added to the Constitution of the Communist Party of China. The Thousand Talent program requires participants sign contracts obligating them to perform both typical academic, research, or entrepreneurial activities on behalf of Chinese institutions, as well as recruitment activities.

Arrest of Qing Wang

The FBI obtained an arrest warrant on May 12^th. He was subsequently arrested without incident and is currently out on personal recognizance bail. As a condition of his bail, Wang had to surrender his passport.

We remind readers that all defendants are presumed innocent until proven guilty.

False Claims Act Cash Rewards for Reporting Grant Fraud

The Justice Department says that Wang was arrested for false claims and wire fraud. His charges are criminal and could lead to a lengthy prison sentence if convicted.

The federal False Claims Act provides for cash rewards to those with inside information about fraud involving a federal program. There have been several rewards paid to those who have reported federal grant fraud.

Wang wasn’t arrested because he is Chinese. He was arrested for failing to report his ties to the Chinese government. The United States is worried that the Chinese and other foreign actors are stealing our technology and intellectual property. It isn’t fair that our tax dollars support research being stolen by foreign nation states.

In recent weeks, the government claims that China is attempting to steal research on coronavirus vaccines and treatments. We are aware of other grant cases involving China that did not involve coronavirus. Dr, Wang’s case is an example.

In Wang’s case, it doesn’t appear the Cleveland Clinic was involved. The FBI report suggests that the clinic was also investigating Wang and reached the same conclusions as the government. Sometimes, however, universities are complicit in the fraud. We believe that is occurring at the University of Maryland and at other schools.

Under the False Claims Act, whistleblowers who report grant fraud are eligible to receive between 15% and 30% of whatever the government collects from the wrongdoers. Triple damages are also available. That means Wang could be asked to pay up to $10.8 million plus interest. (We doubt the Chinese government will pay any penalties on his behalf, that would mean admitting complicity.)

If you have information about grant fraud involving NIH or other federal grant funds, you may be entitled to a cash reward. To learn more, visit our False Claims Act whistleblower reward information page. Ready to see if you qualify for a reward? Contact us online by email brian@mahanylaw.com or by phone 202-800-9791. [Cases accepted nationwide. We only charge a fee if we are successful in collecting a reward for you. All inquiries protected by the attorney – client privilege and kept confidential.]

The post America Strikes Back – Doc Arrested for Undisclosed Chinese Ties appeared first on Mahany Law.

Las Vegas Couple Busted in Huge Medicaid Fraud Scheme – from Private Jets to Prison Cells? (Photo from Instagram)

A recently married Las Vegas couple have been arrested for Medicaid fraud. Prosecutors call their case “one of the most brazen and egregious cases” ever.

On May 19^th, a federal grand jury charged Latisha Harron age 44, also known as Latisha Reese Holt, and 50 year old Timothy Mark Harron with a multitude of felony crimes. We counted 75 charges including wire and Medicaid fraud, conspiracy to commit healthcare and wire fraud, aggravated identity theft, money laundering conspiracy and conducting transactions in criminally derived property. Latisha and Timothy live in Las Vegas.

According to prosecutors, this case begins in 2006. That year Latisha Harron created a company called Agape Healthcare Systems. In 2010, her company became an authorized North Carolina Medicaid provider. Her application said Agape provided home healthcare services. (Readers of this blog know that many home health services are rife with fraudulent billings.)

To become a Medicaid provider, the owner of the company must not have been convicted of a felony. Latisha certified on her application that she had a clean record but prosecutors say she is a convicted felon previously convicted of identity theft. To further hide her tracks, they say she also used a social security number belonging to someone else.

In 2017, Latisha met the man of her dreams on the Internet, Timothy Harron. Timothy was also a convicted felon. A year later they settled in Vegas and thereafter got married.

During this entire time, Latisha continued to operate Agape in North Carolina. After the couple wed, they started a new company called Latisha Assured Healthcare Systems. Despite having just formed the company, Timothy claimed he was the President of Assured, “proudly representing the community for over 18 years coast to coast, in both behavioral and home health services.”

The couple then registered that company as a Medicaid provider in North Carolina, this time they both lied about their criminal records. Unlike his wife who had a simple identity theft conviction, Timothy had been convicted of wire fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering.

Not satisfied with simply defrauding North Carolina taxpayers, they also registered to be a Medicaid provider in Nevada. That was in February 2020.

Similar to North Carolina’s Medicaid provider application, Nevada’s form included the question, “Have you … or any owner, managing employee, or person with controlling interest ever been

convicted of a misdemeanor, gross misdemeanor, or felony?” That question was answered, “no.”

According to the indictment,

“[Timothy and Latisha Harron] publicly projected that Assured was a successful, national healthcare company. They flaunted a corporate jet purchased in the name of Assured, and represented that Assured had locations in Connecticut, Maryland, Virginia, and multiple locations in North Carolina and Nevada. [The Harrons] traveled extensively to exotic locations, routinely broadcasting their expensive meals, wine, and other purchases, over social media. In reality, Assured had no true patient revenue. Instead, Assured was funded entirely by millions of dollars in fraudulent billings from Agape to North Carolina Medicaid for fictious [in-home personal care and respite] services. Likewise, [their] extensive travels and expenses were funded by the same fraud.”

Their scheme was rather ingenious but ultimately, they were caught.

Prosecutors say the couple would search obituaries for names of people who died in nursing homes. They would then query North Carolina’s Medicaid system to see if the person was a Medicaid recipient. If they were, they would back bill for up to a year’s worth of fictitious services that were never performed.

Between February 1, 2017, and December 28, 2019, the Harrons caused Agape to fraudulently bill North Carolina Medicaid for approximately $10,783,985.60. For these fictitious services, they received approximately, $9,597,423.80. All of those sums were paid by taxpayers.

In 2019 they were the subject of a random audit. Being brazen, the couple allegedly created fictious care plans and service plans, monitoring notes, health care applications for employment, competency checklists, nurse aid verifications, and activity logs.

Their new company did the same thing however the Harrons were caught before those bills were paid by Medicaid.

Latisha has been arrested and arraigned. As of March 23^rd, she is being held without bond. On May 21^st, Timothy turned himself in and was released by a Magistrate Judge. The release was stayed for 48 hours so that the Justice Department could file an appeal. The government has appealed Timothy’s release order and says that he is a flight risk.

Not only do the Harrons own a private jet (allegedly purchased with the stolen Medicaid funds), prosecutors say that last time Timothy was arrested it was while trying to cross the border into Mexico. They also say he has ties to organized crime in Europe.

If convicted, the happy couple could spend the rest of their life behind bars. (We remind readers that Timothy Harron and Latisha Harron have not yet been convicted of a crime. They are presumed innocent until proven guilty. The allegations from the indictment that appear in this post are just that, allegations.

Announcing the arrests, U.S. Attorney Robert J. Higdon, Jr.  said, “The indictment alleges a $13 million fraud that funded a gluttonous, social media-marketed lifestyle – one filled with private jets, penthouses and luxury resorts.  Most reprehensible is the fact that this crime is alleged to have been carried out on the backs of our most vulnerable:  the poor, the deceased, the elderly, and the disabled. Even in the face of a global pandemic, this office will continue its work to ensure that defendants like these will be held to fully account for their actions.”

A spokesperson for the Department of Health and Human Services said, “Stealing taxpayer money from a health care program designed to care for the poor and disabled just to bankroll a private jet and other luxury products – as alleged in this case – is reprehensible.”

The FBI, IRS and North Carolina authorities are also investigating.

Cash Rewards for Medicaid Fraud Whistleblowers

No one is saying how the Harrons got caught. Clearly they were living high on the hog and flaunting their wealth. Their social media posts were often signed with the hashtags #jetsetter, #millionaire, #lifeisgood and #billionaire. Unfortunately, it appears their wealth was stolen… their wealth came from the sweat and work of hardworking taxpayers.

Ironically, Timothy’s Instagram has a quote attributable to him that says, “I’m not doing a business that’s new, I’m doing a new way of doing business.” Assuming he is convicted and sentenced to prison, his new hashtag can be #prisonlife. From Louis XIII cognac to prison hooch, this could be a painful life experience for the Harrons.

Fraudsters who flaunt their wealth become targets. Their arrogance is often their undoing.

Most Medicaid fraud schemes are brought to light by whistleblowers, concerned healthcare workers or others with inside information about fraud and greed. Under the federal False Claims Act, people with inside information about fraud involving government healthcare programs (Medicaid and Medicare) are eligible for cash rewards.

North Carolina is one of 29 states that also pay rewards for Medicaid fraud information.

The rewards are usually between 15% and 30% of whatever the government collects from the wrongdoers. The money spent by the Harrons on exotic vacations and Louis XIII cognac is gone but federal agents have seized their private jet. The couple’s Aston Martin will probably also be seized.

To learn more about Medicaid whistleblower rewards and how you can stop homecare fraud in its tracks, visit our homecare and hospice care whistleblower page. Ready to see if you have a case? Contact us online by email brian@mahanylaw.com or phone at 202-800-9791.

All inquiries are protected by the attorney – client privilege and kept strictly confidential. We accept cases anywhere in the United States. There are no fees or costs unless we are successful collecting a reward for you.

The post From Vegas to Prison – Brazen Newlyweds Behind Bars appeared first on Mahany Law.

Patient Recruiter who Paid Addicts to Attend Phony Rehab Clinics Busted.

The FBI and the Justice Department announced the arrest of a 26 year old New Jersey man in  a “patient broker” scheme. The feds say Peter Costas of Red Bank accepted cash payments from various drug rehab clinics across the United States. He would find patients and they would pay him a fee. The fees went through a marketing company to help disguise the kickbacks. Costas would in return pay cash to addicts if they agreed to stay in a facility for at least 10 days.

Immediately after his arrest, Costas pled guilty to one count of conspiracy to commit healthcare fraud.

Prosecutors say this was a complex scheme in which the rehab facilities paid kickbacks to a marketing company who then paid money to Costas who subsequently paid cash to addicts. Court records say that Costas would only get his kickback if the addicts had good insurance. He reportedly received between $2,500 and $5,000 for each patient referred. This was in addition to the money Costas used to bribe patients and pay their transportation costs.

What is perhaps most disturbing is that some of the clinics appear to be scams themselves. Says the Justice Department,

“Costas and the marketing company sent patients to facilities in California and other states that they knew provided ineffective drug treatment or actually fostered drug use on their premises…During the scheme, Costas brokered dozens of patients on behalf of marketing companies around the country, and the conspiracy caused millions of dollars of losses for health insurers.”

Everyone got rich except taxpayers who were left footing the bill for treatment programs that were often medically unnecessary or ineffective. One patient placed by Costas said many of the participants in the program he attended were getting high on meth while at the facility.

Once a patient was discharged from the program, Costas would enroll them in a different program if they still had insurance money left.

Costas faces 10 years in prison when sentenced later this year. Public records show a Red Bank man with the same name and age was arrested in November 2018 for contempt of court.

Costas was prosecuted under federal healthcare fraud laws. New Jersey has its own law that prohibits patient recruiters or brokers.

New Jersey statute 2C:21-22.1  defines a patient “runner” as a person “who, for a [financial] benefit, procures or attempts to procure a client, patient or customer at the direction of, request of or in cooperation with a provider whose purpose is to seek to obtain benefits under a contract of insurance or assert a claim against an insured or an insurance carrier for providing services to the client, patient or customer, or to obtain benefits under or assert a claim against a State or federal health care benefits program or prescription drug assistance program.”

Unlike the federal law that is limited to federally funded healthcare, the New Jersey law includes both government funded healthcare and healthcare financed by private insurance. The law has a presumption of prison if the runner is convicted. In other words, violate the law in New Jersey and you probably won’t get a slap on the wrist.

In our experience, patient recruiter schemes usually prey on nursing home residents, the homeless and addicts. Nursing home patients may not have the mental capacity to understand that they are being recruited for unnecessary treatment. Often nursing home schemes involve payoffs (kickbacks) to someone on the nursing home staff.

The homeless and addicts are easy targets because they frequently are desperate for cash. Some recruiters ply them with booze, cigarettes and even drugs.

Patient Recruiter Schemes Qualify for Whistleblower Awards

Patient recruiter schemes are eligible for Medicaid whistleblower rewards if federal or state healthcare dollars are involved. The federal government and 29 states pay cash rewards to whistleblowers with inside information about kickbacks and patient recruiter schemes.

Congress and the states believe that medical decisions should be based on the best interests of the patient, not on bribes and kickbacks.  In Costas’ case, the rehab clinics, marketing company that employed Costas and the patients themselves may also be guilty of healthcare fraud. In this case it seems like everyone was in on the action: the clinics paid kickbacks to a marketing company who in turn paid money to Costas in order to induce him to find patients. Costas in turn would pay patients to jump from facility to facility.

To be eligible for a whistleblower reward, your information must be original and must relate to federal or state funded healthcare programs. There is also a “first to file” requirement meaning if you have information, don’t wait.

Awards average between 15% and 30% percent of whatever is collected from the wrongdoer.

To earn the award, you must file a complaint under seal in federal court. Many states have similar requirements.

If you are not interested in a reward, you can report directly to your state’s Medicaid Fraud Control Unit. But remember, calling the Medicare hotline or your state Medicaid Fraud Control Unit does not qualify you for a cash reward or give you all the whistleblower protections and anti-retaliation provisions of the False Claims Act. You must have an attorney and file a sealed lawsuit in court to qualify for a reward.

We accept these cases on a contingent fee basis meaning you do not pay for our services unless we recover money on your behalf.

Medicare fraud has reached epidemic levels. The government is only able to audit one-half of one percent of providers. The FBI says that Medicare fraud cost taxpayers tens of billions of dollars per year.

Who can stop Medicare fraud? You. Doing so often saves lives too. (If the charges are true – and Costas has already pled guilty – addicts were attending treatment centers where they really didn’t get the services they needed. What a waste of tax dollars and a danger for those with addiction issues.)

For more information, contact attorney Brian Mahany at brian@mahanylaw.com or by telephone at (202) 800-9791. You can also download our 11 step guide for whistleblowers – we don’t ask for your name, email or telephone and it is free. All inquiries are protected by the attorney – client privilege and kept confidential. Cases accepted anywhere in the United States.

The post FBI Busts New Jersey Patient Recruiter appeared first on Mahany Law.

Coronavirus and REITs – More Deadly than the Virus Itself

We have published many articles about Real Estate Investment Trusts (REITs) in general and in particular non traded REITs.  They are a form of real estate investment that allow investors to participate in large investment projects. The trust buys and holds commercial or multi-family residential real estate for rental income and appreciation. The IRS gives them special tax advantages as long as they pay out 90% of their earnings in the form of distributions or dividends.

By definition, a non-traded REIT does not trade on a securities exchange. If you purchase an interest in one of these trusts you could be stuck holding it for years. Because of their poor liquidity. Securities regulators say they are not suitable for most investors.

We have been sounding the alarm about non traded REITs for years. And It’s not just us. The Financial Industry Regulatory Authority says,

• Avoid putting too much of your nest egg in a single REIT or in multiple REITs of the same family. “Older investors should be particularly cautious about investing large portions of their retirement income in non-traded REITs.”
• Investments in non-traded REIT are not guaranteed and may increase or decrease in value.
• Do not invest solely based on distributions the non-traded REIT may currently be generating. Distributions can be suspended for a period of time or halted altogether. (Those suspensions grow daily as much of economy hits the skids because of COV-19.
• Unlike interest from a CD or bond, REIT distributions may be funded in part or entirely by cash from investor capital or borrowings—leveraged money that does not come from income generated by the real estate itself.
• “Redemption policies can change, making it extremely difficult to get money out of the non-traded REIT when you need it.”
• Think hard before investing any proceeds from one non-traded REIT into another, particularly if both REITs are being sold by the same securities firm. While this may be good for the sales representative, who is likely to make a commission on your investment, it may not be good for you. (Commissions on non-traded REITs may be exceed 7% while most investments pay brokers just 1%.)

The Massachusetts’ securities regulator has been particularly vocal in warning stockbrokers to be very careful to only recommend non-traded REITs to investors who have a substantial net worth and that don’t need ready access to their money. Over the last decade Massachusetts has issued millions of dollars in fines against brokerage firms engaged in selling these products.

Despite all these warnings, investors poured in billions of dollars in recent years. We didn’t see too many problems as many investors were content to receive their distribution check each money.

And then came the coronavirus pandemic.

Investors Can’t Pull Their Money Out of Non-Traded REITs in the Wake of Coronavirus

Suddenly hotels were paying their mortgages. Stores were closed. Malls became ghost towns.

The COVID-19 pandemic delivered a classic one-two knock out blow to many investors. Overnight their distributions stopped meaning no income when they needed it most. At the same time, they suddenly learned they couldn’t sell their investment.

We expect to see thousands of claims against stockbrokers and the brokerage firms that employ them.

In January and February, REIT sales exceeded $1 billion per month. In March that number fell to $780 million and as of April, REIT sales plummeted to just $310 million.

Big independent brokers such as LPL Financial and Cetera have completely halted sales of non-traded investments tied to commercial real estate.

It’s not just that many brokers won’t touch them right now, many REITs have curtailed or eliminated distributions just when investors most need the money. Two large non-traded REITs, Carey Watermark Investors 1 Incorporated and Carey Watermark Investors 2 Incorporated, announced they were halting distributions. Both invested primarily in hotels.

In halting distributions, the two companies issued a joint statement saying,

“Consistent with that being experienced throughout the U.S. lodging industry, to date, the companies have experienced significant cancellations of individual rooms and group bookings and expect that they may continue to do so until the spread of the virus, or the fear of the spread, subsides. In addition, government-imposed restrictions on travel and large gatherings have adversely affected the performance of the companies’ hotels in affected areas.”

The bottom line? Since the coronavirus pandemic began, investors can’t find anyone to buy their non-traded REIT. That means they can’t access their funds or liquidate to generate cash. (Although your monthly statement may show a value, we say they are worthless if you can’t sell them when you need the money.) The pandemic also has resulted in thousands of investors not receiving monthly dividends either.

How Do You Sue a Stockbroker for REIT Losses?

The stockbroker fraud lawyers at Mahany Law understand non-traded REITs and other illiquid investments and how to recover our clients’ hard earned money. Most investment loss cases are handled on a contingent fee basis meaning you don’t owe us anything unless we recover money for you. Our consultations are always no fee and no obligation.

For more information, please visit our cornerstone information page on non-traded REITs. Ready to see if you have a case? Contact attorney Brian Mahany online, by email at brian@mahanylaw.com or by telephone at (202) 800-9791. Cases accepted nationwide.

List of Popular Non-Traded REITs 

• Benefit Street Partners Realty Trust
• Black Creek Diversified Property Fund
• Black Creek Industrial REIT
• Blackstone Real Estate Income Trust
• Carey Watermark
• Carter Validus
• CIM Income NAV
• CIM Real Estate Finance Trust
• CNL Healthcare Properties
• Cole Credit Property Trust
• Cole Credit Office & Industrial
• Corporate Property Associates
• FS Credit Real Estate Income Trust
• Griffin Capital
• Griffin – American Healthcare
• Hartman Short Term Income Properties
• Hartman vREIT
• Healthcare Trust
• Highlands REIT
• Hines Global
• Hospitality Investors Trust
• Inland Real Estate Income Trust
• Inven Trust Properties
• Jones Lang LaSalle Income Property Trust
• KBS Growth & Income REIT
• KBS Real Estate Investment Trust
• Lightstone Real Estate Income Trust
• Lightstone Value Plus
• Moody National REIT
• New York City REIT
• NorthStar Healthcare Income
• Nuveen Global Cities REIT
• Pacific Oak Strategic Opportunity
• Parking REIT
• Phillips Edison & Company
• Procaccianti Hotel REIT
• Resource Apartment REIT
• Resource Real Estate Opportunity REIT
• Rodin Global Property Trust
• Rodin Income Trust
• RREEF Property Trust
• SmartStop Self Storage REIT
• Starwood Real Estate Income Trust
• Steadfast Apartment REIT
• Steadfast Income REIT
• Strategic Realty Trust
• Strategic Storage Trust
• Summit Healthcare REIT

*Don’t see the name of the REIT that is causing you problems? This list isn’t all inclusive and doesn’t include so-called “private REITs” which may actually be worse for investors. If you lost money in any REIT and think you were misled by your stockbroker or other financial professional, call us at the numbers above.

The post Non Traded REITs – Canary in the COVID-19 Coal Mine? appeared first on Mahany Law.

Lost Money in GPB Capital? You Are Not Alone – Act Quickly to Secure Your Funds

[This is one of a series of GPB Posts. Please see our cornerstone on GPB Fraud and How to Get Back Your Investment and our video.]

We have been saying since last year that GPB Capital is a scam.  The company bills itself as an alternative management firm. Since 1983, the GPB Capital has raised almost $2 million dollars from investors, most of that in recent years.

Before we discuss the Massachusetts action and why it is so important, let’s summarize why we believe that GPB is a scam:

• The company has routinely failed to make required securities filings on some of its funds including GPB Holdings II ($646 million) and GPB Automotive Portfolio ($622 million). In some instances, they have missed yearsof filing deadlines
• The company’s auditor, Crowe LLP resigned, reportedly because of reported irregularities and undisclosed third party transactions.
• Last year, GPB announced huge losses in several of its funds, one fund dropped as much as 73%.
• A former GPB Holdings partner claims the company is a Ponzi scheme.(That’s our opinion too.)
• On October 23^rd, 2019 the Justice Department indicted the GPB Capital’s chief compliance officer, Michael Cohn, with obstruction of justice and unauthorized disclosure of confidential information. Those charges relate to Cohn’s time with the SEC and not a GPB but this doesn’t seem like the guy that should be in charge of compliance of a multi-billion enterprise. There is also a claim that while at the SEC he offered to provide inside information to the company.
• The FBI, SEC, the Financial Industry Regulatory Authority (FINRA), New York and Massachusetts all have pending investigations.

So let’s talk about the Massachusetts investigation. We don’t think anyone should need more convincing but we know there are hundreds of investors, if not thousands, still sitting on the sidelines. Sit too long and it may be too late.

Massachusetts Charges GBP Capital with Securities Fraud

On May 27^th, 2020, Massachusetts charged GPB with violating securities laws by making false statements to more than  180 Bay State investors who put more than $14 million in its private-equity funds.

The complaint filed by regulators lays out a clear picture of the history of GPB Capital. We don’t think it started out as a scam or Ponzi scheme decades ago but neither did Bernie Madoff. In our opinion, the company lost its way and began robbing from Peter to pay Paul.

According to the complaint, David Gentile created GPB Capital Holdings, LLC (“GPB Capital”) in 2013 as an offshoot of his father’s New York accounting firm, Gentile Pismeny & Brengel, LLP.

Since its inception, David Gentile has been the managing member of GPB Capital, and maintains full control over the company.

GPB Capital’s general strategy is to acquire middle market, income-producing companies, regardless of a specific fund’s strategy. According to its website, GPB Capital utilizes “four main criteria as the cornerstone of our acquisition thesis, regardless of which focus industry they are applied: current and sustainable yield, recession resiliency, high barriers to entry, and experienced operating partners/management teams.”

If you invested in one of the GPB funds, you probably read about their strategy.

To get people to invest, Gentile offered high sales commissions to stockbrokers to sell his funds. Good stockbrokers and fee based investment advisors usually do what is best for their clients. Many stockbrokers, however, are lured by the prospects of a fat commission check.

To facilitate the marketing and sale of its funds, GPB Capital utilized the broker-dealer branch office Ascendant Capital, LLC (“Ascendant Capital”). Conveniently, Ascendant Capital is wholly-owned by Gentile’s business partner Jeffry Schneider. Eventually, Gentile sought to fully integrate and take control of Ascendant.

In March 2017, Ascendant Alternative Strategies registered as a broker-dealer with the SEC and the Financial Industry Regulatory Authority (FINRA).

Brokerage firms must register in any state where they intend on soliciting clients. In October 10, 2017, Ascendant Alternative Strategies registered in Massachusetts.

If you didn’t know the tie between GPB and Ascendant Capital, you aren’t alone. We think Gentile tried to keep that relationship under wraps. According to Massachusetts securities regulators, “The line between Gentile, Schneider, GPB Capital, and Ascendant Alterative Strategies and Ascendant Capital is blurred beyond recognition.” The companies even share office space.

Gentile’s first fund was GBP Holdings. The key attraction of Holdings was the fund’s 8% distribution. The fund claimed it was making those distributions from profits. Massachusetts says that isn’t true.

GPB Holdings claims it is a diversified fund, with holdings in debt strategies, information technology, healthcare, and automotive retail. As the fund quickly grew its primary focus became automotive retail.

In May 2013 and shortly after the launch of its “diversified” fund, GPB Capital launched GPB Automotive Portfolio, LP (“GPB Automotive”). Unlike GPB Holdings, GPB Automotive’s strategy was to invest strictly in automotive dealerships and automotive retail.

“Emboldened by its success and the persistence of its marketing team, GPB Capital launched a number of other funds, some diversified, like GPB Holdings II, and others more specialized, such as GPB Waste Management and GPB NYC Development.”

GPB Capital’s success in fundraising came from its aggressive marketing strategies and big commissions to brokers.

Gentile hammered investors with its prime selling point – a yearly 8% distribution paid monthly.  GPB Capital “carefully constructed the narrative that unlike a traditional risky private placement, where an investor places chips on a roulette table hoping for a positive outcome, investing in a GPB Capital fund would provide a continuous stream of income in addition to a big payday upon exit. GPB Capital’s approach worked, and to date the firm has raised over $1.5 billion.”

The big attraction for stockbrokers, of course, were the large commissions.

At first, GPB Capital was able to deliver. But as time went on, Massachusetts says what we have been saying, GPB is a Ponzi scheme.

According to the complaint filed last week by the State of Massachusetts,

“As time went on and GPB Capital raised more money, it was unable to deploy its capital efficiently. Instead of limiting contributions until capital was deployed, GPB Capital continued to take on new investors, especially for GPB Automotive and GPB Holdings II. As investor contributions increased, so did the capital required to continue to pay investor distributions. While GPB Capital maintained authority to suspend distributions whenever it wished, the firm continued to make its monthly distributions in order to maintain appearances and stay attractive to investors. In order to keep up with distributions, GPB Capital began dipping into other sources of income, contrary to statements made in its private placement memoranda and marketing materials. GPB Holdings, GPB Holdings II, GPB Automotive, and GPB Waste Management eventually turned to investor contributions to meet the demands of the 8% monthly distributions, and the fund financials tell as much. The funds’ financials show that distributions were issued that exceeded the funds’ net incomes, yet GPB Capital never updated any of its disclosure or marketing materials to reflect this.”

Massachusetts doesn’t use the word Ponzi scheme but taking investor contributions to pay dividends is the hallmark signature of a Ponzi scheme.

We suspect that the company will deny the charges but it still hasn’t been able to provide audited financials as required by the SEC. If it isn’t using investor money to pay distributions, that should be easy to prove.

We don’t think the company can prove it. In fact, the longer the company fails to provide audited financials and fails to submit required SEC reports, the more we worry.

Filing a false report with the SEC is a crime. Perhaps the company feels it is better off not filing then to a) tell the truth or b) file a false report. We think the company is in the classic catch-22. Unfortunately, investors are the ones paying the price.

Suing Stockbrokers for GPB Losses

While many stockbrokers get commissions of 1%, we believe stockbrokers who sold GBP funds were paid between 7% and 9%. That kind of money can cause some brokers to do what is best for themselves instead of what’s best for their customers.

Industry rules require brokers to know their customers (KYC rules) and to only make suitable recommendations. Unfortunately, many brokers forgot that lesson and made recommendations that were in their own best interests (commissions). Because these funds aren’t your typical highly traded stock, they aren’t suitable for most investors and certainly not anyone who needs access to their money.

Investments in GPB funds are considered private placements. That means they can only be sold to accredited investors. We believe that some brokers cut corners and sold to any investor with a checkbook. Once again, if you don’t meet the SEC’s accredited investor test, you may be able to recover any losses.

Finally, brokerage firms have an obligation to perform due diligence on the products they are recommending to customers. That due diligence doesn’t mean simply finding the products that pay the highest commissions.

The bottom line? If your broker recommended and sold you a GPB Capital fund, you may be able to recover your losses. Even if your broker has no money, his or her employer (the brokerage firm) can be held liable.

Massachusetts says that GPB funds were sold by as many as 63 different brokerage firms. We believe the following companies are or were heavily pushing GPB Capital:

• Accelerated Capital Group
• Advisory Group Equity Services
• Aegis Capital Corp.
• American Capital Partners
• Arete Wealth Management
• Arkadios Capital
• Ascendant Alternative Strategies
• Ausdal Financial Partners
• Avere Financial Group
• Axiom Capital Management
• BCG Securities
• Benjamin & Jerold Brokerage
• Cabot Lodge Securities
• Calton & Associates
• Cape Securities
• Capital Investment Group
• Center Street Securities
• Coastal Equities
• Colorado Financial Service Corp.
• Concorde Investment Services
• Crown Capital Securities
• Crystal Bay Securities
• David A. Noyes & Company
• Dawson James Securities
• Dempsey Lord Smith
• DFPG Investments
• Dinosaur Financial Group
• Emerson Equity
• FSC Securities Corp.
• Geneos Wealth Management
• Great Point Capital
• Hightower Securities
• IBN Financial Services
• Innovation Partners
• International Assets Advisory
• Kalos Capital
• Kingsbury Capital
• Landolt Securities
• Lewis Financial Group
• Lowell & Company
• Madison Avenue Securities
• McDonald Partners
• McNally Financial Services Corp.
• Moloney Securities
• Money Concepts Capital Corp.
• MSC – BD
• National Securities Corp.
• Newbridge Securities Corp.
• Orchard Securities
• Pariter Securities
• Purshe Kaplan Sterling Investments
• Royal Alliance Associates
• SagePoint Financial
• Sandlapper Securities
• SCF Securities
• Sentinus Securities
• Silber Bennett Financial
• Stephen A. Kohn & Associates
• Triad Advisors
• Uhlmann Price Securities
• Vanderbilt Securities
• Vestech Securities
• Western International Securities
• Westpark Capital
• Whitehall-Parker Securities
• Windsor Street Capital
• Woodbury Financial Services

If or when GPB goes under, don’t expect to get much from the company. Going after your broker and his or her brokerage firm is your best bet. We urge you not to sit too long and wait. Some of these brokerage firms aren’t very solvent either. The earlier you make a claim, the better your chances of recovery.

How to Make a Claim

Making a claim is easy. Just contact us and we’ll take it from there.

Many of the investors we speak with believe that suing a stockbroker is expensive or difficult. In the U.S., claims against stockbrokers are typically subject to mandatory arbitration before FINRA.

Arbitrations are usually much quicker than lawsuits and when they are over, they over. (Most appeals are not allowed.)

We handle these cases on a contingent fee basis meaning if we don’t win, you don’t pay. To learn more, visit our GPB Investor Loss Claims page. Ready to see if you have a claim involving GPB Capital? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. All inquiries are kept strictly confidential.

The post Massachusetts Charges GPB with Securities Fraud appeared first on Mahany Law.

College Students Want Their Money Back. It’ll Be Tough to Get It.

(94K)

The coronavirus left Grainger Rickenbaker, a 21-year-old Drexel University student and hockey goalie, without in-person lectures, seminars or labs as the school switched to remote learning.

So he sued.

Rickenbaker is suing the Philadelphia university for the pro-rated price of his tuition, saying he didn’t get what he paid for. His lawsuit is one of at least 100 closure-related suits filed against colleges and universities in federal and state courts.

In total, more than 2,000 pandemic-related lawsuits against a variety of businesses, groups and officials had been filed by the end of May, according to the law firm Hunton Andrews Kurth, which has been tracking the cases. Many involve plaintiffs seeking compensation for what the pandemic has taken, as well as taking aim at governments and politicians for their restrictive orders.

Some legal experts say cases such as Rickenbaker’s will be tough to win.

Experienced lawyers and professors say signing up for college may or may not constitute a legal contract. Education has been ongoing, albeit in a new format. The cost to the college of providing that education remotely may be more, or less, depending on how it’s calculated.

The atmosphere of the college or university campus, while a selling point, may or may not be an integral part of the education that the institution provides.

Sam Hodge Jr., a legal studies professor at Temple University’s Fox School of Business also in Philadelphia, said the schools have three defenses against such lawsuits. They can argue that the pandemic has made it impossible to fulfill the contract; they can say they mitigated the damage by providing online instruction; and they can point out that they have had to continue to pay salaries and other expenses.

Moreover, he said, a contract can be superseded by an unforeseen occurrence of nature — most contracts have a “force majeure,” or “act of God” clause — and COVID-19 appears to qualify.

“Most students got most of the semester in the same way they got the rest of their education; now they are all getting the credits they were promised toward their degree,” said Nashville attorney Audrey Anderson, a former in-house counsel for Vanderbilt University who is now in private practice. She suggested since the students are getting their credits and education, they have not been deprived.

“Think of it like going to a restaurant and you are used to the ambiance being a certain way. And there’s a fire next door that interrupts your meal before dessert. Are you going to ask for your money back? They would say, ‘We’ve got to close the restaurant now, but here’s your dessert to go.’”

Rickenbaker, the Drexel hockey player, said in a Facebook message to Stateline that he wasn’t able to talk about the case to reporters. But Roy Willey, a class-action attorney with the Anastopoulo Law Firm who represents Rickenbaker and many other students in a class action, said the cases are about basic fairness.

“Colleges and universities are not unlike any other business in America, and they too have to tighten their belts during this unprecedented time,” he said in an email. “They are not any more entitled to keep money for services they are not delivering than the mom and pop bakery on Main Street.”

Drexel refunded room and board for the spring semester, which began in April (the school is on the quarter system), but not tuition. The suit estimates that Drexel’s tuition reimbursement could be $5 million, plus the $2,405 in fees that Rickenbaker and others paid, plus damages.

In an emailed statement, Drexel’s Niki Gianakaris, director of media relations, said the university’s “top priority is the health and safety of all members of its community during this unprecedented time.”

“Despite the disruption caused by the COVID-19 pandemic, students continue to have access to Drexel’s broad spectrum of academic offerings and support, building on the University’s long-standing tradition of innovation and creativity in the classroom and remote environments,” she said. “The university is aware of the court filing and has no further comment on the pending litigation.”

Tuition a Sticking Point

Many other colleges and universities have returned pro-rated room and board payments to students no longer using university housing and meal plans. But tuition has become a sticking point, since most schools are continuing to educate students through distance learning.

Attorneys for the plaintiffs argue there is more to on-campus learning than what can be transmitted over a video. They cite lab experiments for science majors and on-stage performances for theater and dance majors, among others.

Some attorneys and students have speculated that universities with billions in endowment are in a better position to forgive tuition payments than other schools that rely on tuition to fund the day-to-day education they provide. But high-endowment schools argue that those monies are tightly regulated by agreements with donors and legal restraints and can be used only for certain purposes.

Public universities may find additional protection in laws that make it harder to sue states. The California Tort Claims Act, for example, limits the types of accidents and injuries for which the state can be liable.

Many suits also are being filed against governors and states themselves over the COVID-19 crisis, including businesses that allege they are being hurt by orders to stay closed. In one recent action, a state Court of Claims judge in Michigan ruled Gov. Gretchen Whitmer, a Democrat, was within her constitutional rights to issue executive orders in response to the pandemic, including closing businesses.

In some of the college cases, plaintiffs have focused on their loss of the “city as a classroom” experience, touted by many schools that see their cities as extensions of their campuses.

One of the highest-profile cases is the suit against New York University, partially because the school showcases its presence in the large, vibrant city as an asset, and partially because New York has been among the areas most affected by the virus.

Christina Rynasko of Palm Beach, Florida, whose daughter Emily studies musical theater at NYU, sued the school for a partial refund of tuition, fees, and room and board. “[O]nline classes are particularly ineffective and inadequate for musical theater majors, who cannot participate in required performances, receive in-person feedback/critique, or partake in the facilities necessary to perform,” the suit said.

In an email to Stateline, NYU spokesman John Beckman said the suit is “unwarranted and ill-advised. The reality is that in the face of an unprecedented, world-altering pandemic … faculty continue to teach, and continue to be fully paid; students continue to have class with their faculty; student work is evaluated; academic credit is appropriately awarded; and students will graduate.”

Hands-on Learning

But whistleblower and class-action expert attorney Brian Mahaney said there are grounds for these suits, especially when they involve programs that require hands-on learning like cooking classes, physical education or physical therapy, to name a few.

“You can’t say you are going to learn to play the piano by watching a video,” he said. “It’s not the same quality of education.”

While his firm has not yet filed any suits, Mahaney has heard from parents of a handful of students who want to take action, including parents whose children have gone to the same schools that they attended.

“They say, ‘I paid for my son to get the same education I got, and now we are paying and he’s sleeping till 4 in the afternoon and taking a couple of classes [online] and that’s not the same.’ The quality of the education is not the same,” Mahaney said. “I feel badly for the kids who are taking on debt to finance this.”

Mahaney is best known for bringing a whistleblower claim against Bank of America for fraudulent housing loans ahead of the Great Recession. It resulted in a $17 billion settlement, one of the largest in U.S. history.

Lynn Pasquerella, president of the Association of American Colleges and Universities, which advocates for liberal education, said the lawsuits could have a lasting impact, especially as the schools look toward a safe reopening.

“College and university leaders are doing the best they can to ensure safety of students, faculty and staff as we plan to reopen,” she said in a phone interview. “Leaders are facing enormous uncertainty about COVID-19 standards of care. Even though they have engaged in reasonable decision-making, it’s that uncertainty that will have an impact.”

She called on Congress to protect higher education institutions “against the economic threat of lawsuits at this moment of maximum economic vulnerability.”

Atlanta attorney Derin Dickerson, an expert in class action and higher education law at the Alston & Bird firm, said it is unfortunate that plaintiffs firms are “using these claims against colleges and universities that are doing the best they can to ensure the health and safety of students.”

He said plaintiffs are going to have a tough time showing that paying tuition constitutes an actual contract with the school. “You have to show there’s a contract, that it was breached, and you suffered damages,” he said.

And he says arguments that online education is cheaper may not hold in this instance because colleges had to ramp up technology quickly, and they are still paying their tenured professors to teach, rather than hiring professors for lower pay to helm online courses.

A study by Boston Consulting Group and Arizona State University found online classes saved colleges between $12 and $66 a credit hour, but mostly because the classes were taught by adjuncts and teaching assistants who are paid less than tenured professors.

“In reality, class actions are primarily driven by law firms,” he said. “These class-action law firms walk away with a lot of money.”

The post PEW Trust June 2, 2020 appeared first on Mahany Law.

College Students Want Their Money Back. It’ll Be Tough to Get It.

(119K)

The coronavirus left Grainger Rickenbaker, a 21-year-old Drexel University student and hockey goalie, without in-person lectures, seminars or labs as the school switched to remote learning.

So he sued.

Rickenbaker is suing the Philadelphia university for the pro-rated price of his tuition, saying he didn’t get what he paid for. His lawsuit is one of at least 100 closure-related suits filed against colleges and universities in federal and state courts.

In total, more than 2,000 pandemic-related lawsuits against a variety of businesses, groups and officials had been filed by the end of May, according to the law firm Hunton Andrews Kurth, which has been tracking the cases. Many involve plaintiffs seeking compensation for what the pandemic has taken, as well as taking aim at governments and politicians for their restrictive orders.

Some legal experts say cases such as Rickenbaker’s will be tough to win.

Experienced lawyers and professors say signing up for college may or may not constitute a legal contract. Education has been ongoing, albeit in a new format. The cost to the college of providing that education remotely may be more, or less, depending on how it’s calculated.

The atmosphere of the college or university campus, while a selling point, may or may not be an integral part of the education that the institution provides.

Sam Hodge Jr., a legal studies professor at Temple University’s Fox School of Business also in Philadelphia, said the schools have three defenses against such lawsuits. They can argue that the pandemic has made it impossible to fulfill the contract; they can say they mitigated the damage by providing online instruction; and they can point out that they have had to continue to pay salaries and other expenses.

Moreover, he said, a contract can be superseded by an unforeseen occurrence of nature — most contracts have a “force majeure,” or “act of God” clause — and COVID-19 appears to qualify.

“Most students got most of the semester in the same way they got the rest of their education; now they are all getting the credits they were promised toward their degree,” said Nashville attorney Audrey Anderson, a former in-house counsel for Vanderbilt University who is now in private practice. She suggested since the students are getting their credits and education, they have not been deprived.

“Think of it like going to a restaurant and you are used to the ambiance being a certain way. And there’s a fire next door that interrupts your meal before dessert. Are you going to ask for your money back? They would say, ‘We’ve got to close the restaurant now, but here’s your dessert to go.’”

Rickenbaker, the Drexel hockey player, said in a Facebook message to Stateline that he wasn’t able to talk about the case to reporters. But Roy Willey, a class-action attorney with the Anastopoulo Law Firm who represents Rickenbaker and many other students in a class action, said the cases are about basic fairness.

“Colleges and universities are not unlike any other business in America, and they too have to tighten their belts during this unprecedented time,” he said in an email. “They are not any more entitled to keep money for services they are not delivering than the mom and pop bakery on Main Street.”

Drexel refunded room and board for the spring semester, which began in April (the school is on the quarter system), but not tuition. The suit estimates that Drexel’s tuition reimbursement could be $5 million, plus the $2,405 in fees that Rickenbaker and others paid, plus damages.

In an emailed statement, Drexel’s Niki Gianakaris, director of media relations, said the university’s “top priority is the health and safety of all members of its community during this unprecedented time.”

“Despite the disruption caused by the COVID-19 pandemic, students continue to have access to Drexel’s broad spectrum of academic offerings and support, building on the University’s long-standing tradition of innovation and creativity in the classroom and remote environments,” she said. “The university is aware of the court filing and has no further comment on the pending litigation.”

Tuition a Sticking Point

Many other colleges and universities have returned pro-rated room and board payments to students no longer using university housing and meal plans. But tuition has become a sticking point, since most schools are continuing to educate students through distance learning.

Attorneys for the plaintiffs argue there is more to on-campus learning than what can be transmitted over a video. They cite lab experiments for science majors and on-stage performances for theater and dance majors, among others.

Some attorneys and students have speculated that universities with billions in endowment are in a better position to forgive tuition payments than other schools that rely on tuition to fund the day-to-day education they provide. But high-endowment schools argue that those monies are tightly regulated by agreements with donors and legal restraints and can be used only for certain purposes.

Public universities may find additional protection in laws that make it harder to sue states. The California Tort Claims Act, for example, limits the types of accidents and injuries for which the state can be liable.

Many suits also are being filed against governors and states themselves over the COVID-19 crisis, including businesses that allege they are being hurt by orders to stay closed. In one recent action, a state Court of Claims judge in Michigan ruled Gov. Gretchen Whitmer, a Democrat, was within her constitutional rights to issue executive orders in response to the pandemic, including closing businesses.

In some of the college cases, plaintiffs have focused on their loss of the “city as a classroom” experience, touted by many schools that see their cities as extensions of their campuses.

One of the highest-profile cases is the suit against New York University, partially because the school showcases its presence in the large, vibrant city as an asset, and partially because New York has been among the areas most affected by the virus.

Christina Rynasko of Palm Beach, Florida, whose daughter Emily studies musical theater at NYU, sued the school for a partial refund of tuition, fees, and room and board. “[O]nline classes are particularly ineffective and inadequate for musical theater majors, who cannot participate in required performances, receive in-person feedback/critique, or partake in the facilities necessary to perform,” the suit said.

In an email to Stateline, NYU spokesman John Beckman said the suit is “unwarranted and ill-advised. The reality is that in the face of an unprecedented, world-altering pandemic … faculty continue to teach, and continue to be fully paid; students continue to have class with their faculty; student work is evaluated; academic credit is appropriately awarded; and students will graduate.”

Hands-on Learning

But whistleblower and class-action expert attorney Brian Mahaney said there are grounds for these suits, especially when they involve programs that require hands-on learning like cooking classes, physical education or physical therapy, to name a few.

“You can’t say you are going to learn to play the piano by watching a video,” he said. “It’s not the same quality of education.”

While his firm has not yet filed any suits, Mahaney has heard from parents of a handful of students who want to take action, including parents whose children have gone to the same schools that they attended.

“They say, ‘I paid for my son to get the same education I got, and now we are paying and he’s sleeping till 4 in the afternoon and taking a couple of classes [online] and that’s not the same.’ The quality of the education is not the same,” Mahaney said. “I feel badly for the kids who are taking on debt to finance this.”

Mahaney is best known for bringing a whistleblower claim against Bank of America for fraudulent housing loans ahead of the Great Recession. It resulted in a $17 billion settlement, one of the largest in U.S. history.

Lynn Pasquerella, president of the Association of American Colleges and Universities, which advocates for liberal education, said the lawsuits could have a lasting impact, especially as the schools look toward a safe reopening.

“College and university leaders are doing the best they can to ensure safety of students, faculty and staff as we plan to reopen,” she said in a phone interview. “Leaders are facing enormous uncertainty about COVID-19 standards of care. Even though they have engaged in reasonable decision-making, it’s that uncertainty that will have an impact.”

She called on Congress to protect higher education institutions “against the economic threat of lawsuits at this moment of maximum economic vulnerability.”

Atlanta attorney Derin Dickerson, an expert in class action and higher education law at the Alston & Bird firm, said it is unfortunate that plaintiffs firms are “using these claims against colleges and universities that are doing the best they can to ensure the health and safety of students.”

He said plaintiffs are going to have a tough time showing that paying tuition constitutes an actual contract with the school. “You have to show there’s a contract, that it was breached, and you suffered damages,” he said.

And he says arguments that online education is cheaper may not hold in this instance because colleges had to ramp up technology quickly, and they are still paying their tenured professors to teach, rather than hiring professors for lower pay to helm online courses.

A study by Boston Consulting Group and Arizona State University found online classes saved colleges between $12 and $66 a credit hour, but mostly because the classes were taught by adjuncts and teaching assistants who are paid less than tenured professors.

“In reality, class actions are primarily driven by law firms,” he said. “These class-action law firms walk away with a lot of money.”

The post The Columbian June 2, 2020 appeared first on Mahany Law.

Is Utah Cord Bank Peddling Dangerous (and Ineffective) Stem Cell Products?

A Pittsburgh woman claims she suffered horrific injuries after being injected by a stem cell product called StemVive marketed by the Utah Cord Bank. Last month Marianne Cornetti filed a lawsuit against the maker of the product and the chiropractor’s office where she received the injection.

We have long warned about the dangers of stem cell products. Although the industry is still in its infancy, there is great promise for life changing therapies. Unfortunately, several products have received FDA approval for limited purposes, the marketplace still resembles the wild west. Some companies produce untested and poor quality products in garages while other companies make wild claims just like the traveling snake oil salesmen of the 1800’s.

In this post we will share Marianne Cornett’s story and then discuss how to separate the good companies from the bad and how to sue if you are injured by a defective stem cell product.

Marianne’s story begins in May 2019 after she saw an ad for stem cell injections. The business behind the ad campaign was Verri Chiropractic Associates and its owner, Dr, Frank Verri. She attended a seminar sponsored by the chiropractic office and the Utah Cord Bank. During the seminar she heard that stem cell injections could be used as a treatment for arthritis.

She says that seminar promoted a product called StemVive.  The seminar touted the “safety, efficacy, approval and certification” of the product, for the treatment of degenerative joint disease including arthritis.

Marianne became a patient of Dr. Verri’s clinic. On May 14^th, she received multiple stem cell injections in both knee joints. The injections were either made or sold by Utah Cord Bank and were administered by a nurse practitioner.

What is unusual is that a representative of Utah Cord Bank was present for the injections.

Marianne says she was told the StemVive product contained viable stem cells, that the product would grow stem cell colonies, that the cell forming properties of the product exceeded the capabilities of her own bone marrow, that the FDA had approved the product for the treatment of degenerative joint arthritis and that the product was safe. According to her lawsuit, all of those claims are false.

Shortly after receiving the injections, Marianne says she suffered from a wide variety of side effects including:

1. Bacterial infection of the right knee;
2. Septic Right Knee;
3. Injury and damage to the bone, joint, cartilage, ligaments and surrounding soft tissue of the right knee from infection;
4. Complications from extended hospitalization for IV antibiotic therapy, including deep vein thrombosis of the right upper extremity and adrenal hemorrhage;
5. Gastrointestinal injury and damage from extensive administration of pain medication while hospitalized; and
6. Other serious and permanent injuries.

Lessons from the StemVive Stem Cell Complaint

There are several interesting twists to Marianne’s complaint.

First, the stem cell advertisement and subsequent seminar were sponsored by a chiropractor. Depending on the state, in many locations advising patients on stem cell therapies is outside their scope of practice.

Despite our belief that stem cells should only be prescribed by a medical doctor, many chiropractors have jumped on the stem cell bandwagon and see the product as an extra revenue source.

We believe that Marianne was pressured to sign up while attending a seminar. If I have arthritis, my doctor doesn’t invite me to a seminar. We meet her in office, discuss options and agree on a treatment plan. Because many insurances don’t pay for non-FDA approved treatments and products, stem cell hucksters use seminars as a way to woo new patients into forking over thousands of dollars in return for a miracle cure. It’s also probably why a representative of the Utah Cord Bank was present when she was injected; many of these seminars are “high pressure” meaning they want patients to sign up and pay immediately before they change their mind.

If the patients are lucky, they just lose their money. If they are like Marianne, they have permanent disabling injuries.

Next, Marianne sued not only the Utah Cord Bank but also Dr. Verri, his chiropractic office and the nurse practitioner who did the actual injection.  In our experience, many garage based stem cell makers and distributors don’t have much in the way of insurance. Physicians, healthcare clinics and nurses, on the other hand, usually have good liability insurance.

Finally, Marianne says the stem cell products weren’t viable. We agree and that is a huge problem. To get the benefits of live stem cells, they must be living. Many companies, however, sell freeze dried product. If it was flash frozen, any living cells are dead.

An exposé from a competitor said the product they obtained from Utah Cord Bank was frozen. It shouldn’t be surprising then, that the StemVive sample had no active colonies.

In May, 2019, the New Yorker ran a story that claims two former employees of the Utah Cord Bank says the company used expired chemicals and reagents in their lab. The company denied those allegations.

Because the lawsuit was just filed, we don’t know how any of the defendants will respond. Utah Cord Bank’s website claims, “We Change Lives.” If you ask Marianne Cornetti, the change she experienced is not very good.

How Do I File a Stem Cell Lawsuit for My Injuries?

Some stem cell products have received FDA approval and are already on the market. Others have obtained an FDA investigational new drug designation. According to the National Institutes of Health (NIH), more than 1,000 clinical trials examining stem cell therapies are currently underway.

All manufacturers of FDA-regulated stem cell products must adhere to strict FDA safety guidelines regarding manufacturing practices to ensure safety, potency, and purity. Patients injured by contaminated products have the right to file a stem cell lawsuit for financial compensation, including money to pay for past and future medical expenses, lost wages, pain and suffering, and other damages. (If a patient receives dead cells or if the company selling the cell products makes inaccurate claims about the effectiveness of its products, you may also have a claim.)

Since properly prepared stem cell therapies rarely cause serious complications, you may be eligible to file a stem cell lawsuit if you suffered serious injury due to a stem cell product. [See our contact information at the end of this post.]

To meet FDA current good manufacturing practices (cGMP) requirements, stem cell companies must maintain a sterile facility to prevent risk of contamination. Live stem cells must be irradiated to ensure no bacterial or viral contamination is present.

Many stem cell products are manufactured overseas, making efficient FDA regulation difficult. With an FDA staffing shortage, overseas stem cell companies aren’t worried about surprise inspections and often fail to maintain a sterile facility or have proper quality control testing.

The dangerous products lawyers at Mahany Law are interested in hearing from anyone who has experienced serious complications after stem cell therapy.

Working with our national network of dangerous drug lawyers, we can help you receive answers and compensation. Stem cell products may be the future of modern medicine. Unfortunately, there are far too many companies rushing into the field with untested or dangerous products and making wild claims of miracle cures.

To learn more, visit our Stem Cell Injury Lawsuit page. Ready to see if you have a claim for your injuries (or if you are an insider with information that can help patients) contact us by email at brian@mahanylaw.com, by phone at 202-800-9791, or online.

All inquiries are kept strictly confidential. Cases handled on a contingency fee basis meaning no fees unless we win and recover money on your behalf.

The post New Stem Cell Injury Lawsuit Filed – StemVive & Utah Cord Bank appeared first on Mahany Law.

A&W claims to have the franchise on “hometown goodness.” If you have ever been bombarded by unsolicited and unwanted text messages from the root beer and hamburger fast food chain you might have different thoughts. This month a federal judge in Fresno, California approved a $4 million class action settlement for people who say they receive these nuisance texts.

Cory Larson began the lawsuit in 2016. He claims that Americans receive billions of spam text messages each year including thousands sent on behalf of A&W.

Larson heard by word of mouth that he could receive a free A&W Papa Burger by texting the word BURGER to a certain number. He did and received an online coupon for his burger. What Larson didn’t know, however, was that his number was stored and that he would soon be receiving many more text messages, messages that he never wanted or gave consent to receive.

To better understand what happened, let’s take a brief moment to discuss the rules on sending marketing text messages to consumers.

Government Rules on Marketing Text Messages

The Federal Communications Commission (FCC) bans text messages sent to a mobile phone using an autodialer unless the recipient previously gave consent to receive the message. There are a few exceptions including messages sent for emergency purposes.

• For commercial texts, your consent must be in writing.
• For non-commercial, informational texts (such as those sent by or on behalf of tax-exempt non-profit organizations, those for political purposes, and other noncommercial purposes, such as school closings), your consent may be oral.

Larson Gets Bombarded with Unwanted Text Messages

Larson says he never consented to be added to a marketing list. That marketing list was supposedly maintained by Harmon Management Corporation and 3Seventy, Inc. Both companies are not exactly household names.

Harmon Management is a large national franchisee of several well-known fast food companies including A&W, KFC, Taco Bell and Pizza Hut. 3Seventy was the company hired to help design their marketing campaign.

When the A&W messages didn’t stop, Larson filed a class action lawsuit.

Under the Telephone Consumer Protection Act – TCPA, unwanted text messages are just like unwanted phone calls (sometimes called robocalls). Violations of the act carry a fine of between $500 and $1,500 per unwanted text or call.

Finding someone to take an individual case is difficult. As annoying as those text messages can be, most lawyers don’t feel that a single case is worthwhile. In recent years, these cases have also become tough to prove. The law says the plaintiff – the person bringing the lawsuit – must show that the call was made by an autodialer and that there was no consent.

While everyone knows that these marketing companies aren’t employing thousands of people to send individual text messages, the burden of proof is on the recipient of the text to prove an autodialer was used. It’s possible to do but too expensive for a single case.

In a class action, the person filing the lawsuit brings the case on behalf of herself and everyone else who may have received similar unwanted text messages.

Once the case was filed, Harmon and 3Seventy attempted on four separate occasions to stop or dismiss the case. Tens of thousands of documents were produced. While the final motion to halt the case was pending, a mediator helped the parties reach a settlement.

Settlements are common in TCPA cases. Defendants could go bankrupt if they lose and have to pay everyone $500 per call or text. (In this case, 17,439 people joined the class. Even if each only received one unwanted text message and the minimum damages were applied, both companies could have owed $8.7 million. If each person had received an average of 10 unwanted spam texts, the damages would be approaching $90,000,000.00!)

At the same time, consumers could have easily lost. Did Larson implied consent by sending his number to A&W in return for a free burger? Could anyone prove that the texts were sent by an autodialer? (The technical rules on autodialers are currently in a state of flux.)

As we said earlier, most people can’t find a lawyer to take a single case. In the A&W case, 17,439 people opted in and just 4 opted out.

Ultimately, each person who joined the class will receive $157 dollars. Larson received an extra $10,000 from the court for bringing the original lawsuit. That buys a lot of papa burgers!

3Seventy was dismissed from the case. Harman also agreed to insure that it has proper consent before sending future text messages.

I Am Getting Unwanted Text Messages, What Should I Do?

To answer that question, let’s start by discussing what you can do to avoid getting spam texts. The FCC says that there are several things consumers can do to help avoid unwanted texts.

First, do not respond to unwanted texts from questionable sources. Once you respond, you have verified that you have a working number. Unscrupulous marketing companies sell lists of working numbers to other fraudsters and scam companies.

Next, several cell providers allow you to block the sender by forwarding unwanted texts to 7726 (the letters stand for “SPAM” on a telephone keyboard).

If you opt into a marketing campaign, understand the terms. In Larson’s case, that may not have helped since he claims he was never told that he was consenting to future text messages.

Finally, see if there is a way of opting out if you find yourself bombarded by unwanted texts. Legitimate companies will offer a STOP or opt out feature. Once again, not all companies honor those opt outs.

The Dirty Secret about Spam Texts

Believe it or not, we can’t take action on many of the complaints we receive from consumers. There are several reasons for that.

First, many of the truly illegitimate marketing companies spoof the identity of real companies. Did you get an unsolicited text about health insurance, amazon gift card or a hotel vacation? There is a real chance that the message isn’t coming from Blue Cross, Amazon or Marriott. The really bad companies simply take the names of honest businesses in an effort to gain legitimacy.

Second, the really bad operators are hard to prosecute. Running a spam operation requires a computer and some software. In fact, a smartphone can be programmed to become an autodialer. And single autodialer can send millions of sequential text messages. Even if we find the company, what have we found? A closet with a couple pieces of hardware? Its not worth anything.

Finally, some of the real bad operators aren’t even located in the United States. Using the internet, they can send messages anywhere in the world by broadband.

Mahany Law TCPA and Spam Text Message Lawyers

As annoying as spam text messages and robo calls are, we are often able to fight back. Recently we settled with a mortgage company that made thousands of calls to homeowners seeking to have them refinance. Some of the people getting those calls didn’t even own a home!

To learn more about fighting back, visit our TCPA robocall cornerstone content as well as our original spam text blog post. Ready to see if you have a case? Contact us online, by email brian@mahanylaw.com or by phone at 202-800-9791. All inquiries are protected by the attorney – client privilege.

Do you work at one of these companies and believe the company is wrong for spamming people? We would love to hear from you confidentially and off-the-record.

The post A&W Franchise Agrees to Pay $4 Million for Spam Text Messages appeared first on Mahany Law.

Can I Receive a Cash Reward for Reporting Coronavirus Fraud?

Uncle Sam Poised to Pay Millions to People Reporting Fraud in Coronavirus Stimulus Programs and Vaccine Development (Everything You Need to Know about Coronavirus Whistleblower Rewards in One Place)

After every major disaster, there is marked increase in fraud. We saw it after Hurricanes Katrina and Maria. It’s not just natural disasters like hurricanes, either. As our banking system teetered on the brink of collapse in 2008, we saw another wave of fraud, this time centered around mortgages and banking.

As companies feel the pressure to make ends meet, some think that fraud is the answer. Falsification of financial statements, ripping off stimulus programs and even ripping off the public become more common. We have already seen a doctor prosecuted for peddling phony coronavirus vaccines and charging Medicare for the worthless vaccines!

Fraud typically blossoms when three factors are present; pressure, opportunity and rationalization. With unemployment rivaling that of the Great Depression and many businesses closed or empty, the pressures on American businesses have never been greater.

To keep our economy afloat, Congress and the President have rolled out stimulus programs that are pumping trillions of dollars into the economy. Because the COVID-19 crisis was so sudden, Congress and the regulatory agencies didn’t have much time to write careful regulations. Most of the current relief programs were slapped together in a matter of days.

Rationalization is the third side of the fraud triangle. With so much money being pumped into the economy, it is easy to simply convince yourself that no one will miss a couple million bucks. Their convoluted thought process goes like this, by taking and spending money they are really just helping the economy.

Coronavirus created the perfect storm and already we are seeing billions of dollars in fraud taking place. That’s not a misprint.

What is the solution? Whistleblowers. Let me explain.

Because the economy is so weak, tax revenues are down. When America most needs more prosecutors and agents to ferret out crime, we have no money to pay for them.

We truly are experiencing the perfect storm. And whistleblowers can help.

Coronavirus Whistleblower Claims

The year was 1863, Abraham Lincoln was president and America found itself in a bloody Civil War. Like today, tax revenues were down – worse than they are today – yet fraud was rampant. Whatever tax revenues the government collected were needed for the war.

So what did President Lincoln do? He convinced Congress to pass the federal False Claims Act. That law allowed private citizens file anti-fraud lawsuits in the name of the United States. If their lawyers were successful in prosecuting one of these cases, their whistleblower client could keep a portion of the recover.

Fast forward to 2020 and that Civil War era law is still on the books. In fact, each year whistleblowers help the government collect billions of dollars annually from companies and individuals who tried to rip off taxpayers. And the whistleblowers who brought these cases get paid several hundreds of millions of dollars.

To qualify for a reward, you must have inside “original source” information about fraud involving government programs or funds. If your case is successful, you can keep between 15% and 30% of whatever the government collects from wrongdoers. 

With $2 trillion in new stimulus money and very few government watchdogs to watch for fraud, it has become a fraudsters paradise. And that’s why we need you.

Mahany Law Launches Coronavirus Whistleblower Initiative

The whistleblower lawyers at Mahany Law have a long history of fighting fraud and representing whistleblowers. In the last several years we have helped the government collect over $16 billion in revenue and our whistleblowers have received over $100 million in rewards.

Our fraud fighting team consists of former prosecutors, special agents, investigators and senior government officials. No one has our experience or track record. Period. But the real reason for our success is always our whistleblower clients. And you could be next.

Another key to our success is our close working relationships with state and federal prosecutors, the FBI, Justice Department officials, the IRS and SEC. In fact, when the government has been too busy or otherwise unable to prosecute a whistleblower case, they know we have the experience to step in and take the case all the way through trial.

Many so-called whistleblower lawyers look for an easy win but when the government fails to prosecute, many of these same firms bail. They simply have never pursued a declined case. (This is why it is so important to find the right whistleblower lawyers to handle your case.)

If you have information about a person or company committing coronavirus stimulus funds fraud, contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. (We accept cases nationwide.) We are happy to evaluate your case without fee or obligation.

Coronavirus Fraud – Where Is the Money Coming From?

Uncle Sam’s printing presses have been working overtime! The original coronavirus quarantine and Safer at Home orders began in March of 2020. Barely three months later, the government has authorized trillions of dollars in spending. That is a record and with the anticipated Heroes Act, will represent more money than spent on the entire federal budget last year.

As of this writing we have the following appropriations which have already been approved:

• March 6^th, 2020 – Coronavirus Preparedness and Response Supplemental Appropriations Act ($8 billion)
• March 19^th, 2020 – Families First Coronavirus Response Act ($3.5 billion)
• March 27^th, 2020 – Coronavirus Aid, Relief, and Economic Security Act – CARES Act ($2 trillion or $2,000,000,000,000.00)
• Under debate – Health and Economic Recovery Omnibus Emergency Solutions Act –
• HEROES Act (>$3 trillion)

Yes, there will be fraud, and many opportunities to help combat that fraud and earn a reward. Probably more so than in any other time in modern history. Remember, the trillions the government spends now will need to be paid back at some point. Unless we are careful, we are guaranteeing that today’s kids will be saddled with an impossible mountain of debt. It is vital that we combat fraud in every way possible.

How is the Coronavirus Stimulus Being Spent?

The numbers are rapidly changing but as of this writing, the government has already spent hundreds of billions of dollars. Some of the money was spent in the form of $1,200 stimulus checks to help those who may have lost their job during the quarantines.

Another large amount went through the Small Business Administration in the form of Paycheck Protection Program (PPP) loans to small businesses. These loans are forgiveable if the company receiving the loans agrees to rehire or not to lay off their employees for a certain time period. Another SBA program provides low interest Economic Injury Disaster Loans (EIDL). Under either program, businesses can receive millions of dollars.

We are already investigating several PPP and EIDL scams involving businesses misspending the loan proceeds or accepting money to which they were not entitled.

Yet another chunk of the money is going to government spending on vaccines, healthcare costs, personal protective gear and the like.

The Department of Health and Human Services has already spent $140 billion on companies researching a vaccine, for companies involved in coronavirus research and developing treatments, for testing, ventilators and PPE.

The Defense Department has spent $11 billion to date, much of it on the same things as Health and Human Services.

Homeland Security isn’t involved in finding a cure and preventive vaccine but they have already spent $46 billion to date, much of it on PPE and grants to state and local disaster relief programs.

The VA has already spent $20 billion, much of that money on PPE, telemedicine and increased healthcare costs for veterans.

Trillions of Dollars in New Spending with Little Oversight, What Could Go Wrong?

We don’t criticize Congress or the agencies for rushing these new programs with little time for review. Those decisions were made because people were jobless and unable to buy groceries and because America needed PPE and a vaccine immediately, .

Most companies that receive grants or loans will do the right thing and use the money wisely. We know, however, that there are always fraudsters ready to take advantage of people in need and already we are seeing investigations and prosecutions. Before we provide some examples, here is a list of where we expect to see major coronavirus fraud cases (and therefore major whistleblower opportunities):

• Grant fraud
• Procurement fraud
• Bid rigging
• Defective products (drugs, ventilators, testing kits, masks…)
• cGMP violations (adulterated or underpotent drugs)
• Kickbacks
• Off label marketing violations
• Best price violations
• Contracting fraud
• Clinical trial fraud
• SEC violations (phony claims of cures and financial reporting fraud)

Coronavirus SEC Fraud

SEC fraud doesn’t fall under the False Claims Act but the Securities and Exchange Commission has its own robust whistleblower program that also pay rewards. We are already investigating claims by some pharmaceutical companies that say they have developed a vaccine for COVID-19 but really don’t.

Companies make these claims in the hopes of boosting their stock prices. Insiders get out while investors get worthless stock and lose their money. Another form of SEC fraud are companies that don’t want to tell their investors that they are on the verge of going under. Instead they cook their books in the hopes of fooling both investors and the public.

Already Coronavirus Whistleblower Reports Are Making a Difference

Ronald Romano Gets Prosecuted for Wire Fraud

Before New York even began its lockdown, used car salesman Ronald Romano was busy selling N95 respirators to the City of New York so that healthcare workers would be protected when hospitals began to fill. He pitched he could provide 7 million respirators to the city even though he didn’t have them. His brazen plan was to find respirators on the open market and drastically mark up the price to a desperate New York City. Price gouging is illegal during a declared emergency both under New York law and the federal Defense Production Act.

Later Romano allegedly forged a letter from a supplier saying that they had 400 million masks available. According to the complaint filed in court,

“Broker-1 also informed NYC’s Office of Citywide Procurement that Vendor-1 could sell a large volume of 3M-brand face respirators, conveying to NYC several of ROMANO’s materially false statements, including that Vendor-1 had a relationship with a hedge fund that had a contract with 3M to obtain 400 million face respirators and that the respirators would be manufactured in the United States. In reality, Vendor-1 had no ability or authority to procure or sell 3M-brand face respirators.”

State laws vary but price gouging is generally illegal during a declared state of emergency. Under the federal Defense Production Act, a whistleblower needs to show three things. First, one must show that the wrongdoer accumulated materials; second, the accumulation of at least some of the materials took place after the materials were designated  as scarce and important to the national defense; and third, that the wrongdoer accumulated the materials either (a) in excess of his reasonable needs of business or personal consumption; or (b) for the purpose of resale at prices in excess of prevailing market prices.

Romano is being prosecuted by the feds. In many cases, the governments that are defrauded by these fraudsters are state and local governments. Both New York State and New York City have their own whistleblower reward laws. So do many other states.

Romano is being prosecuted for price gouging and for trying to get money for masks he didn’t even have. Another variation of the fraud is selling PPE or other goods that are defective. Right now, many of the respirators being sold to the government are counterfeit. That puts the lives of both patients and our healthcare workers / first responders at severe risk.

Sam Yates and his Phantom Employees (PPP Fraud)

Many people are barely getting by on their $1200 stimulus check. Sam Yates, however, decided to go big. He applied for a $5 million Payroll Protection Program loan by claiming he had hundreds of employees that he was trying to stay employed. The feds claim it was all a scam.

In announcing his arrest and prosecution, a Department of Homeland Security spokesperson said, “Today’s arrest should serve as a strong deterrent to anyone considering exploiting the COVID-19 pandemic to enrich themselves through fraud. These individuals have no concern for legitimate businesses whose employees and their families are hurting financially during these unprecedented times.”

Hip Hop Star Charged with Coronavirus Fraud

The feds charged Maurice Fayne a/k/a Arkansas Mo with bank fraud after he received $2,045,000 from the PPP program. Fayne, a reality TV star, claimed he owned a trucking company and needed the money to help keep his 107 employees on the payroll. Instead, the feds say Fayne used the money for back child support, a Rolex Presidential watch and 5.73 carat diamond ring for himself.

While executing a search warrant at Fayne’s home, police found a 2019 Rolls Royce that still had dealer tags on it.

In announcing his arrest, prosecutors released a statement saying, “The defendant allegedly stole money meant to assist hard-hit employees and businesses during these difficult times, and instead greedily used the money to bankroll his lavish purchases of jewelry and other personal items. The department will remain steadfast in our efforts to root out and prosecute frauds against the Paycheck Protection Program.”

The Wall Street Journal says that the SBA isn’t equipped to audit the hundreds of billions of dollars in loans that are being made. “The SBA is a shoestring agency with several thousand employees. It’s literally impossible for them to do the kind of job that taxpayers would desire.”

According to the Journal, during the 2008 financial crisis an audit found that 40% of the loans made by the SBA had inappropriate or unsupported documentation.

Whistleblowers can be helpful in two different areas of coronavirus PPP fraud. First, did the loan proceeds go to eligible recipients? If so, was the money properly used? (Remember, if the company says it used the money to retain workers the loans are forgiven meaning taxpayers foot the bill.)

Michigan Doc Accused of Phony COVID-19 Cure in Medicare Scam

Most folks believe that doctors and healthcare workers are the heroes of the pandemic. They are but that doesn’t mean there aren’t a few bad apples ready to scam patients and taxpayers.

The FBI raided a Sterling Township, Michigan clinic and charged Dr. Charles Mok with healthcare fraud. Online records show that Mok operated a clinic that helped patients with varicose veins, hormone replacement, stem cell therapy, skincare and weight loss. To slow the spread of the coronavirus, Michigan officials stopped non-emergency medical visits for several weeks. That meant Mok’s practice was largely on hold for two months.

Dr. Mok could have helped out at area hospitals that were swamped with COVID-19 patients while his clinic was closed. Instead, prosecutors say he took a different path. They say he began touting preventative vaccine and treatments for coronavirus. The miracle cure? Vitamin C.

They also say he was billing Medicare (meaning taxpayers) for these phony cures. Worse, authorities also say that he failed to follow proper protocols to minimize the spread of the virus. According to the complaint, “The clinics’ waiting rooms were full of patients sitting next to each other and not adhering to the six-foot social distancing recommendation by the Centers for Disease Control. Employees are working without proper PPE and are in close contact with each other and patients during examinations and treatments.”

Five of his employees tested positive for coronavirus yet continued to treat patients. We have no idea how many of his patients were infected as a result or if any of them died.

The case was brought to light by a concerned worker-turned whistleblower.

How to Earn a Coronavirus Whistleblower Reward

Our nation’s healthcare professionals, scientists and pharmaceutical workers are actively working on vaccines and cures. Their efforts also include taking care of over 2 million Americans already confirmed infected with the virus. With our economy in shambles, over 117,000 Americans dead from the virus, and record unemployment, it is vital that everyone do their part to protect, rebuild and recover. That includes fighting coronavirus fraud.

Here is what you can do.

If you have any evidence or information about persons or companies offering phony cures or vaccines, phony test kits, defective respirators or PPP, price gouging, misuse of stimulus funds or even companies lying to their investors and shareholders, blow the whistle.

Blowing the whistle means filing a sealed complaint in court. You can’t get a reward by emailing or calling a hotline. The coronavirus fraud team at Mahany Law has the experience to thoroughly investigate these cases, file the necessary lawsuit and paperwork and prosecute the case in the name of the government.

There are not rewards for every type of fraudulent behavior out there but we have found the overwhelming majority of whistleblowers are primarily motivated by doing the right thing. They understand the need to protect vulnerable members of the public and taxpayers.

Knowing that there are risks faced by whistleblowers, Congress and the state legislatures in 29 states have passed laws allowing whistleblowers to receive a cash reward for their efforts. In most jurisdictions, those rewards are between 15% and 30% of whatever the government recovers from the wrongdoer.

Just about every state makes retaliation against whistleblowers illegal too. If you are fired for blowing the whistle you could receive double damages and attorneys’ fees.

To learn more, we have several sections on our whistleblower information page dedicated to specific fraud topics including government contract fraud, Medicare fraud, SEC whistleblower cases and many others. They can all be accessed from the drop down menus at the top of the page. We also have a coronavirus information page which is primarily dedicated to those who suffered because of a coronavirus related fraud.

Ready to see if you qualify for a coronavirus whistleblower reward? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. We accept cases anywhere in the United States (SEC cases worldwide). All inquiries are protected by the attorney – client privilege and kept confidential. Cases accepted on a contingency fee basis meaning there is no fee unless we recover money on your behalf.

*All persons reported in this blog are presumed innocent until proven guilty. Simply because a person is indicted or arrested does mean they are guilty.

The post COVID-19 Fraud Is Everywhere (Coronavirus Whistleblower Reward Post) appeared first on Mahany Law.

First It Was False Promises of “Unprecedented Upgradability”, Now Its Performance Issues and Overheating – Alienware Area 51 Investigation Expanded

For well over a decade, Dell’s Alienware Area 51 gaming systems have been plagued by reports of overheating. With just days until the new Area 51m R2 laptops are released, owners of the first generation Are 51m R1 machines are outraged by overheating problems. With some gaming laptops costing over $5,000, owners of these defective machine certainly have the right to be upset.

In May we launched an investigation to Dell’s failure to deliver on the R1’s promise of “unprecedented upgradability.” Dozens of owners have contacted us to complain how they were unable to upgrade the core components of these devices, the CPU and GPU. As we began talking to these owners, we realized that many report overheating problems.

If you want to know what folks are saying, look no further than Dell’s community forum:

“Illicit” wrote in May,

“I’ve been using the Alienware Area-51m for a long time now and feel it heats up way past normal. Specially along the panel adjacent to the power button, which is understandable since the Heat sink lies below. But also on the palm rest area on for the left hand which you would normally use to access the WASD keys (as a gamer). It gets so hot that I cannot keep my hand there for more than a few minutes. To counter this, I have to always keep the Air Conditioner in my room running…

“I’ve attached a screenshot showing CPU temperatures soaring well above  90 degree C even when the load is not that high.”

Another user wrote that same month,

“I bought mine a year ago and have the same problem for a long time… Still, it often ends with a throttling and sometimes with a blue screen of death and/or simple system shutdown even with all fans on. And it gets really hot.”

And yet another user said in the forum,

“I have a 1 year old m15 r1 but had the same overheating problems. CPU temps during gaming were 100 degrees without fail. Area around power button became almost untouchable. Could feel the heat through the AWSD keys. Graphics and CPU freezes were common.

Just took the heat sink out and the thermal paste was dry and flaked off in chunks except in the very center of the CPU and GPU. Also has oxidized fingerprints on the heat sink copper directly over the chip contact areas…”

Dell’s support team says, “Avoid running Alienware continually for longer time.” That is not a helpful solution for someone paying thousands of dollars for a machine that shouldn’t overheat.

One user told us that all firmware versions greater than 1.5.0

“have been crippled by Dell to reduce performance of the machine and lock the thermal limit at 75 celsius which causes most if not all current gaming software to stutter and slow down when the laptop temp reaches 75 as the thermal controls lower the speed of the GPU from 1700 down to 300 in attempt to lower the heat.

“At release and for a short time afterwards, some machines were burning up specifically the MOSFITS used were not of sufficient tolerance for the voltages going through them, it APPEARS that instead of fixing the engineering issue or upgrading the poor quality MOSFITS used on the motherboard, Dell appears to have made the questionable decision to lower the performance and consequently the heat generated by locking the thermal limit setting to 75C to avoid more burned units and the cost of repair of every already sold and to be sold Area51m.”

There seems to be a common theme here… one that certainly warrants more investigation.

The earliest reports we have found of overheating go back to 2008. There is no reason why 12 later people are still having the same problems.  And if the reports we are hearing are correct, Dell simply throttled back the performance of their top of the line Area 51m R1 laptops instead of fixing the problem.

It appears that many users are forced to choose between slow performance or machines the “blue screen of death.”

Mahany Law in cooperation with our partners at Hochfelsen Kani have now expanded our class action investigation to include overheating and resultant performance issues.

Dell launched the Alienware Area 51m R1 gaming laptop in January of 2019. These machines cost thousands of dollars but many gamers were attracted to Alienware’s top performance and the promise of what Dell called “unprecedented upgradability.” Dell’s advertisements suggested its core components – the CPU and the GPU – were fully upgradable.

Today we believe that the performance of these top end machines aren’t as advertised, that many machines overheat or burn up and that the promised upgrades have never materialized.

While we hope the new 2^nd generation machines being released by Dell this month will be much better, owners of the Area 51m R1 are entitled to everything they were promised.

Depending on where you live, Dell may be liable for a breach of warranty and breach of warranty of fitness for a particular purpose (lawyer speak for the concept that the laptops do not perform as advertised).  We also believe Dell has engaged in deceptive business practices which are illegal in many states. Purchasers who relied on these performance and upgradeability claims and on Dell’s advertising campaign may be entitled to significant cash damages.

Sadly, the gaming industry has had a long tradition of taking advantage of consumers by advertising and selling products that don’t do what the sellers claim they can do.

If you are an owner of one of these devices and have problems due to overheating, problems with the performance of the laptop (not meeting specs) or have been harmed by the inability to upgrade the core CPU and GPU components please contact us online, by email brian@mahanylaw.com. We cannot accept phone calls on consumer class action cases.

For more information about the upgradability items, visit our Dell Alienware Area 51 Class Action information page.

When writing us, please let us know the following information:

• Your name
• Address
• Phone
• Email
• Preferred method of contact (email or phone)
• Model of Alienware product purchased
• Date of purchase (approximate)
• Price paid if known
• Please describe any conversations or correspondence you may have had with Dell regarding upgrades, refunds, overheating, performance or warranty issues
• Whether you purchased online from Dell.com, by phone from Dell or from a third party (Best Buy, Amazon, etc.)

PLEASE NOTE: We need your help! We are still looking for the purchaser of an Area 51m17 R1 laptop that has the original materials that came in the box with the laptop.

Presently we intend to bring Alienware class actions in those jurisdictions where state unfair and deceptive trade practices laws permit. We intend to seek damages or an order requiring Dell to replace the R1 laptops with the newer Alienware Area 51m R2 2^nd generation machines.

The post Alienware Area 51m Expands to Overheating and Performance Claims appeared first on Mahany Law.

Precious Metals Scams Are on the Rise Again – Learn How to Spot a Scam and Recover Your Losses if Scammed

[Updated through 2020] Recently there has been a glut of advertisements promoting investment in precious metals. Internet websites, infomercials, radio ads, cold calls and TV ads – many promise quick riches through the investment of gold, silver and platinum. It’s no wonder that with COVID-19 worries roiling the market, many believe that gold and silver are safe havens to ride out the storm. Fraudsters know this too and are quick to capitalize on innocent investors hoping to cash in on the hot metals market.

What prompted this article? An ad I just saw that promised 300% returns in just 30 days and with “virtually no risk”! Is that possible? Theoretically yes, but not likely and with some of the fees charged by these scams, it truly is impossible.

In fact, as this update is written in 2020, I just received a text message from a commodities firm that says with the outbreak of the coronavirus, the markets are poised to “collapse” and therefore I should purchase gold “today.”

Many of these frauds promise to arrange financing for the client’s purchase. They suggest that a client can purchase much more metal by utilizing the finance option and leveraging their investment. It sounds great until you read the fine print (assuming the fees are even disclosed anywhere in writing). Commissions, loan origination fees, interest , security and storage fees.

Storage fees? Yes. Typically these companies charge high fees to safeguard and insure your purchase in their vault. Unfortunately, in many cases these promoters never even take physical delivery of the gold.

Want to have your investment shipped to you so that you can safekeep it? That’s impossible, at least that is what these same promoters will tell you.  Frequently they claim that government regulations prohibit shipping or that shipping is cost prohibitive because of the security measures needed. That is just plain nonsense. Jewelers, gold buyers and coin dealers ship precious metals every day.

In most of these scams, the promoter promises high profits. Legally, commodities brokers should not make such guarantees. How can they? No one knows whether the market for metals will go up or down and by how much. If you are leveraged and the price goes down, you could easily lose everything. Some promoters rely on that to make more profits.

These same companies typically also minimize the risk involved in these transactions. If it is disclosed, it is often found in the tiny print.

If this isn’t bad enough, many of these companies never even take possession of the metal. The investor thinks there are gold bars sitting in a vault, a vault he is paying for. In reality, there is no gold in anyone’s vault.

While some of these companies are located in the US and subject to US laws, many are offshore operators that utilize a local US phone number and a website. Government regulators have little change of helping you recover your investment in such cases.

As with any investment, the cardinal rule applies – if it sounds too good to be true it probably is.

How to Spot Precious Metals Scams

According to the Commodities Futures Trading Commission (CFTC), there are several warning signs of precious metals scams:

• Promotions that lead you to believe you can profit from current news already known to the public.
  For example, “Since that mine disaster, you are certain to earn big returns on your deposit….”
• Promotions by people who call themselves “metals dealers” or “merchants”.
• Advertised on radio, television, or online.
• Contacts you asking for personal information such as your name, phone number, and email and home address.
• Calls received from a broker or salesman from the company to promote the precious metals purchase (and we will add SPAM text message promotions).
• And two more from our experience – Promotions that ask you to move retirement savings into volatile metals investments and promotions received through unsolicited texts and phone calls.

We urge extra caution if the company is offshore or doesn’t have anything more than a post office box or UPS store address. If the company is offshore, it can be much more difficult to pursue if your investments is really just a scam.

We also suggest that you check out the company with the CFTC and the National Futures Association.

Texas, Other States Pursue Precious Metals Fraud Claims Against Metals.com

In 2019, regulators from at least two states took action against TMTE inc doing business as metals.com saying the company was involved in a precious metals scam.

According to an emergency cease and desist order filed by the Texas State Securities Board, the company and three affiliated individuals, exploited an account holder who was a vulnerable adult. They say the company assisted and advised an 80 year old woman to liquidate her retirement accounts and transfer almost $850,000 to them in to invest in precious metals.

“Respondent Metals.com is engaging in a scheme to solicit elderly persons through unsolicited’ telephone calls. The tactic is often referred to as “cold-calling.”

“Respondent Metals.com is also soliciting potential investors through an internet website accessible by the public at https://www.metals.com.

“Respondent com is telling the potential investors that investments in precious metals, as opposed to investments in securities, are reliable investments that will preserve value regardless of market fluctuations, and investments in precious metals will better hedge against inflation and the devaluation of the dollar.”

“Most of these investors are elderly persons, as the majority of Respondent Metals.corn’s clients are sixty-five to ninety (65-90) years.”

Metals.com allegedly would complete all the paperwork so that the investor simply had to sign an online form transferring all of their retirement assets to the company. Included in the paperwork is a statement that each potential investor to declares, under the penalty of perjury, that the potential investor either deals in precious metals due to his or her occupation, or as a result of his or her avocations as collector, speculator or investor, he or she has knowledge or skill peculiar to precious metals or the practices involved in the purchase of precious metals.

Of course, there were also waivers in the documents such that the elderly investors waived any claims they had against the company.

Texas and Colorado settled with the company after it agreed to fully refund investors money. Seven other states had pending claims against the company.

In 2018, the CFTC charged the owner of BullionDirect with a precious metals scam involving a phony storage vault.

Regulators said in court ‎that from 2009 to 2015, the money sent to BullionDirect was not used to ‎purchase precious metals on behalf of investors. Instead ‎of buying the bullion purchased by the company’s customers, the money was diverted and spent by the owner of the company, CharlesMcAllister, ‎for his personal use. An estimated $16 million disappeared in just two years.

McAllister was indicted on criminal wire fraud and money laundering charges in 2018. In November of 2019 he was convicted by a jury on all counts. McAllister unsuccessfully attempted to overturn the verdict by claiming he was only guilty of sloppy bookkeeping. Prosecutors noted, however, McAllister formed and organized BullionDirect “without sufficient capital, without an adequate accounting system, without segregating customer funds or metals, and without investing in a company pool of metal… [McAllister] also did not perform any financial analysis of his company or file any tax returns for the first ten years of operations, and that after a financial analysis was performed… refused to share BDI’s financial situation with potential customers.”

On February 18, 2020 he was sentenced to 120 months in prison. McAllister has appealed.

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Mahany Law is a national boutique law firm concentrating in fraud recovery. Our stockbroker fraud lawyers can help victims anywhere in the U.S. Our goal is to get back every penny lost through these scams and unscrupulous operators. If you were the victim of a precious metals scam, visit our investor fraud information page. Ready to see if you have a case?  Contact Brian Mahany online, by email brian@mahanylaw.com or by phone 202-800-9791.

The post Precious Metals Scams on the Rise – Gold, Silver or Rusty Scrap? appeared first on Mahany Law.

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Charles Ponzi “Blessed” Us with the Ponzi Scheme. But Bernie Madoff Set the Stage for Approval of a Controversial Fraud Recovery Tool – Clawbacks.

Until the Bernie Madoff case, the term “clawback” was virtually unknown in the asset recovery world.  Now it has become a powerful tool for court appointed receivers and a nightmare for those lucky Ponzi scheme victims who cashed out early or managed to independently recover some of their investment. The Wikipedia definition is quite vague (forget finding the term in a conventional dictionary): “Any recovery of a performance related payment based on discovery that the performance was not genuine.”

For fraud recovery purposes, we define Clawback as the situation when money that’s already been paid out must be returned.

Until a few years ago, the last victims to invest in a Ponzi schemes frequently had little hope of recovering any money.  The earliest investors in Ponzi schemes frequently get paid while the investors still holding their investment when the scheme collapses get nothing. Ponzi schemes rely on an ever broadening pyramid of new money coming in to pay off old investors. The base soon becomes so large that the pyramid collapses. The newest investors typically lose everything.

Until now.

U.S. courts are becoming increasingly sympathetic to efforts to “claw back” profits (and in rare cases, principal) from the earlier “winners.”  Is this fair? It depends on who you are.

For the losers in a Ponzi scheme, their only chance of recovery is getting some money from the earlier winners. The theory is that since the entire scheme was a fraud, allowing the earlier investors to receive profits is fundamentally unfair to the newest investors.  That sounds good BUT, many earlier investors, having no idea that the investment was a scam, long ago spent the profits they received.

The issue is likely to be litigated intensely for the next several years but clawbacks are being accepted with increasing frequency by the courts.

Thus far, courts have been reluctant to allow clawbacks of anything more than profits. By way of example, a person who invested $100,000 and later cashed out his investment plus $30,000 in interest might have to disgorge the interest.  A receiver could seek to have the court “claw back”  any monies received beyond the original $100,000 principal.

One federal judge in Pennsylvania found no legal prohibition against clawing back any monies paid to early investors. The government, however, has a stated policy of not recovering principal from innocent investors who cashed out early.

What does this mean for investors who decide to sue of recover their investment losses?  We recommend that any “profits” or interest recovered in excess of the original investment be segregated into a special account until all filing deadlines have passed. Why? To insure that these profits are available if a receiver is later appointed and a court does order that profits be turned over.

With courts allowing claw backs, why would anyone want to retain private counsel and recover their losses?

Unfortunately, the federal government has very limited resources. Notwithstanding the extensive publicity that often accompanies a new Ponzi scheme or fraud prosecution, most fraudsters are not prosecuted. When the government does step in, receivers must share whatever is collected with all victims.

Fraud victims usually can achieve a much higher recovery by being first to civilly prosecute a fraudster. If you collect more than your initial investment, however, just remember you might have to later share your “profits” with other victims.

By waiting for the government to step in, there is a higher risk of getting nothing or very little.

The case law on clawbacks is very recent and in a state of flux. Consult with a competent asset recovery lawyer before spending any of your recovery.

Bernie Madoff and Clawbacks

Bernie Madoff is spending the rest of his life in federal prison. Unless he gets a compassionate release and allowed to die at home, he will never leave jail. That he is prison provides some measure of justice to his victims but many have lost their life savings. Knowing that the man who stole their money is in jail does little to pay bills.

The court appointed trustee charged with recovering money for Madoff’s victims is Irving Picard. When he was first given the assignment, he hoped to collect between 5¢ and 10¢ on the dollar. Believe it or not, that’s average.

By the end of 2018, Picard and a court appointed receiver had recovered $13.3 billion or roughly 75% on the dollar. How did they do such an amazing job? Through clawbacks.

In 2010, Picard sought money from the estate of Jeffry Picower, Madoff’s largest investor. Just weeks before his death in 2009, Picard had sued claiming that over a two decade period, Picower had cashed in billions of dollars he made from investing with Madoff. Only after Madoff’s arrest did everyone realize that those profits they had received were fake.

Some say that Picower was an innocent victim who just happened to be lucky in that he cashed out before Madoff’s Ponzi scheme collapsed. Others like the Wall Street Journal journalist and Madoff biographer say Picower may have been the brains behind Madoff’s audacious scheme.

We probably never know the truth because Picower died. That didn’t stop the court’s trustee from demanding Picower’s estate pay back every penny and then some of the billions in “profits” he received from Madoff.

His widow agreed and that started the push for other clawbacks.  Not every investor was eager to pay back all the profits they received. Ultimately a federal appeals court approved Picard’s clawback method.

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Mahany Law is a national boutique fraud recovery law firm headquartered in Milwaukee, Wisconsin. We help victims of fraud throughout the United States – Ponzi schemes, investment frauds, stockbroker fraud… if you lost your hard earned money, we can help get it back.

Asset recovery is a new, emerging areas of law. Our fraud recovery lawyers have the experience and knowledge to quickly trace, locate and recover your money. We understand how fraudsters work and how they hide their money. Often we can  unwind fraudulent transfers too. To learn more, visit our fraud recovery information page.

Ready to see if you have a case? Contact us today for a no obligation, no nonsense review of your case. In many cases we will work on a hybrid fee basis. Even if we are unsuccessful, we can document the good faith recovery efforts to insure you qualify for special IRS fraud loss treatment. Brian can be reached online, by email brian@mahanylaw.com or by phone at 202-800-9791.

All inquiries protected by the attorney client privilege and kept confidential. Minimum loss $1 million. (We do make exceptions for stockbrokers and registered broker dealers.)

The post What Are Clawbacks and How Can They Help Ponzi Scheme Victims? appeared first on Mahany Law.

Can One Man (or Woman) Make a Difference in One of the Most Corrupt Cities in America? We Answer that Question Here

One of the first blog posts I ever wrote concerned the City of Bell, California. In 2010, we reported that the Los Angeles County District Attorney had much of Bell’s city government arrested for ripping off city taxpayers. Three years later and we learned that the FBI and IRS also jumped into the fray. In December 2013, former city administrator Robert Rizzo has agreed to plead guilty to filing a false tax return and conspiracy to defraud the IRS. Both are federal felonies.

When we first wrote about the City of Bell, we said the story began in 2010 when the D.A.’s office accused city officials of bilking taxpayers out of $5.5 million. We were wrong. We now believe it started with a whistleblower two years earlier in 2008. More on that below.

Stealing $5.5 million from a small town of just 37,000 mostly blue collar residents sounds like a lot money and it is. Instead of simply embezzling the money, city officials are accused of conspiring to pay themselves outrageous salaries and then hide that fact from voters. If the big salaries were not enough, at least one official simply “loaned” himself additional monies from city coffers.

How high were the salaries? The city manager earned $1.1 million per year. The part-time city council members – $96,000 to $110,000 per year. (The council met just once a month.) And Bell’s police  chief, a paltry $457,000. So many city officials were arrested by county prosecutors that Bell was left with just one sitting council member. (Rizzo was making over twice as much as even the president of the United States!)

In addition to the criminal charges, the state also brought a civil suit to recover the pay, loans and benefits.

Fast forward 3 years and now we learn that the feds also charged the city administrator. Prosecutors say that his outrageous million dollar salary apparently wasn’t enough. In addition to deceiving taxpayers about his high salary, the IRS says that Rizzo created a corporation to claim phony rental property deductions. His return preparer, Robert Melcher, already pleaded to his role in the scam.

In April of 2014, Rizzo pled guilty to filing a false tax return and criminal conspiracy. He was sentenced to 33 months in prison and ordered to pay substantial restitution.

After the plea deal was inked, IRS’s Criminal Division Chief Richard Weber said, “It is regrettable that some public officials believe they are above the law. Instead of filing accurate tax returns, Mr. Rizzo claimed bogus corporate losses on his income tax return to illegally reduce his tax liability. Pursuing public servants who corruptly endeavor to circumvent the tax laws to fund their lavish lifestyles is a top priority for IRS Criminal Investigation.”

The IRS charges weren’t the end of his problems, however. A state court judge sentenced Rizzo to an additional 12 years in prison.

At his state court sentencing, Judge Kathleen Kennedy said, “Power tends to corrupt, and absolute power corrupts absolutely.” She also said, “That is the theme of what happened in Bell. There were no checks and balances to control Mr. Rizzo and those that were in power in the city.”

Whistleblower Reports City Misconduct

Bell, California may have been one of the most corrupt cities in America. But just one person standing up to fraud and corruption can make a difference. We now believe this case began when a city police officer stepped forward and reported misconduct.

Robert “Leo” McSweeney joined the United States Marine Corps in 1990. In March of 2004 he joined the Bell Police Department. He switched his military service from active duty to active reserves.

About a year after being hired, McSweeney was ordered to active duty and deployed to Iraq. Under federal law, national guard troops and reservists are protected while on active duty. An employer can’t fire them or discriminate against them for being called to duty.

While in Iraq, McSweeney served in 150 combat missions and was awarded the Navy Achievement medal. Upon his return to civilian life, he should have been treated as a hero. He wasn’t.

Starting on his first day back Officer McSweeney faced discrimination and retaliation. He lost his seniority and his pay increase. His accrued sick time and leave were taken away. His crime? Apparently it was defending our country’s freedom and leaving the city shorthanded. (The city had almost 100 police officers.)

Things really got bad after McSweeney testified against another police officer who he believed threatened an innocent resident. (If we had more officers like Leo McSweeney, George Floyd might be alive today.)

Combat veteran, decorated hero and City of Bell Police Officer Robert “Leo” McSweeney was fired. McSweeney, however, didn’t go quietly into the night. As we already know, he already reported misconduct within the department and having testified against another police officer who he believed was acting unlawfully.

But McSweeney wasn’t done. After suffering retaliation he reported the city’s illegal behavior and sued the city, city manager and the police chief. We believe his actions finally shed a light on what was happening within the city and ultimately resulted in the indictments of all but one of the city’s leaders.

Public Corruption and Whistleblower Rewards

The motto of the City of Bell is “Bell believes in promoting a healthy, balanced and moral lifestyle.” Unfortunately, many of the city’s elected officials never grasped the “moral lifestyle” concept.

Typically, there are no whistleblower rewards for reporting corrupt government officials. There is an exception, however. Depending on where the corruption takes place, some states have state false claims acts that allow whistleblowers to collect a reward for reporting fraud involving state or municipal funds. California, Illinois and New York are prime examples. In states with false claims acts, whistleblowers can receive between 15% and 30% of whatever monies are collected from the wrongdoers. (Exact recovery percentages vary by state.)

And if there is tax fraud, the IRS also has a whistleblower reward program.

Our whistleblower lawyers have helped ordinary folks collect over $100,000,000.00 in rewards. You don’t have to be a decorated combat Marine to collect a reward. The only requirement is that you have inside information about fraud involving government funds or unpaid taxes.

For more information, visit our False Claims Act and IRS whistleblower reward pages. Ready to see if you qualify for a reward? Contact attorney Brian Mahany online, by email at brian@mahanylaw.com or by telephone (202) 800-9791.

All inquiries are protected by the attorney – client privilege and kept in strict confidence. We represent whistleblowers nationwide.

The post For Whom The Bell Tolls – Most Corrupt City in the US? appeared first on Mahany Law.

EUCYT Labs, Maker of VidaCord, VidaGel, VidaStem, COVIXO and XOsomes, Receives Stern Warning from FDA

Injured or Crippled because of Defective Stem Cell Products from Eucyt Labs? You May Be Entitled to Compensation

EUCYT Laboratories is a stem cell company located in La Vegas. They sell a wide variety of products made from human umbilical cord blood, amniotic fluid and exosomes. Last year the company’s exosome product, XOsomes, was linked to several serious health complications of patients in Nebraska. Some of those patients reportedly developed sepsis.

State officials in Nebraska last year issued a warning after people receiving Eucyt’s products. According to the Nebraska Department of Health and Human Services.

“Recent events in our state and others have highlighted the risks to patients treated with unapproved stem cell, placental and umbilical cord blood-derived products. A recent incident involved individuals treated in Nebraska who became ill after receiving a product derived from C-section placentas, a subset of whom became bacteremic. The FDA recently issued a warning regarding unapproved products derived from stem cells.1 Today, the FDA has issued a patient safety notification warning of risks associated with products derived from stem cells and placentas, especially a product termed exosomes.2 These therapies are administered through intravenous injection, inhalation, or injection into joints or soft tissue. Nebraska DHHS continues to actively assess this situation along with our federal partners at the FDA and CDC.”

That product was XOsomes.

Less than a year later EUCYT is again in trouble.

On June 4^th, the FDA issued a stern warning letter to the company. Apparently, the company is now trying to market its products as a cure for the novel coronavirus without any FDA approval and without proof that the product works.

According to the FDA, “Most recently, you began marketing an exosome product, COVIXO, for the treatment or prevention of patients’ Coronavirus Disease 2019 (COVID-19).”

Products made from human cells or tissues are subject to regulation by the FDA. The government wants to know the products are safe, effective and only marketed for approved purposes.

Not only is EUCYT marketing a product that hasn’t been proven safe or effective, the manufacturing facility where the products are made has serious life safety concerns.

“.. [D]uring the inspection, FDA investigators documented evidence of significant deviations from current good manufacturing practice (CGMP) and current good tissue practice (CGTP)… The deviations in manufacturing processes observed as well as those noted in documents collected during the inspection indicate that the use of your products raises potential significant safety concerns. For example, EUCYT’s deficient donor eligibility practices, unvalidated manufacturing processes, deficient environmental monitoring, and inadequate aseptic practices, as described below, pose a significant risk that your products may be contaminated with viruses or microorganisms or have other serious product quality defects.

Additionally, there have been reported safety concerns with one of your products.”

Each of those violations are very serious.

Often a patient will have his or her stem cells harvested for later use during or after surgery. If handled under sterile conditions, that process is relatively safe.

EUCYT uses stem cells from donors but apparently couldn’t document those donors met eligibility requirements. For example, donors were not screened to insure they did not have Zika virus (or other communicable diseases) which could be transferred through their products.

The FDA also found during an inspection that the company’s manufacturing practices couldn’t guarantee their products were sterile. In fact, the FDA didn’t find evidence of any controls to ensure that its products had the identity, strength, quality, and purity as advertised.

There were also no records for cleaning of equipment used in processing or packaging. The Company says it cleans its equipment but maintains no logs and has no formal process for how cleaning and sterilization takes place. (While the FDA was inspecting EUCYT’s plant, they observed workers cleaning a cutting board used for processing umbilical cords being “cleaned” in an eye wash station!)

The FDA says the company had at least 152 sterility failures including contamination with Acidovorax temperans, Clostridium perfingens, Enterococcusm faecalis, Escherichia coli (better known as the E. coli), Gram positive cocci, Gram negative rods, Klebsiella pneumonaie, Kocuria varians, and Streptococcus. Despite these failures, there was no documentation of corrective or preventative measures.

When the facility knew they had an E. coli problem they failed to test all product batches made that same day. Later a patient tested positive for the deadly E. coli after having received product from one of the untested batches.

The FDA says the company didn’t even keep proper complaint records. We wonder why EUCYT Labs even remains in business.

Since we began investigating and prosecuting stem cell injury cases, we have run into several companies pushing dangerous products on the unsuspecting public.

Worse, many of these same products don’t even work. Many companies freeze dry their product which effectively kills all the live stem cells.

The FDA specifically cited EUCYT for claiming its products are effective treatments for or prevent COVID-19.

Stem Cell Personal Injury Lawsuits

Not all stem cell products are bad. Unfortunately, the industry is going through what we call the “Wild West” phase. There are some legitimate companies that are careful in both their manufacturing processes and their claims. Others are nothing more than garage operations backed up by a slick website and outrageous marketing claims.

If you are hurt because of a bad stem cell product, the injuries could be permanent, life threatening and sometimes fatal. We don’t know much yet about EUCYT but in our experience, many of these smaller companies have little or no insurance.

Fortunately, in many states we can pursue the doctors, chiropractors and others that peddle these products. Whether these doctors were naïve or just plain greedy doesn’t matter. Most doctors and clinics have good insurance.

If you or a loved one was hurt after being prescribed a stem cell product, we can help.

For more information on stem cell therapy, visit our cornerstone post on stem cell lawsuits. In a constantly updated post, we list the history of stem cell therapy, what companies are registered with the FDA, questions you should ask your doctor and how to spot a scam.

Interested in learning whether you have a case and want to get reimbursed for your pain, suffering and medical bills? Contact us immediately. Although most states give injured parties several years to file claims for defective products, we worry that many of these companies have little insurance.  Typically, the physicians, clinics and chiropractors that inject these products are better insured but many states require claims against doctors be filed within just 1 or 2 years from the date of injury.

To see if you have a claim for your injuries (or if you are an insider with information that can help patients) contact us by email at brian@mahanylaw.com, by phone at 202-800-9791, or online. We consider cases nationwide. No legal fees unless we are successful recovering money on your behalf.

The post EUCYT Latest Stem Cell Company in Trouble with the FDA appeared first on Mahany Law.