Fighting Back Against Debt-Collectors and Telemarketers

In 1991 Congress passed the Telephone Consumer Protection Act (TCPA), in an attempt to end unwanted prerecorded telemarketing messages and unwanted calls to cell phones. Although it was enacted more than 20 years ago, the Wall Street Journal recently reported that the number of claims for violations of the TCPA that are filed in, or transferred to, Federal court has increased exponentially in the past few years.  Also, many large companies have agreed to multi-million dollar settlements for alleged violations of the TCPA.  Recently, Heather Nelson, a plaintiff mentioned by the Wall Street Journal, was awarded $571,000 after a debt collection agency called her cellphone over 1,000 times and left more than 100 prerecorded messages in regards to her unpaid debts.  Ms. Nelson’s award was vacated after an undisclosed settlement.

The TCPA prohibits prerecorded calls to residential landlines without prior consent from the consumer, and it requires a consumer’s express consent for calls or text messages to cellphones, fax machines, or “any service for which the called party is charged.”  Considering the proliferation of cellphones in recent years and the increase in the use of auto-dialers by debt collection companies, it makes sense that claims for violations of the TCPA have increased.  TCPA claims have also increased as a result of decisions by regulators and courts.  In 2008, the Federal Communications Commission said that the provisions of the TCPA applied to debt collectors.  In 2012, the Supreme Court held that plaintiffs could bring TCPA cases in Federal court.

Plaintiffs have been successful in claims against debt-collectors because TCPA cases allow defendants fewer defenses than in claims brought under the Fair Debt Collection Practices Act, the law under which debt-collection cases were typically filed.  In a TCPA case, the defendant is often left without a defense if it cannot produce proof of the express consumer consent required by the TPCA for calls to cellphones.  Additionally, if the defendant cannot provide proof of one plaintiff’s consent, there are often many other potential plaintiffs for whom the debt-collector cannot prove consent.  This phenomenon has led to a number of class actions suits and settlements against debt-collectors.

According to the Wall Street Journal, consumer-rights advocates say that, despite the increased litigation, the TCPA has actually reduced unwanted calls to cell phones.  The law has also helped protect consumers’ privacy.  As would be expected, debt collectors feel stymied by the law, especially because auto-dialers are the most efficient way to reach a large number of people.  The Centers for Disease Control also reported in 2012 that about 38% of U.S. households only have cellphones, which further limits the debt-collectors’ ability to contact individuals in accordance with the provisions of the TCPA.


Some Financial Advisors Prey on Veterans

According to the Wall Street Journal, veterans who hire financial advisors to assist them in receiving military benefits are at risk for abuse.  These financial advisors are accredited by the Department of Veterans Affairs’ Office of General Counsel.  Attorneys, veteran service organization employees, financial planners and others are all eligible to apply for such a position.  However, the lack of educational and occupational requirements for these advisors threatens the financial stability of the veterans who seek their guidance in acquiring military benefits.  Additionally, the veterans’ Office of General Counsel does not review the moral character of or the knowledge of the individuals who are accredited.  In an investigation done by the U.S. Government Accountability Office (GAO), various problems were found with these financial advisors, ranging from incompetency to unethical behavior, including the improper sale of annuities to assist veterans in claiming pensions.  From this investigation, the GAO has recommended re-vamping the accreditation program through hiring more staff, acquiring information-technology resources, as well as enhancing initial and continuing education requirements for potential and accredited financial advisors.  The GAO has also recommended addressing the ever-rising threats to veterans before they fall victim to such abuse.

Veterans who have claims against licensed stockbrokers are almost always required to bring their claims before Financial Industry Regulatory Authority (FINRA) arbitration panels.  Typical claims against stockbrokers made in FINRA arbitrations involve the purchase of unsuitable securities and misrepresentations and/or material omissions in connection with the sale of securities.

I began my legal career in the Marine Corps. Upon completing my military service, I was an attorney in the Enforcement Division of the U.S. Securities and Exchange Commission, where I investigated and litigated civil violations of the federal securities laws.  After the SEC, I served as a federal prosecutor in the U.S. Attorney’s Office in Miami and Ft.  Lauderdale, where I was  assigned to the Securities Fraud Unit.  In private practice, I have represented a major brokerage firm.  For the past 13 years, I have concentrated on representing investors.  In my many years of litigating securities fraud cases, I have encountered many excellent securities attorneys and financial advisors.

Veterans who suspect that they have possible claims against their financial advisor should seek out an attorney who is  experienced in handling such claims.  In seeking experienced counsel, veterans should look into the background and experience of eaah prospetive attorney to learn if he or she has ever worked for a federal or state securities regulator and how many investor claims he or she has litigated.

Firing Shots Into the Crowd

On the morning of Friday, August 24, 2012, visitors to the Empire State Building were lining up to ascend the famous structure.  The area was crowded, as usual, with tourists and office workers.   There was nothing out of the ordinary until police began firing shots into the crowd.  A total of 16 shots were fired.

Earlier, a disgruntled employee, armed with a handgun, had approached and killed a former co-worker.  As he was fleeing the scene, he drew a handgun, and two pursuing police officers opened fire.  In addition to killing the gunman, nine innocent pedestrians were hit by the officers’ shots.

As the victims from this police shooting have attempted to recover from the city for their injuries, they have found that the city and the police department are not receptive to making these victims whole.

Relying upon a 2010 New York Court of Appeals decision that held that the Police Department guidelines require officers to exercise professional judgment when they open fire around bystanders, the New York court ruled that police are not barred from discharging their weapons when innocent bystanders are present.  They are prohibited from doing so only when it would “unnecessarily endanger innocent persons.”  New York has grasped onto this language and has made a practice of refusing to settle cases where bystanders were injured or killed by police gunfire.  Moreover, the city has tried to have these cases thrown out without a trial.  Without a day in court, victims are left to wonder if the city is interested in ensuring that police making such judgment calls are giving what could be a life-or-death decision adequate weight.  The city and the Police department have asserted that police officers’ decisions should be protected from excessive second-guessing, but should this protection go so far as to insulate police departments from decisions where deadly force is used and innocent civilians are injured or killed as a result?

Nine innocent persons shot by police.  The concern is not excessive second-guessing, it is excessive shooting.  The bystanders deserve their day in court.

Financial Advisors “On the Move” – Protocol and Covenants You Should Know

1024_heilman_nyse_bull Whether the move is voluntary or as a result of an unexpected termination, financial advisors moving to new brokerage firms face a legal and business quagmire that may affect their ability to serve new and existing clients: What about the client list and the accounts that were serviced with the former firm? Can the new firm be sued for “raiding?”  Is the former firm going to sue, or seek to restrain the financial advisor (alleging tortious interference with contractual relations, breach of covenants not to compete, misappropriation of trade secrets, breach of a fiduciary duty or duty of loyalty, or other related business torts)?  What about U-5 issues?  Will the financial advisor be precluded from working with the clients and in the industry that he has known for years?  And, is the financial advisor entitled to damages against the former employer for claims based on wrongful discharge, or for unpaid commissions and other compensation? Savvy financial advisors shouldn’t make this move without legal advice concerning their rights and duties under this potentially injurious predicament. Among the key considerations are whether the former and new employer brokerage firms are both signatories to the Protocol for Broker Recruiting, and whether the Protocol applies in the individual situation. Also determinative are the terms of the employment agreement, and whether the restrictive covenants are enforceable under state law.   In Virginia, covenants not to compete that have the effect of restraining trade are disfavored and strictly construed against the employer.   The covenants must be narrowly drawn and the restrictions limited by geographic area, time, and scope.   Virginia courts have found the following covenants to be invalid:

  • Those seeking to prohibit the employee from competing with any branch of the former employer’s operations, when the employee had no connection to some of those branches
  • Those seeking to prevent the employee from engaging “directly or indirectly” with business in any area in which the employee had previously worked for two years from the date of termination
  •  Those seeking to prohibit the former employee from working, directly or indirectly, and within a 50 mile radius of any of the employer’s offices, in any capacity, with a competing company for one year after the former employee’s departure from the employer
  • Those seeking to prevent the former employee from engaging, directly or indirectly, with businesses similar to the employer within 100 miles of the employer’s office
  •  Those seeking to prohibit the former employee from contracting with any of the employer’s clients
  • Those seeking to prevent the former employee from working, directly or indirectly, for any company that might solicit business from the employer’s customers for one year after the former employee’s termination

Just because an employment contract has a restrictive covenant does not mean that it is enforceable.  Don’t take the former employer’s (or its lawyer’s) word for it.  Ask an independent lawyer to review the contract, and the move just might be a little smoother.

Large Estate May Pass to New York State

“He was a very smart man but he died like an idiot,” is the frank and harsh assessment made by Paul Skurka concerning his friend and fellow Holocaust survivor, Roman Blum, who died last year at the age of 97 without a will. Blum had no known heirs and no surviving members. Blum’s estate is valued at almost $40 million. It is the largest unclaimed estate in New York State history, according to the state comptroller’s office. The public administrator handling the case has hired a genealogist to search for relatives. If none are identified, the money will pass to New York State.

Mason D. Corn, his accountant and friend for 30 years told the New York Times, “I spoke to Roman many times before he passed away, and he knew what to do, how to name beneficiaries.” Julie Satow, “He Left a Fortune, To No One, N.Y. Times, Apr. 28, 2013, MB. P. 1. “Two weeks before he died, I had finally gotten him to sit down. He saw the end was coming. He was becoming mentally feeble. We agreed. I had to go away, and so he told me, ‘O.K., when you come back I will do it.’ But by then it was too late. We came this close, but we missed the boat.”

According to the N.Y. Times, Blum’s funeral was attended by a small number of mourners, most of them elderly fellow survivors or children of survivors.

In her article, Satow provides an interesting description of Mr. Blum’s early years in the U.S.:

In 1949, the Blums came to New York and settled in Forest Hills, in Queens. There, they joined a tightknit community of survivors, many of whom they knew from the Zeilsheim camp.

“They all lived the same type of lifestyle, going to the bungalow colonies together, the Catskills, everything was done as a group,” said Jack Shnay, a child of survivors who grew up in Forest Hills with the Blums. “Initially, they all lived in apartments in Rego Park; then they starting buying or building private homes.”

“Every weekend was a party,” said Charles Goldgrub, the child of survivors and Mr. Blum’s godson, who also grew up in Queens. “They had survived Hitler so they thought they would live forever.”

On weekends, the survivors would often gather to play high-stakes poker and drink plum brandy. They rarely discussed their wartime experiences, but sometimes, as a group and tipsy, they would grow emotional. Mr. Blum’s favorite tune was the 1968 single by Mary Hopkin, “Those Were The Days,” recalled Michael Pomeranc, a hotelier who grew up in Forest Hills and whose parents, also survivors, were close to the Blums. “He was always singing that song, and especially if he’d had a bit to drink, he’d try to get everyone to join in with the lyrics,” Mr. Pomeranc said.

Blum’s circumstances indicate that, given the opportunity, he could have identified charities that he found to be doing meaningful work. Many people who don’t have a will, don’t because they simply have never gotten around to addressing the matter. Local business professionals can generally identify competent estate planning lawyers. Modifications to wills may be made through “codicils.” Waiting to devise a plan for the distribution of assets may result in no plan at all.

“Pension Advances” Threaten Retiree Savings

Retirees are being solicited by certain companies to obtain “pension advances,” which regulators say are really disguised loans. The New York Times has determined that pension advances carry (after factoring in fees) interests rates ranging from 27 percent to 106 percent. Jessica Silver-Greenberg, “Loans Borrowed Against Pensions Squeeze Retirees,” New York Times, Apr. 28, 2013, p. A1.

Ads for the pension advances tout to military retirees and others: “Convert your pension into CASH”; “You have put your life on the line for Americans to protect your way of life. You deserve to do something important for yourself.”

According to the New York Times, legal aid offices in Arizona, California, and New York have reported a surge in complaints from retirees about the products.

The New York Times reports:

Pitches to military members must sidestep a federal law that prevents veterans from automatically turning over pension payments to third parties. Pension-advance firms encourage veterans to establish separate bank accounts controlled by the firms where pension payments are deposited first and then sent to the lenders. Lawyers for retirees have challenged the pension-advance firms in courts across the United States, claiming that they illegally seize military members’ pensions and violate state limits on interest rates.

To circumvent state usury laws that cap loan rates, some pension advance firms insist their products are advances, not loans, according to the firms’ Web sites and federal and state lawsuits. On its Web site, Pension Funding asks, “Is this a loan against my pension?” The answer, it says, is no. “It is an advance, not a loan,” the site says.

The advance firms have evolved from a range of different lenders; some made loans against class-action settlements, while others were subprime lenders that made installment and other short-term loans.

P. A4.

One former Marine, Ronald Govan of Snelville, Georgia, states, “I served this country and this is what I get.” The N.Y. Times reported that Govan paid an interest rate of more than 36% on a pension-based loan.

S&P’s Defense: “We Weren’t Really Serious”

In response to a DOJ civil lawsuit that the company committed fraud when it asserted that its ratings were independent and objective, Standard and Poor’s Rating Services has claimed that the assertions were mere “puffery.”

Whether or not the argument is legally viable, the Wall Street Journal notes that the position degrades the reputation of the firm. See Jeanette Neumann, “S&P Has Unusual Defense,” Wall St. J., Apr. 22, 2013, p. C1. In the Wall Street Journal article, Samuel Buell, a law professor at Duke University, questioned what the point of a rating agency is if the firm contends that its ratings are “puffery.”

Forms of mere “puffery” generally include comments by businesses that they are “the best in town,” and have “the lowest prices.” Judges have long regarded these types of assertions as a form of permitted boasting by businesses and upon which a fraud claim cannot be made. However, if the ratings agencies contend that their ratings should be regarded as mere “puffery,” then, as Prof. Buell notes, one has to wonder why rating agencies even exist? S&P seems to be carrying out a legal Houdini act – claiming in court that their representations are not to be depended upon, but on Wall Street that their comments are credible and important. We will see if the street remembers the rating agency’s courtroom assertions.

Securities Brokers to Disclose Financial Incentives for Switching Firms

For years, brokers with sizeable books of business (large and well-funded client bases) often moved between firms in order to receive robust up-front bonuses. The bonuses often measure between $750,000 and $1 million. The bonuses are generally paid to brokers in the form of “forgivable loans” – for each year that the broker is employed by the new firm a portion of the bonus is forgiven (the entire amount is generally extinguished after five years). Clients are generally told that the broker’s move was spurred by a desire to improve client account services or to obtain better research. Until now the clients have never been told the truth behind the move, or for that matter, been informed at all regarding their bottom-line value to the broker. That may be changing. On April 15, 2013, the Wall Street Journal reported that securities regulators are widely expected to start forcing stockbrokers to disclose to clients when they receive big dollars in connectio with a move to a new firm. The disclosure may cause clients to be more circumspect about moves that are touted as being made for the client’s benefit. My own experience in handling securities matters is that at least 90% of clients follow departing brokers to their new firms. Perhaps now, clients will begin to question the logic of such. Also, the circumstances may spur a discussion between the client and broker about the fees and costs being paid by the client. A large client who is informed that the broker is being paid handsomely simply because the client has hitched his wheel to the broker may extract greater price concessions for following the broker to the new firm, or conversely, with the current firm for staying put.

Author: Mark Krudys, a former SEC Enforcement Division attorney and securities federal prosecutor who regularly represents clients in disputes with brokerage firms.

Prisoners “Boiling to Death” In Their Cells

A New York Times article on the Texas prison system entitled, “In Texas, Arguing That Heat Can Be A Death Sentence for Prisoners,” exposes a shameful problem that exists in jails and prisons throughout America–prisoners dying from hyperthermia or cooking to death in their cells. The Times reports that last summer, in a 26-day period in July and August, ten Texas inmates died of heat-related causes. Texas experienced one of the hottest summers on record in 2011. The summer of 2012 looks like it might break heat records across the country.

The 10 inmates were housed in areas that lacked air-conditioning, and several had collapsed or lost consciousness while they were in their cells. All of them were found to have died of hyperthermia, a condition that occurs when body temperature rises above 105 degrees, according to autopsy reports and the state’s prison agency. One such Texas inmate, Kenneth James, 52, was due to be released in a few months when officials found him in dead in his cell with a body temperature of 108 degrees. His autopsy report stated that Mr. James most likely died of “environmental hyperthermia-related classic heat stroke.” His mother said, “I don’t think human beings should be treated that way.”

A corrections supervisor who works at a prison where one of the inmates died said the number of heat-related fatalities was a cause of concern, as was the larger number of inmates and corrections officers who require medical attention because of the heat. At least 17 prison employees or inmates were treated for heat-related illnesses from June 25 through July 6, according to agency documents. Many of them had been indoors at the time they reported feeling ill.

At the Darrington Unit near Rosharon, Texas, on June 25, a 56-year-old corrections officer fainted in a supervisor’s office and was taken to a hospital. Heat exhaustion was diagnosed. At the four-story Coffield Unit near Palestine, where one inmate died of hyperthermia last August, dozens of windows have been broken out — prisoners slip soda cans or bars of soap into socks and throw them at the windows, hoping to increase ventilation.

“I’m supposed to be watching them, I’m not supposed to be boiling them in their cells,” said the corrections supervisor, who declined to be identified because he was not authorized to speak to the news media. “If you’ve got a life sentence, odds are you’re going to die in the penitentiary. But what about the guy who dies from a heat stroke who only had a four-year sentence? His four-year sentence was actually a life sentence.”

This problem is not limited to Texas. Here in Richmond, Virginia, our local paper reported today that the death rate at the Richmond jail far outpaces the national average.

The mortality rate for inmates at the overheated and chronically overcrowded Richmond jail was 2.5 times higher than the average annual death rate at jails of similar size across the country from 2000 through 2007, the most recent years for which comparable national data were available.

These are the conclusions of Dr. Marc Stern, who does consulting work for the U.S. Department of Justice and the Department of Homeland Security. “The difference is striking enough that it should prompt a review of the original cases,” Stern said, referring to the Richmond jail’s higher death rate.

Stern’s call for an evaluation of Richmond’s jail deaths comes less than three weeks after Katrina Jones, a 19-year-old prisoner, died after she apparently strangled herself at the jail. She fatally injured herself after mental-health workers concluded she was not a threat to herself, even though she had tried to hang herself once before in front of deputies, according to sheriff’s officials.

The City of Richmond, the Richmond Sheriff, and the Sheriff’s Office also are facing a lawsuit involving a man, Grant Rollins Sleeper, 55, who died on June 26, 2010 of “Environmental Heat Exposure” at the Richmond City Jail, which has no air conditioning in the men’s tier where Mr. Sleeper was being held. On June 18, 2010, Jail staff found Mr. Sleeper slumped over in bed, unresponsive to verbal communication, laboring to breathe, and registering a temperature of 104.5 degrees. An autopsy performed by the Office of the Chief Medical Examiner in Richmond noted that Mr. Sleeper’s pre-death bladder temperature was 107.6 degrees. According to the Assistant Chief Medical Examiner, Mr. Sleeper’s body revealed “hyperthermia” and dead tissue and hemorrhaging in the liver and kidneys, which findings were stated to be “attributable to marked increase in body core temperature with consequent multiple organ failure.”

Our firm filed a Complaint on behalf of the personal representative of Mr. Sleeper’s estate asserting that defendants, City of Richmond and C.T. Woody, Jr., Sheriff, were responsible for maintaining and operating the Jail, including in a manner that would not endanger the health and safety of the detainees/inmates held at the Jail. The Complaint further asserts that, for many years, however, the Defendants knew of the life-threateningly high temperatures and other inhumane conditions at the Jail. Nevertheless, at the time of Mr. Sleeper’s death, the Complaint alleges that the Defendants did nothing to remedy these conditions.

In Sunday’s Richmond Times-Dispatch article, the Sheriff appears to lay the blame for all of Richmond’s inmate deaths on the fact that a majority of the inmates come to the Jail with pre-existing physical and mental health problems. This may be true, but it is no excuse for allowing inmates to cook to death. Indeed, the Sheriff is on record for years voicing concern about the poor conditions, including overheating, at the Jail. The Jail was built in the 1960s to house 882 inmates, but the average daily population hovers at more than 1,300. A new jail is under construction and is scheduled to open in 2014, despite concerns that it will be overcrowded immediately. The new facility will have 1,032 beds.

Mark J. Krudys obtained a $2.4 million jury verdict against Sheriff Woody and the Richmond Jail’s former chief physician in a wrongful death case resulting from the death of inmate James D. Robinson. The Robinson lawsuit alleged that Mr. Robinson died in March 2008 after medical staff and the jail failed to diagnose or properly treat his pneumonia.