Securities Fraud & Financial Schemes Defense Attorney

Are you being investigated by the government for fraud?

Contact Neal Davis – an award-winning Houston defense lawyer skillfully defending individuals and companies from charges of securities fraud, investment fraud, financial schemes and other white collar crimes.

When talking about securities and investment fraud, one cannot help but think of Enron – an American energy company once based in Houston, Texas.

By exploiting certain accounting loopholes and engaging in poor auditing practices, Enron concealed billions of dollars in debt from shareholders and the Securities and Exchange Commision until filing for Chapter 11 bankruptcy in 2001 – making it the largest corporate bankruptcy in U.S. history at the time.

Upon investigation, many of Enron’s executives were indicted for various federal fraud crimes – including former CEO Jeff Skilling, who was tried and convicted on 35 counts of insider trading, securities fraud, conspiracy and other criminal white collar offenses. Skilling is now serving out his 24-year prison sentence and was forced to pay a fine of $45 million.

While the story of Enron and Skilling is one of the most infamous cases of investment fraud in America, it certainly isn’t the only one. The SEC and Department of Justice file hundreds of fraud charges against corporations, CEO’s, executives, brokers, analysts, employees and individuals each year. From 2006 to 2009, the number of pending securities fraud cases increased by 30 percent according to the FBI.

What is securities fraud?

Securities fraud, otherwise known as investment fraud or stock fraud, is an intentional and deceptive business practice that occurs when a company conceals or fabricates financial information to try to influence the purchasing behavior of investors and shareholders. The two primary federal laws which apply to the prosecution of securities fraud cases are the Securities Act of 1933 and the Securities Exchange Act of 1934 – though there are numerous other federal and state laws which may also come into play.

Securities fraud cases can come in many different shapes and forms, from outright embezzlement or theft from stockholders to offering high-risk financial schemes to unknowledgeable investors or lying to auditors. The following illegal actions are considered securities fraud and punishable as a criminal offense under federal law:

• Insider trading
• Front running
• Churning
• Boiler rooms
• Stock manipulation
• Misleading investors

• Stock embezzlement
• Misreported assets or debt
• False promises on investment returns
• “Dummy” corporations
• Corporate misconduct
• Microcap fraud

• Abusive short-selling
• Accountant negligence
• Ponzi schemes
• Pyramid schemes
• Financial “pump-and-dump” Internet scams

What agencies investigate securities fraud?

The U.S. Securities and Exchange Commission (SEC) is the primary federal authority that gets involved whenever corporate fraud is suspected. The SEC is also the enforcer of laws made by the government to protect against securities fraud, and the agency has extensive power to access a company’s financial information when conducting an investigation. If the SEC determines that securities fraud has been committed, the U.S. Department of Justice (DOJ) may be called in to prosecute the offender to the full extent of the law.

In addition to the SEC and DOJ, other federal and regulatory agencies that may conduct securities fraud investigations include:

• The Federal Bureau of Investigation (FBI)
• The Internal Revenue Service (IRS)
• The U.S. Postal Inspection Service
• The Commodities Futures Trading Commision
• The Treasury Department’s Financial Crimes Enforcement Network
• Local law enforcement

Is securities fraud a felony?

Yes. The federal government, along with most states, consider securities fraud and financial schemes felony offenses. Although securities fraud is a federal crime, each state’s individuals laws and securities commision may help determine sentencing. In addition to losing your job and derailing your career, a fraud conviction could land you up to 25 years in federal prison, heavy fines as well as civil court settlements and restitution awarded to the victims.

One important piece of legislation that comes into play during sentencing for securities fraud is the Sarbanes-Oxley Act of 2002.

Passed soon after the Enron scandal to improve the accuracy of financial reporting by publicly traded companies, the Sarbanes-Oxley Act effectively increased punishments for destroying, altering or fabricating financial records during a federal investigation or for the purposes of defrauding investors. The accountability of auditing firms was also increased by this law.