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Persistence Pays Off in Colorado Complaint Against E*Trade

Posted by Larry Doyle on July 24, 2010 3:50 PM |

“The only thing necessary for the triumph of evil is for good men to do nothing.”

This quote is commonly attributed to Edmund Burke, an Irish statesman, author, orator, and political philosopher who lived in the 1700s. The depth of Burke’s words continue to resonate today. In fact, I thought of his words of wisdom when reflecting on the latest episode in the ongoing saga surrounding the auction-rate securities travesty.

No doubt there remain many miles to go and mountains to climb before real justice and full compensation are afforded all those who were defrauded in the distribution of auction-rate securities. That said, this week brought a small victory for all ARS holders — and one individual specifically — as word broke that the state of Colorado has filed a complaint against E*Trade for improperly distributing auction-rate securities. The Denver Post reports, State Charges E*Trade:

The Colorado Division of Securities has filed charges against E-Trade Securities LLC, a New York broker-dealer, alleging the firm sold Colorado investors auction-rate securities without properly informing them of the risks involved.

The securities were marketed as liquid, short-term investments, but the auction- rate markets froze in February 2008, preventing investors from obtaining their money.

The complaint before an administrative-law judge seeks revocation, suspension or the imposition of conditions upon the broker-dealer license of E-Trade in Colorado. No hearing date has yet been scheduled. Previous actions against other firms have been settled and investors reimbursed.

Did this case just happen to develop in Colorado? No, it did not. The simple fact is, those following this ongoing nightmare are well aware that one Colorado-based investor has doggedly pursued Colorado officials to file this complaint. This individual has persisted when few if any cared to listen. He never gave up. He was convinced that he had been defrauded. Neither his work nor the work embedded in the mission of Sense on Cents are complete. That said, the fact that Colorado officials have picked up the torch that this individual has shouldered and filed this suit against E*Trade should bring every citizen in our country a real measure of satisfaction.

I implore each and every individual reading this commentary to briefly review the attached 16-page complaint filed by the Colorado Securities Commissioner Fred Joseph against E*Trade. Place yourself in the shoes of the investors highlighted in this complaint. Reflect on the fact that there are tens of thousands of our fellow brethren in a similar position.

A nation of laws does not allow institutions such as E*Trade to act in the manner alleged in this report. The story of this complaint is virtually identical to that shared by almost every ARS investor with whom I have crossed paths across our entire nation.

While a mere handful of Attorneys General and securities commissioners have brought suits on behalf of ARS investors, the overwhelming number of AGs, securities commissioners, and financial regulators in our nation have been remarkably silent. On that note, Sense on Cents calls on each and every one of these individuals occupying these positions to review this Colorado complaint and initiate the process to file a similar complaint within their own jurisdictions.

Every attorney general is obligated to defend the rights and interests of their citizens who have been defrauded in the distribution of auction-rate securities. Why haven’t these attorneys general already filed suit? The ARS market froze in February 2008. If these attorneys had any real guts, they would have filed complaints a long time ago. If they need any evidence on the massive ARS fraud, they can go right here: Sense on Cents/Auction-Rate Securities.

The aforementioned officials, individuals remaining frozen with ARS, and truly citizens everywhere in our land owe a debt of gratitude to the individual in Colorado who never gave up in his pursuit of justice. He toiled and fought when nobody seemed to want to listen. He marched on when nobody would follow. The fight remains far from over, but today I am happy to immediately induct this individual into the Sense on Cents Hall of Fame because he did not sit idly by, but rather took action and did something. He provides a real lesson for all of us!! I commend him.

Please take ten minutes to review this complaint (click on image below to open up pdf document). The education embedded in this document will last a lifetime.


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  • CEO of E-Trade


    Honestly, we THOUGHT they were as good as cash. We were just as surprised as all of our investors when the market crashed.

    How were we supposed to tell that everything was going to go sour? I don’t have a crystal ball.


    • Liz

      CEO? Not… The company name is E*TRADE, not E-Trade. If you were CEO, you would know the company’s correct name. The delineation above was a Legal distinction that E*TRADE Legal was always adamant about. Clearly you are not CEO, you are not an ARPS holder, and you have no sensitivity to just how fraudulent E*TRADE was in their misrepresentation of these securities to their Customers and their risk. To the contrary, they represented that they were completely safe vehicles where we could redeem our principle at any time on 7 days notice. They failed to mention that this was contingent upon liquidity in the market or that it was contingent upon anything for that matter.

      • raccoon


        Thanks for your keen observation on the – vs. *, and your strong 2nd to my motion. That ‘CEO’ clown imposter is just a string puller. Every blog has its comedian, but E*Trade isn’t laughing tonight I would wager. Then again they have demonstrated that they are shameless and void of any integrity, so maybe nothing bothers them. Their day of reckoning could be sooner than we all thought however.
        The Colorado action indicated that the AG there apparently has an email copy from a Retail Manager internally at E*Trade telling fellow management that the ARS market was soon to crash in October 2007! no less, right after this is when E*Trade alledgely started unloading out of their House account on retail clients as fast as possible, right up to Feb. 2008 to boot! That was just plain beyond stupid
        and three steps below imbecilic on their part.


  • raccoon

    CEO of E-Trade,? HA, and I am the King of Siam. You are a sham shill imo.
    The word “honestly” is not in E*Trade vocabulary. The real CEO’s crystal ball worked fine in October 2007 when he (Donald Layton )sold sold them in E*Trade’s House account and in what we believe was a tip from FINRA who sold in summer 2007.
    Redemption and rescission is never having to say you are “sorry”.

    • Scammed

      Would love to see documentation of Layton’s sale. If so, he would become just another of the financial executives to front run this market. A few execs were fined but many were not.

      Very interesting that the bulk of the progress on this ARS debacle has been driven by a few state regulators and AGs. Where are the big boys who are supposed to protect investors? More inclined to protect themselves and their brethren on Wall Street perhaps?

  • John W

    Subject: Ballad Dedicated to E*Trade from Colorado

    One Tin broker ( The Legend of E*Trade & Auction Rate Securites)
    Adapted by an Individual in Colorado

    Open link for backround music and blend with customized script written here.

    Listen now cheated investors to a story written not so long ago

    ‘Bout a kingdom on a Colorado mountain and criminal Wall Street fraud-men below
    On the Mountain were our life savings buried underneath a Wall Street stone
    And the broker-dealers swore they’d take it for their very own
    Go ahead and hide the truth, go ahead and cheat your clients
    Do it in the name of greed and money, you can try to justify it at your trails
    There won’t be any trumpets blowin’ come the ARPS redemption day

    On the bloody morning after, one tin E*Trade broker rides away.

    So the greedy lawyers for the con-men sent a message up the hill
    Asking FINRA to protect the stolen buried savings, billions of cash for whick they’d kill
    Came an answer from the mountain “With our brothers we will defend what’s ours and “Ruthless” we will be.
    To get back our lives on our mountain, and have redeemed all our savings frozen there.”

    Go ahead and deceive your neighbor, go ahead and cheat your customers
    Do it in the name of greed is good, and fraud is better, if you can justify it in your bottom line end.
    There won’t be any trumpets blowin’ come the Redemption judgement day
    On the bloody morning after, one tin E*Trade rides away.

    Now the auction rate victims cried with anger, mount your Attorney Generals, draw your sword!
    And they slayed the brokerage people so they won their just reward

    Now Wall Street stood atthe end of its path of plunder by the mountain, dark and red.
    Turned the stone thought they has stolen and looked beneath it “Right wins out” was all it said.

    Go ahead and ignore your conscience, go ahead and cheat for gold
    Do it in the name of profits, if you can justify more fines and penalties in the end
    There won’t be any trumpets blowin’ come the Auction Rate Recission day
    On the bloody morning after, one tin E*Trade legal counsel rides away.

    Borrowed song and templated lyrics from original One Tin Soldier Rides Away

    Original credits and lyrics to;

    “One Tin Soldier (The Legend Of Billy Jack)”

    (As recorded by Coven)
    Listen children to a story that was written long ago
    ‘Bout a kingdom on a mountain and the valley folk below
    On the mountain was a treasure buried deep beneath a stone
    And the valley people swore they’d have it for their very own.

    Go ahead and hate your neighbor, go ahead and cheat a friend
    Do it in the name of heaven, you can justify it in the end
    There won’t be any trumpets blowin’ come the judgement day
    On the bloody morning after, one tin soldier rides away.

    So the people of the valley sent a message up the hill
    Asking for the buried treasure, tons of gold for which they’d kill
    Came an answer from the kingdom “With our brothers we will share,
    All the secrets of our mountain, all the riches buried there.”

    Go ahead and hate your neighbor, go ahead and cheat a friend
    Do it in the name of heaven, you can justify it in the end
    There won’t be any trumpets blowin’ come the judgement day
    On the bloody morning after, one tin soldier rides away.

    Now the valley cried with anger, mount your horses, draw your sword
    And they killed the mountain people so they won their just reward
    Now they stood beside the treasure on the mountain, dark and red
    Turned the stone and looked beneath it “Peace on earth” was all it said.

    Go ahead and hate your neighbor, go ahead and cheat a friend
    Do it in the name of heaven, you can justify it in the end
    There won’t be any trumpets blowin’ come the judgement day
    On the bloody morning after, one tin soldier rides away.

    (c) Copyright 1969 by Cents and Pence Musique Co. Copyright assigned
    1971 to Trousdale Music Publishers. International Copyright Secured.
    All Rights Reserved.

    Copyright 1969 by Cents and Pence Musique Co. Copyright assigned
    1971 to Trousdale Music Publishers. International Copyright Secured.
    All Rights Reserved.

    – SONG HITS, August 1972.

  • Kathy

    Fortunately, state regulators have the evidence showing that most of these execs sold out their own ARS just in advance of the crash — the one they didn’t know was coming.

    Every person waiting for ARS money should be in touch with state regulators. It’s the only way they’ll ever get their money back.

  • raccoon

    Raymond James Loses 2.5 million ARS suit.

  • jim

    Once upon a time NY AG Cuomo fought for ARS victims…at least against the big guys..not Oppenheimer or Raymond James, etc. Now that he’s running for Governor those days are over – don’t want to upset the Wall St money train.

  • raccoon

    MY SAGA OF HOW PERSISTENCE FINALLY PAID OFF IN COLORADO in the auction rate security sales fraud by E*Trade}
    ( provided here per request)

    “I never surrendered nor gave up. The Empire struck back vs the Evil Dark Side of the Sith on this one, it only took me since June of 2008 to get the Colo AG to do this! Sort of like Luke Skywalker finding that one small vunerable spot on the Death Star. A lot of credit has to go to my Conrgressman an Ed Perlmutter (D) 7th Dist CO. Yes, I know he is a Dem., however he made himslef available to me to meet him in person in mid-May this year regarding this matter, and he said he would “get on it” ! This gentleman is the ONLY ONE in “power” who would EVER listen. I will campaign for him this fall. ( I would not care if he was TEA Party or a communist, he works for the little people here in Colorado.) He actually interceeded and prodded the AG’s office in CO to finally act! Of course they had documentaion from me and 39 others to support this. E*Trade fought it and fought it, and denied, and fought it again, I understand, finally Fred Joseph did the right thing! Kudos to him as well.

    Persistence…….I have invested probably over 1000 man hours in 30 months on this matter, I started by writing Prez. Bush to Obama and all in between, (Regulators etc, FINRA, SEC )that you could imagine. It almost cost me a divorce, and I had to get treated for anxiety and high blood pressure from this stress. Half of my life saving are at stake, and I have a son who is going to college next year. I worked 20 years for this money and E*Trade effectively stole it. I could go on and on, and describe the direct abuse I had to endure from them, but you get the idea. Can you image in April 2008 some E*Trade rep. called me at home at 3:00am from a blocked cell number and told me I would be sorry if I proceeded and continued to file my complaints!!?? What kind of thugs are they?! Fortunately, I am a strong 62 year old, as many would have given up! I made this a crusade for a just cause! I have a deep thanks to give you ( ref : Larry Doyle ), as it was/is your site that at times gave me the courage to go on, when I saw there were voices out there like you with courage to expose this. A Million Thanks for all of your efforts L.D.!!! You are a hero in my mind!

    I hope the other 39 victims in Colorado appreciate it, some had 10X more at stake than I, unbelievable how they just rolled over. E*TRADE CAN YOU HEAR US NOW???

  • Has there been any outcome from this case? Where do things stand? I am lodging a similar complaint with the New Jersey Bureau of Securities.

    • Hotel California

      * State of Colorado filed fraud charges against E*Trade on 07/21/10
      * E*Trade made two motions to have the Court dismiss in August.
      * Both of E*Trade’s motions were REJECTED!
      *Teh CO AG’s charged pervailed.
      * The case has been rendered to trial hearing set to May6th, 2010.

      In all other cases the CO AG brought against these ARPS fraud sales the other brokers settled before trail. The bad PR and press is probably what motivated to some extent.
      E*Trade has been pretty intransigent and onery however, and seem intent on cuting thier nose to spite their face off.

      Per public documents ( under Freedom of Information Acts ) at the Office of Admin Courts in Denver Colorado. For further info contact them, and get more details if anyone wishes.

    • Hotel California

      sorry typos

      *The CO AG’s charges prevailed, and the Judge saw it that way too, apparently.

      * The case has been rendered to trial hearing set to May 6th, 2011.

      Next year 2011

      As a footnote, per FINRA records, South Carolina has joined North Carolina and Colorado in recently bringing similar action. Traction against E*Trade is starting one could conclude.

  • Marc

    Can anyone find a copy of the SC or NC
    case against ET? I could only find the
    CO case.

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