Investment Fraud Lawyer

Seattle Securities Lawyer

John J Tollefsen


Have you been a victim of investment fraud?

John began practicing business law in 1974. He has represented numerous defrauded investors and has successfully helped many to recover at least part of the money taken. He constantly works on increasing his knowledge through experience and education. He takes more than 20 fraud related continuing education courses each year. He is a Certified Fraud Examiner and Certified Controls Specialist. He graduated from the University of Washington business school with an emphasis on accounting and finance. He has owned a broker-dealer and obtained the necessary licenses from the NASD (now FINRA).

His legal work has received high praise from clients. Reviews He writes frequently on securities law topics. MORE

John’s security law experience includes filings with the Securities and Exchange Commission, defense of SEC and state enforcement actions, plaintiff and defense litigation in complex cases, and building companies for entrepreneurs.

John has the knowledge and experience to represent you as you attempt to recover from investment fraud. If you are looking for an investment fraud lawyer, email us.

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Investment Fraud Lawyer

“Regulators may have missed securities fraud by Kirkland firm” – The Puget Sound Business Journal

Smith v. Finger Stockbroker pleads guilty to taking millions from investors. FINRA arbitration filed. Regulators may have missed securities fraud by Kirkland firm Puget Sound Business Journal by Kelly Gilblom, Staff Writer Date: Friday, October 21, 2011, 3:00am PDT – Last Modified: Thursday, October 20, 2011, 6:51pm PDT On Aug. 18,Jon-Michael Smith called the Kirkland Police Department to report an unusual theft. Smith, a distraught investor, had been trying to reach his broker for several days because his July statement hadn’t arrived. Finally, Smith phoned a company that handles trading for his account. What he heard made him sick. Instead of the $1.56 million he was supposed to have, the clearing broker said Smith’s balance was just $27,000. The account statements Smith had received were false, part of a fraud allegedly conducted by Kirkland broker Richard Finger Jr. to conceal the fact that he had lost nearly $7 million that his 25 clients had trusted him to manage, according to police reports and court documents. By the end of that week, Smith had given statements to the FBI, the Justice Department and the Securities and Exchange Commission. On Sept. 8, the federal entities went to court to arrest Finger and freeze the assets of his firms, Black Diamond Securities and Black Diamond Capital. What makes the story unusual is that just three weeks before Smith called the police, regulators had audited Black Diamond Securities and did not report finding any fraud. Finger, 32, quickly admitted his misdeeds. In a statement issued two weeks after Smith went to the police, he “acknowledged deceiving some of his customers” and said he...

Unjust Enrichment

Unjust Enrichment – Washington State Law The terms “restitution” and “unjust enrichment” are the modern designations for the older “quasi contracts” terminology.127 WAPRAC § 5.51 The Washington court has adopted the unjust enrichment terminology, but continues to use the quasi contractual terminology interchangeably: “Quasi contracts” are not true contracts but are obligations created by the law when money or property has been placed in one person’s possession under such circumstances that in equity and good conscience, he ought not to retain it. [Citation omitted.] Thus, the substance of an action for unjust enrichment lies in a promise, implied by law, that one will render to the person entitled thereto that which in equity and good conscience, belongs to the latter. At common law, such actions are brought under the principles of assumpsit, and where the cause of action arises from a tortious wrong, it is the general rule, whether or not there be an express contract, that the injured party may waive the tort and sue in assumpsit, in which case the law will imply a contract on the part of the tort-feasor to pay the injured party a just remuneration for the damages suffered to his property.2Bill v. Gattavara, 34 Wash. 2d 645, 209 P.2d 457 (1949), (4-1 decision). In unjust enrichment terms, two basic elements must be established in quasi-contractual actions: the person receiving a benefit (such as money) must be unjustly enriched, and the party conferring the benefit must not be a volunteer.3Lynch v. Deaconess Medical Center, 113 Wash. 2d 162, 776 P.2d 681 (1989); Trane Co. v. Randolph Plumbing & Heating, 44 Wash. App. 438,...

Criminal Profiteering

Criminal Profiteering: Washington State’s “Baby” RICO Act The Criminal Profiteering Act of 1985 is Washington State’s version of the federal RICO law.1State v. Thomas, 103 Wash. App. 800, 14 P.3d 854 (2000); Bowcutt v. Delta North Star Corp., 95 Wash. App. 311, 976 P.2d 643 (1999) (trial court erred in failing to provide full scope of equitable remedies authorized by Washington statute). It provides civil penalties and remedies for a variety of criminal activities. “Criminal profiteering” is defined to include the commission, or attempted commission, for financial gain, of any one of a number of crimes listed in the statute.2These include many violent felonies, as well as felonies relating to gambling, drugs, pornography, prostitution, extortion, and securities fraud. The act provides that a “pattern of criminal profiteering activity” means engaging in at least three acts of criminal profiteering within a five-year period. To constitute a “pattern,” the three acts must have the same or similar intent, results, accomplices, principals, victims or methods of commission, or be otherwise interrelated by distinguishing characteristics including a nexus to the same enterprise, and must not be isolated events. A “pattern” of profiteering is usually required before any of the special civil remedies apply.3Winchester v. Stein, 135 Wash. 2d 835, 852, 959 P.2d 1077, 1083 (1998). See 16A WAPRAC § 26.51. There are many similarities between the Washington statute and the federal statute, and as a result, Washington courts look to the case law interpreting the federal statute as a guide to interpretation of the Washington statute.4Id. However, the Washington statute has been characterized as being somewhat narrower. For example, whereas the federal statute...


Fraud by Fiduciaries      Fiduciaries are those upon whom the law imposes the highest duty because of their special status and relationship. Examples include those who are trustees, those who have a power of attorney, professionals like lawyers, and others to whom property or money is entrusted. Depositories like banks whose relationship is defined by contract are not held to be fiduciaries. The law is sometimes inconsistent but those who have significant lobbying power (like financial institutions) are not considered fiduciaries because of protective statutes passed by the politicians. Unlike fraud cases, it is not generally necessary to prove intent by the fiduciary. Mere negligence is usually sufficient. Learn About Breach of Fiduciary...

Qui Tam Law Overview

The traditional name for cases which attempt to recover money defrauded from the king is “Qui Tam” litigation. Qui Tam is pronounced “kee tam” or “kway tam”) and is an abbreviation from the Latin “qui tam pro domino rege quam pro sic ipso in hoc parte sequitur” meaning “who as well for the king as for himself sues in this matter.” History of Qui Tam Laws in the United States Qui tam legal actions can be traced back as far as 13th Century England where they were used by private citizens to gain access to the king’s court. The U.S. legal system, derived from the British system, allowed qui tam actions since the nation’s founding in 1776. They were rare. During the Civil War, Congressional hearings investigated widespread instances of military contractor fraud including defective products, substitution of inferior material, and illegal price gouging. At the urging of Abraham Lincoln, a former practicing lawyer, Congress enacted the Civil False Claims Act in 1863 as a weapon to fight procurement fraud. This law has also been known as the “Lincoln Law” and the “Informer’s Act.” The False Claims Act was designed to entice whistleblowers to come forward by offering them a share of the money recovered. Even though this Act was enacted to combat military contractor fraud, it was applicable to all government contractors, federal programs and any other instances involving the use of federal revenue. The Act allowed any person to act as a “private attorney general” and sue for recovery of the money taken. The named plaintiff on the action is the United States Government. The one filing...

Disavowing an Inheritance

Disavowing an inheritance not a fraudulent conveyance Fraudulent Conveyance in Bankruptcy  Gaughan v. Edward Dittlof Revocable Trust (In re Costas), 555 F.3d 790, 2009 U.S. App. LEXIS 2260, Bankr. L. Rep. (CCH) P81,413, 61 Collier Bankr. Cas. 2d (MB) 52 (9th Cir. 2009) The Bankruptcy Code’s federal fraudulent conveyance provision allows a trustee to avoid “any transfer … of an interest of the debtor in property” within a two year reach back period where the transfer was actually or constructively fraudulent. 11 U.S.C. § 548(a)(1). Debtor was left an inheritance which he relinquished under Arizona law. He then filed bankruptcy under Chapter 7.  The Chapter 7 trustee, sought to avoid Costas’ disclaimer of the Trust property under 11 U.S.C. § 548. Bankruptcy courts have ruled in favor of the debtor in this situation but that ruling was thrown into doubt by Drye v. United States, 528 U.S. 49 (1999). In Drye, a tax debtor inherited his mother’s estate after the IRS had obtained a tax lien on all his “property and rights to property.” Relying on Arkansas’ relation-back disclaimer rule, Drye disclaimed his inheritance and argued that he had no property to which the IRS lien could attach. The Supreme Court, however, rejected Drye’s theory and held that the tax lien attached to disclaimed property despite state law relation-back rules. After discussing the breadth of federal tax lien law, the Court described its analysis: “We look initially to state law to determine what rights the taxpayer has in the property the Government seeks to reach, then to federal law to determine whether the taxpayer’s state-delineated rights qualify as ‘property’...

Accredited Investor Defined

Accredited Investor Defined by Regulation D The federal securities laws define the term accredited investor in Rule 501 of Regulation D as: Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; ; Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; Any organization...

Churning Legal Fees

Major law firm was caught churning legal fees probably to make mandatory minimum billable hours. ‘Churn that bill, baby!’ email surfaces in fee dispute with DLA Piper Posted Mar 25, 2013 3:54 PM CDT By Martha Neil It all began with a corporate bankruptcy case. Retained by energy entrepreneur Adam H. Victor in April 2010 to prepare the Chapter 11 filing for one of his companies, DLA Piper ran up a hefty bill. And when Victor refused to pay it, the law firm sued him for $675,000. Victor defended aggressively, not only filing a counterclaim over what he alleged was a “sweeping practice of overbilling” on the megafirm’s part but discovering some 250,000 pages of documents, according to the DealBook page of the New York Times. Among the documents were copies of email in which lawyers, a number of whom no longer work for DLA Piper, lightheartedly discuss the rapidly growing bill for Victor’s company, Project Orange Associates, which operated a Syracuse, N.Y., power plant, the article recounts. The emails are included in a copy of an affidavit filed Thursday in the Manhattan Supreme Court case, to which a link is provided by the New York Times (reg. req.). “I hear we are already 200k over our estimate—that’s Team DLA Piper!” wrote then-DLA Piper partner Erich P. Eisenegger in one email. After another lawyer responded, noting that an attorney colleague, whose first name is Vince, had been added to the group working on the bankruptcy matter, then-DLA Piper attorney Christopher Thomson added his thoughts: “Now Vince has random people working full time on random research projects in standard ‘churn...

Transfer to Spouse Fraudulent

Fraudulent Conveyance Wife Put Briefly on Title for Financing Douglas v. Hill, — P.3d —-, (Wash.App. Div. 1 Jan 20, 2009) (NO. 60428-7-I) This case may have been decided differently if there had been better lawyers representing the defendants. At trial, the court inexplicably held there must be a lien before a creditor can invoke the Uniform Fraudulent Conveyance Act (UFTA) even though there is no such provision in the Act. It is hard to understand how the trial judge (Island County Clerk Court; Honorable Alan R. Hancock, J.) could come to this conclusion unless the briefing by the lawyers was exceptionally poor. The trial court reasoned that a judgment creditor was entitled only to recover the amount it would have received but for the fraudulent conveyance of the property. Since the creditors, the Douglases, had not recorded their lien with the county auditor as required by statute, they could not collect upon the judgment and were thus not injured by the wife’s conveyance to her husband. The wife had embezzled $500,000 and the couple filed for bankruptcy protection. The husband exonerated of crime. After the bankruptcy, a house was purchased by the husband and briefly put in wife’s name to obtain refinancing. The defendants’ lawyers negligently failed to prove this well known lender requirement. The Court of Appeals was not aware of the requirement and did not consider whether the refinancing motive changed the outcome. Wife’s interest was then transferred back to husband without consideration. The Court of Appeals pointed to the language of the statute. Under the definitions provided in the UFTA, a creditor need only have...

Negligent Misrepresentation

Negligent Misrepresentation in Washington State Law Also see Four Theories of Negligence Plaintiffs who are unable to allege fraud may resort to an alternative theory.1This section quotes from 16 WAPRAC § 18.10. The tort of negligent misrepresentation occurs when the defendant, in the course of business, profession, employment, or a transaction in which the defendant has a pecuniary interest, negligently supplies false information for the guidance of others in their business transactions, and the plaintiff justifiably relies to his detriment.2Peterson v. Big Bend Ins. Agency, Inc., 150 Wash. App. 504, 202 P.3d 372 (Div. 3 2009), as amended on reconsideration, (July 14, 2009) (trial court erroneously dismissed negligent misrepresentation claim against insurance agent who misrepresented cost of replacement coverage); Ross v. Kirner, 162 Wash. 2d 493, 172 P.3d 701 (2007) (Court of Appeals erroneously determined conduct to constitute negligent misrepresentation as a matter of law); Baddeley v. Seek, 138 Wash. App. 333, 156 P.3d 959 (Div. 3 2007) (negligent misrepresentation claim properly dismissed where no representations were made); Ross v. Ticor Title Ins. Co., 135 Wash. App. 182, 143 P.3d 885 (Div. 2 2006) (trial court properly dismissed negligent misrepresentation claim where defendant had no duty to disclose); Van Dinter v. Orr, 157 Wash. 2d 329, 138 P.3d 608 (2006) (trial court properly dismissed claim against vendor and title insurer, where defendants had no duty to disclose capital facilities rate); Shah v. Allstate Ins. Co., 130 Wash. App. 74, 121 P.3d 1204 (2005) (trial court erroneously dismissed claim for negligent misrepresentation); Lawyers Title Ins. Corp. v. Baik, 147 Wash. 2d 536, 55 P.3d 619 (2002); Restatement (Second) of Torts...