On June 10, 2019, the Illinois Securities Department, Massachusetts Securities Division, New Hampshire Bureau of Securities Regulation, and New Jersey Bureau of Securities each charged Glenn C. Mueller of West Chicago, Illinois, and his companies for selling unregistered securities. Mueller developed his scheme for over 40 years, building a web of at least 32 real estate development companies and selling at least $47 million of unregistered securities in the form of promissory notes in these companies to consumers. He referred to these promissory notes as “CD alternatives”, “CD IRAs”, or represented them as being real estate investment trusts (“REITs”). His companies include, but are not limited to, Northridge Holdings, Ltd., Eastridge Holdings, Ltd., Southridge Holdings, Ltd., Cornerstone II Limited Partnership,  Unity Investment Group I, 561 Deere Park Limited Partnership, 1200 Kings Circle Limited Partnership, & 106 Surrey Limited Partnership (collectively referred to as “Mueller Entities”). Mueller organized Northridge in North Dakota with the subsidiaries incorporated in Illinois.

Northridge, founded by Mueller in 1984, is the primary property management company through which Mueller ran his scheme and is the general partner of many of his other limited partnerships. Mueller, through Northridge and the Mueller Entities, owned properties through the Chicagoland area. Mueller set up a “CD Account” through the Northridge website for investors. Once Northridge received the funds, he solicited investors to use the funds in their Northridge CD Account to invest in his various companies.

The Illinois Securities Department filed a Temporary Order of Prohibition against Mueller, Northridge, and several of the Mueller Entities. Mueller solicited 140 Illinois residents to invest over $19 million through 244 promissory notes. Some of these investments were sold to clients in their IRAs.

Stoltmann Law Offices, P.C is investigating recent filings by both FINRA and Ameritas Investment Corp. regarding the sales practices of James F. Anderson of Dakota Dunes, South Dakota. Mr. Anderson also serviced clients through offices in Iowa and Nebraska. According to Mr. Anderson’s publicly-available FINRA BrokerCheck Report, Mr. Anderson was registered with Ameritas Investment Corp. from July 2004 until he was terminated by the firm for cause in February 2019. According to Ameritas, Mr. Anderson was discharged after the conclusion of an internal investigation which determined he had sold clients indexed annuities and promissory notes without authorization from the firm.  Not surprisingly, about two months later the first customer complaint appeared on Mr. Anderson’s BrokerCheck report, alleged that he sold $400,000 in promissory notes to the investor. Just this past week, on June 3, 2019, FINRA finally stepped in and barred Mr. Anderson from the securities industry for life. Mr. Anderson was technically barred for failing to respond to requests for information and to provide on-the-record (OTR) testimony pursuant to FINRA Rule 8210. Although the FINRA Acceptance, Waiver, and Consent does not reference his selling away activities, it does not take a grand leap of faith to conclude that his termination and the customer complaint specifically referencing selling away and selling promissory notes to clients was the crux of the investigation by FINRA. By refusing to show up and provide testimony, Mr. Anderson’s silence about his misconduct is deafening indeed.

Promissory notes are an all too common tool used by brokers and financial advisors to lure investor money into their pockets. First, it is important to understand that in almost all circumstances, promissory notes are securities, which means in order to be legal in your state, they must either be registered with the state securities department, or they must be exempt from registration. The exemption is still something that must be filed with the state. So, if your financial advisor wants to sell you a promissory note, or a loan agreement, or a “memorandum of indebtedness”, it does not really matter what they call it, functionally its the same: its a promissory note. Do yourself a favor and decline the offer and call your state securities department.  Stoltmann Law Offices has prosecuted dozens of cases involving “promissory notes”, many of which turned out to be Ponzi Schemes. Just recently, we have been litigating on behalf of investors who were sold promissory notes – called “Memorandum of Indebtedness” – in now bankruptcy 1 Global Capital.

The good news for investors who get swindled into investing in promissory notes, including those who bought them from Mr. Anderson, regardless of whether Ameritas says these were approved, Ameritas is legally bound to supervise the activities of all of its registered representatives.  Further, because a promissory note is a security, and because Mr. Anderson’s job through Ameritas was to provide financial advice and sell securities, Ameritas can be liable for Mr. Anderson’s conduct through what is called Respondeat Superior. This legal theory means that the principal (Ameritas) is responsible for the conduct if its agent (Anderson) performed within the scope of his employment (selling securities and providing investment advice).  So, for investors who purchased promissory notes through Mr. Anderson, you have two avenues of recovery against Ameritas and Stoltmann Law Offices urges you to call our Chicago-based law firm at 312-332-4200 to discuss filing a FINRA Arbitration claim to recover your losses.

Stoltmann Law Offices, P.C. is evaluating investor claims in connection with recently disbarred financial advisor Philip Nalesnik from Pottsville, Pennsylvania.  According to a document signed by Mr. Nalesnik on April 15, 2019, he voluntarily consented to a permanent bar from FINRA. This is a professional death sentence for anyone who wants to provide financial services or financial advice to clients. The Acceptance, Waiver, and Consent (AWC) states that Mr. Nalesnik refused to provide on-the-record testimony to FINRA in connection with its investigation into his outside business activities.  Prior to signing the AWC, according to his FINRA BrokerCheck Report, Mr. Nalesnik was terminated for cause by LPL Financial on July 8, 2018 as a result of LPL’s internal investigation into his outside businesses, including not cooperating with LPL’s investigation.

Mr. Nalesnik’s FINRA BrokerCheck Report reveals a few other troubling red flags.  He has been named in five customer complaints, with one of them resulting in an adverse arbitration award in November 2010.  He filed for Chapter 7 bankruptcy protection in January 2012 and more recently, was hit with two tax liens.  Financial troubles like these can be red flags or indications that a financial advisor could slip into various forms of misconduct, including selling away, where an advisor has investor-clients invest money in an outside entity without the formal authorization of his firm.

Mr. Nalesnik did prominently disclose several outside businesses on his CRD Report.  These include Ridgeview Wealth Management which was disclosed as a company through which Mr. Nelsnik sold non-variable insurance products.  He also disclosed Integrated Insurance Management, LLC which looks to be an insurance agency. Mr. Nalesnik also reports an affiliation with Private Advisor Group, LLC, which is a registered investment advisory firm headquartered in Morristown, New Jersey. Doing business with any of these entities would be required to be supervised by LPL Financial.

If you or someone you know is a victim of financial fraud perpetrated by Ed Matthes of Oconomowoc, Wisconsin, there is legal recourse that could lead to the recovery of those stolen funds.  According to published reports, Ed Matthes, who was a registered representative for Mutual of Omaha Investor Services until March 12, 2019, missappropriated and stole upwards of $1 million from his clients.  According to the cease and desist order entered by the Wisconsin Department of Financial Institutions, Matthes stole money from client annuities after convincing them to give him authority to enter transactions and withdraw funds on their behalf.  Providing this level of authority to a financial advisor is rarely a good idea, but Ed Matthes was able to elicit a substantial level of trust and confidence from his clients. He created fake account statements which masked the withdrawals he had been taking, hiding his misconduct for years.  Matthes was also barred by FINRA – the regulatory body charged with overseeing and disciplining financial advisors and their firms.

According to Matthes’s FINRA Broker/Check report, several customer complaints have been filed against Matthes’s former firm, Mutual of Omaha Investor Services. These claims were filed as arbitration actions through FINRA’s Dispute Resolution program. Mutual of Omaha is certainly a viable target for Matthes’s fraudulent scheme since at all times he was a registered representative of the firm and as such, Mutual of Omaha had a duty to supervise his activities.  Case law establishes that brokerage firms like Mutual of Omaha can be held liable for negligent supervision even when the activities of the schemer fall outside the scope of his employment with the firm.  See McGraw v. Wachovia Securities, 756 F. Supp. 2d 1053 (N.D. Iowa 2010). Here, Mutual of Omaha had an obligation to supervise the withdrawal of funds from Matthes’s clients’ annuities to ensure they were legitimate, as part of the firm’s anti-money laundering compliance apparatus mandated by the Bank Secrecy Act, and NASD Notice to Members 02-21 and NASD Notice to Members 02-47.

Similarly, the annuity companies from which these funds were converted could have liability to the victims too. Anytime investors withdraw substantial amounts of money from annuities, the annuity company should be on alert, and presumably Matthes had the funds directed to a third party, which is a serious red flag. Stoltmann Law Offices will pursue all viable options to recover our clients’ funds.

It is time for GPB Fund investors to seriously consider their legal options. Over the last year, the GPB Capital Funds have been beset by serious issues raising red flags for investors:

  • On April 30, 2018, GPB missed a mandatory filing date with the SEC
  • In August 2018, GPB announced that is was “overhauling” and restating its 2015 and 2016 financials

Have you or your child been injured by a vaccine? Many people do not realize this, but there is legal action that you can take and we can help! Importantly, under the National Vaccine Injury Compensation Program, your legal fees and costs are paid by the Program, so pursuing a legal action is risk free to you!

In the 1980s, as the number of vaccines grew, there was also an increase in vaccine injuries.  The vaccine companies were inundated with law suits, which threatened a vaccine shortage and an increase in vaccine refusal. In order to compensate victims without the backlash and expense of traditional civil litigation, the U.S. Health Resources and Services Administration created the National Vaccine Injury Compensation Program (“VICP”), aka “Vaccine Court”.

Under the VICP, if you meet the criteria under the VICP, you can file a petition with the Vaccine Court, which is the U.S. Court of Federal Claims, for monetary compensation. The criteria includes 1) receiving a covered vaccine and 2) suffering an injury; 3) within a certain time period. The monetary compensation available to the victims of these injuries include compensation for pain and suffering and current and future medical expenses. Our firm will also petition the Court to pay fees and costs from the Vaccine Injury Compensation Trust Fund. However, unlike traditional personally injury cases, these fees and expenses are not deducted from your compensation or paid by you out of pocket – they are awarded directly to your attorneys from the vaccine compensation fund.  Thus, you do not have to worry about paying us out of pocket or losing a large percentage of your award to pay your legal fees.

The National Vaccine Injury Compensation Program (“VICP” aka “Vaccine Court”) is a streamlined litigation program run through the U.S. Court of Federal Claims to award compensation to individuals injured by vaccines. In order to receive compensation through this Program, you or your loved one must meet the criteria discussed supra. However, do not let this criteria alarm or confuse you. We are here to provide you with a free evaluation, so please contact our office to help you navigate the VICP. Importantly, you need to contact an attorney sooner rather than later for your evaluation, as there are strict statute of limitations periods for filing a case.

The VICP Criteria

The VICP created the “Vaccine Injury Table”  to evaluate injury petitions. The table below lists the following criteria needed for a claim under the VICP: 1) the vaccine received; 2) the injury suffered; and 3) the time period during which the first symptom occurred.

The securities fraud attorneys at Stoltmann Law Offices, P.C. continue to investigate investor claims against brokerage firms that sold their clients investments in various GPB Capital Holdings offerings.  On March 22, 2019, attorney Joe Wojciechowski announced the filing of a Statement of Claim with FINRA Dispute Resolution for an investor who was sold units in GPB Automotive Fund, L.P. The claim was filed against NewBridge Securities and also includes allegations in connection with various non-traded REITs issued by American Realty Capital (ARC). The claim is for a retail investor whose financial advisor recommended she invest nearly 100% of her accounts in alternative investments offered by GPB Capital and ARC.  The claim alleges misrepresentations and omissions of material facts in violation of the Securities Act of Washington, consumer fraud in violation of the Washington Consumer Protection Act, negligence for violating numerous regulatory rules including FINRA Rules 2111 (suitability) and 3110  (supervision), and breach of fiduciary duty. Our client seeks rescission of her GPB Automotive Fund investment and compensatory damages for her realized losses in the ARC REITs, plus attorneys fees, costs, interest, and punitive damages.

Investors who were solicited by financial advisors and brokers to invest in GPB Capital funds should consider their legal options to seek rescission of those investments.  Under the state securities laws (frequently referred to as the Blue Sky Laws), the primary remedy for investors is called rescission, which means the investor sues to force the brokerage firm to buy the investment back.  The rescission remedy seeks to put the investor back in the same place she was prior to purchasing the investment. This is important for investors who own alternative investments like GPB Capital Funds.  These are not liquid or tradable investments, meaning an investor cannot call their advisor and sell it and realize a gain or a loss. Essentially, the investor is stuck. Given the troubling news about GPB Capital over the last several months, something Stoltmann Law Offices has written about extensively, investors are correct to be wary and should consider an exit strategy. Unfortunately, because there is no way out of the GPB Funds, the only option for investors may be to pursue arbitration claims against the brokerage firm responsible for soliciting the investments in the first place.

In the last several years, as interest rates remained very low, it has been difficult for investors to find fixed income investments, like corporate and municipal bonds, that offered higher yields without exposing them to speculative risk. Likewise, due to the long term low interest rate environment, the principal value of the bonds begin to drop as interests rates have risen. The solution to these problems for brokerage firms has been to sell “alternative investments” that offer relatively high yields, but because they are non-traded and do not report any real market value, they have the appearance of a stable value for investors. The bonus for brokerage firms is that these alternative investments offer the advisors commissions they could never achieve by selling standard fixed income securities like corporate bonds or municipal bonds. Advisors sell the sizzle of a high yield and fixed prices and either gloss over or completely misrepresent the speculative risk being taken by investors who entrust their money to private entities like GPB Capital.

Investors who were solicited to invest in Direct Lending Investments (DLI) in Glendale, California by their financial advisor may have actionable claims to recover their money.  This week, the Securities and Exchange Commission (SEC) charged registered investment advisor Direct Lending Investments LLC with a fraud spanning multiple years that caused an $11 million over charge of management and performance fees to its private funds https://www.sec.gov/litigation/litreleases/2019/lr24432.htm.  The company allegedly fraudulently inflated it annual returns by 2 percent to 3 percent per year for multiple years.

According to the SEC:

Brendan Ross, DLI’s owner and then-chief executive officer, arranged with QuarterSpot to falsify borrower payment information for QuarterSpot’s loans and to falsely report to Direct Lending that borrowers made hundreds of monthly payments when, in fact, they had not. The SEC alleges that many of these loans should have been valued at zero, but instead were improperly valued at their full value, because of the false payments Ross helped engineer.

The securities fraud attorneys at Stoltmann Law Offices, P.C. are continuing to investigate due diligence and suitability claims against brokerage firms that sold their clients investments in various GPB Capital Holdings offerings.  The most recent news has to do specifically with the Waste Management Fund, which buys and sells private waste haulers and garbage collectors. Not exactly the most glamorous of funds certainly, but new allegations have surfaced that GPB Capital purchased a company called Five Star Carting in March 2017, which has been embroiled in litigation amid allegations of a poor safety record. To make matters worse for GPB Waste Management, according to an InvestmentNews report,  GPB’s director of waste strategy – that is seriously the reported title – is Rod Proto, formally of Waste Management. He was fired from his position as President and COO of Waste Management 1999 and then charged with insider trading in 2003 by the SEC for which he paid a $3.7 million fine and stipulated to a ban from serving as an officer or director of a publicly traded company for five years.  It is unknown at this time if the FBI search warrant or other searches conducted by the New York City Business Integrity Commission – which happens to regulate waste haulers in New York City – has anything to do specifically with the GPB Waste Management Fund. In any event, the continued bad press and regulatory pressure is not good for GPB Fund investors.

Almost weekly more negative news comes out about GPB Capital Holdings. We have written considerably about many of these issues.  Brokers sell private placements like GPB Waste Management Fund, or the more popular GPB Automotive Fund for one reason – commissions. There is no other logical reason and exposure to a particular sector is not an excuse. If an investor needs exposure to the automobile sector, there are hundreds of publicly traded, low-commission options, including common stocks of car companies  or the companies from the automotive supply chain. If an investor is seeking a high-income investment, there are literally thousands of publicly-traded corporate or municipal bond options available at a fraction of the cost of a private placement like the GPB Funds. These private placements offer investors a toxic cocktail of 1) illiquidity, meaning once your money goes in it does not come back out until GPB says it does, 2) speculative risk, meaning the highest risk investment product available, and 3) a poor risk/return profile, meaning the risk you are taking is not being compensated by some potential of a high return. GPB Funds  were simply bad deals for investors. The only people that make out in situations like this are the brokerage firms like NewBridge Securities, FSC Securities, Cetera Advisors, Royal Alliance, and many others, who sold an estimated $1.5 billion of these funds to their clients.  At a 10% commission rate, these brokerage firms generated approximately $150 million in revenue just from selling these speculative and opaque funds.

If you were sold investments in any of the GBP Capital offerings by your financial advisor and wish to know your legal options, please call 312-332-4200 for a no obligation free consultation with an attorney. Stoltmann Law Offices is a Chicago-based  contingency fee firm which means we do not get paid until you do.

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