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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  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.

Stoltmann Law Offices and its securities arbitration practice group are investigating Jay Weiser of small-town Mendota, Illinois in LaSalle County in connection with serious allegations involving the sale of notes offered by Woodbridge and notes offered by Future Income Payments (FIP). Both of these entities have been exposed as Ponzi schemes. According to Mr. Weiser’s FINRA BrokerCheck Report, he was discharged with cause from DesPain Financial in connection with allegations he sold Woodbridge and FIP notes to investors. Mr. Weiser was then barred from the securities industry by FINRA on January 17, 2019 when he refused to provide information to FINRA pursuant to FINRA Rule 8210.  As we have discussed in previous blogs, there are various reasons why brokers refuse to provide “on the record testimony” (OTR) or provide documents in connection with a FINRA regulatory investigation pursuant to FINRA Rule 8210. Sometimes it is because a broker simply is no longer interested in being licensed and is making a career change and does not want to go through the hassle or the expense of complying with FINRA’s requests. Other times it is because submitting information or testimony to FINRA may do the broker more harm than good.  Here, given the allegations made by two clients against Weiser that he sold them notes in Woodbridge and FIP, it is reasonable to conclude Mr. Weiser voluntarily submitted to a lifetime ban from the securities industry because his misconduct is serious.

According to a Notice of Hearing filed the the Illinois Securities Department on November 5, 2018, Mr. Weiser, while affiliated with Weiser Financial and DesPain Financial, sold at least $611,000 in investments in FIP to at least six Illinois residents. According to the publicly available Notice, Mr. Weiser also sold at least $795,000 in Woodbridge notes to at least seventeen Illinois investors. According to the Illinois Securities Department, by selling interests in FIP and Woodbridge, Mr. Weiser violated numerous provisions of the Illinois Securities Law, including Section 12.A, Section 12.F, Section 12.G, Section 12.H, and Section 12.I.

The Notice of Hearing, along with the FINRA action, both find that Weiser failed to disclose these activities to his broker/dealer firm, DesPain Financial. It is critical not to confuse Weiser’s failure to disclose certain activities as if it in any way disclaims potential liability of DesPain or any other entity responsible for supervising Weiser, his firm, and his dealing with investors, because it does not. This failure to disclose does not alleviate the  regulatory, statutory, and common law responsibility to supervise the conduct of Mr. Weiser and specifically, if there are “red flags” present that Weiser was conducting investor business with FIP or Woodbridge, the burden would be on DesPain Financial to establish reasonable measures taken in reaction to these “red flags” of potential misconduct.

Stoltmann Law Offices is investigating misconduct reported by FINRA alleging that Kristian Gaudet of Cut Off, Louisiana, utilized customer funds for personal use. According to his publicly available FINRA BrokerCheck Report, FINRA initiated an investigation into Mr. Gaudet on November 30, 2018 based on suspicions that Mr. Gaudet was involved in potentially fraudulent activities. Only a few weeks later, Mr. Gaudet was terminated by Ameritas Investment Corp., alleging Mr. Gaudet used client funds for personal use. Finally, on January 24, 2019, FINRA barred Mr. Gaudet for failing to appear for  on-the-record testimony in connection with the allegations he used client funds for personal use.  Pursuant to FINRA Rule 8210, if FINRA requests a broker sit for on the record testimony (called an OTR) and the broker either refuses or simply does not show up, it can be grounds for being permanently barred from the securities industry.  FINRA also cited Mr. Gaudet for violating FINRA Rule 2010.

Typically, brokers who refuse to show up for a Rule 8210 request do so knowing they are sacrificing their securities licenses. Some brokers may be near retirement or are not interested in maintaining their licenses, so they rather not submit themselves to an OTR, which can be stressful and require retaining legal counsel. Other brokers fail to show up for an OTR because they fear the testimony they will give may be incriminating if they are truthful. The FINRA AWC agreed to and signed by Mr. Gaudet only states he failed to show up for the OTR and provides no further explanation for barring him from the securities industry.

Routinely, financial advisors who steal money from their clients do it in such a manner which should have alerted their firm’s compliance or supervision departments. Whether there were unauthorized withdrawals or transfers from your accounts, every FINRA brokerage firm, like Ameritas, is required to adhere to Anti-Money Laundering rules and regulations in order to ensure a level of alertness in these circumstances. Failing to properly execute these procedures which result in a broker absconding with clients money results in liability for the firm for negligent supervision.

AdobeStock_35532974-1-300x200Stoltmann Law Offices is investigating Adam Lopez, of Springfield, Illinois, who the State of Illinois has alleged swindled clients out of at least $403,000.  According to a Temporary Order Of Suspension and Prohibition filed by the Illinois Securities Department, # 1800493, Lopez advised clients, including family members, to transfer funds out of their Country Capital controlled accounts and in order to participate in better investments, needed to then write checks to Lopez. This fraudulent conversion of his clients’ money also resulted in tax consequences for some of these clients because the money withdrawn was from tax-deferred IRAs.

On September 5, 2018, Country Capital discharged Lopez for cause, apparently related to this conversion scheme. Country Capital’s public disclosure found on FINRA BrokerCheck states that Lopez was “terminated due to termination by affiliated insurance companies for alleged violation of provisions in his insurance agent contract relating to obligations of honesty. Not securities related.”  This self-serving public disclosure by Country Capital does not appear to be forthright. According to the allegations made by the State of Illinois, the recommendations by Lopez to sell certain investments and withdraw IRA funds clearly involve securities and goes well beyond mere dishonesty. Country Capital makes generic disclosures like this in order to deflect responsibility for supervising Lopez, which the complaint by the State of Illinois establishes, the company failed to do in any reasonable manner.

If you or someone you know lost money as a result of misconduct engaged in by former Country Capital financial advisor Adam Lopez, please contact our securities investor-protection law firm in Chicago for a free no obligation consultation with an attorney.  We are a contingency fee firm meaning unless we recover money for you we do not get paid.


Business diagram shows change of the prices for oil

Were you a client of Creative Planning and TD Ameritrade? Did you have unauthorized trades placed in your account in oil and gas related echange traded notes or funds?  If so the FINRA arbitration claims process can be used to recover those losses.  Please contact our law firm in Chicago for a no cost review by an attorney as to how Creative Planning and TD Ameritrade can be sued in the FIRNA arbitration forum.

Forest-Oil-Uses-Spotfire-to-Drill-Down-to-Real-Results-300x174Were you recommended oil and gas investments by Stifel Nicolaus financial advisor Andrew Elsoffer (30100 Chagrin, Suite 101, Pepper Pike, OH, 44124)?  If so, those losses are potentially recoverable in the FINRA arbitration forum.  Brokers are obligated to make investment recommendations that are suitable and consistent with their clients objectives, net worth, age and other holdings.  Recommendations in Lynn Energy and other oil and gas concentrated investments may have been unsuitable and therefore entitle the investor to damages.   If you were recommended oil and gas related investments by Andrew Elsoffer, please contact our law firm for a free review by a lawyer.

AdobeStock_82110313-1-300x125Stoltmann Law Offices is investigating Jon Pariser, of Pacific Grove, California, who consented to a lifetime bar from the securities industry. Jon Pariser refused to provide information in connection with a FINRA investigation into allegations that he had referred clients to an unregistered advisor who then recommended those clients invest money in unsuitable investments.  More specifically, and according to published reports, Jon Pariser represented to his clients that he was retiring and began referring them to Christopher Parris, an unregistered advisor who was previously suspended by FINRA. Parris then recommended an investment in First Nationale Solutions, which the SEC has alleged to be a Ponzi scheme.

If you or someone you know lost money as a result of misconduct engaged in by former Independent Financial Group financial advisor Jon Pariser of Pacific Grove, California, please contact our securities investor-protectionlaw firm in Chicago for a free no obligation consultation with an attorney.  We are a contingency fee firm meaning unless we recover money for you we do not get paid.

Former Ameritas Investment Corporation broker Daniel Kittner, out of Mesa, Arizona, recently resigned from his firm. He was “permitted to resign” from his position at Ameritas “during the firm’s investigation into a customer’s verbal complaint.” In December 2016, a customer alleged that Kittner, while employed at Edward Jones, did not properly advise him with respect to unsuitable investments in mutual funds, stocks, certificates of deposit and variable annuity products. This is against securities laws, and internal firm rules. Ameritas can be held liable for investment losses on a contingency fee basis in the Financial Industry Regulatory Authority (FINRA) arbitration forum because the firm did not reasonably supervise Mr. Kittner while he was employed there.

According to FINRA records, Mr. Kittner was previously registered with Edward Jones in Prescott Valley, Arizona from May 2001 until March 2006, Wells Fargo in Mesa, Arizona from March 2006 until December 2011 and Ameritas Investment Corp in Mesa from December 2011 until November 2017. He has one customer dispute against him. He is not currently registered as a broker.

According to a recent InvestmentNews article, former broker Bradley Mascho allegedly failed to appear at a hearing with the Financial Industry Regulatory Authority (FINRA). Mr. Mascho was terminated from Western International Securities in December 2017. He and Dawn Bennett, who also worked at Western International, were the subjects of an investigation by the Securities and Exchange Commission (SEC) that involved the sale of more than $20 million in convertible and promissory notes to at least 46 investors from December 2014 until July 2017. In connection with its fraud case against Ms. Bennett, the SEC also charged Mr. Mascho with aiding and abetting an offering fraud by the firm. He was the previous chief financial officer of DJB Holdings, Bennett’s investment firm. According to FINRA’s Letter of Acceptance, Waiver and Consent (AWC) against him, it stated that the regulatory body was investigating him for “potential serious violations, including fraud, undisclosed outside business activities, and private securities transactions.” These are all violations of securities laws and internal firm rules and regulations.

Bradley Mascho was previously registered with IDS Life Insurance Company in Minneapolis, Minnesota from March 1997 until July 1999, American Express Financial Advisors in Minneapolis from March 1997 until July 1999, Legg Mason Wood Walker in Baltimore, Maryland from September 1999 until February 2006, Royal Alliance Associates in Washington, D.C. from February 2006 until October 2009 and Western International Securities in Frederick, Maryland from October 2009 until December 2017. He has one customer dispute against him and one criminal pending charge alleging that he conspired to commit securities fraud, aided and abetted and conspired to commit wire fraud. All are felonies. He has one civil pending charge against him and has been permanently barred from the industry. This is according to FINRA records online.

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