Stoltmann Law Offices, P.C., a Chicago-based securities and investment fraud law firm offering nationwide representation to investors who are victims of fraud and negligence of their financial and investment advisers, is currently representing clients who have suffered losses in connection with several Eco-Vest sponsored conservation easements, including Hammersmith Landing Holdings LLC.
Investors in Hammersmith Landing Holdings run the risk of facing steep IRS penalties as a result of the potentially fraudulent nature of the easement structure. On its face, Hammersmith offered investors a 4.1 – 1 deduction to investment ratio, which is more than double the ratio considered by the IRS to be reflective of a questionable tax avoidance transaction. EcoVest, the issuer of Hammersmith and hundreds of other conservation easements, has been under active investigation by the Department of Justice since 2018 and by the Senate Finance Committee since as early as 2016. A new wrinkle in the governments enforcement and investigation into these tax avoidance schemes is the recent revelation that President Trump has taken advantage of these conservation easements for many years and could have participated in structures that the IRS now considers to be illegal.
What investors actually get when they purchase a conservation easement is a Regulation D private placement – it is a security sold by a broker/dealer. As such, financial advisors and brokerage firms have numerous duties and obligation to vet the investment and to perform reasonable due diligence on the security prior to even offering it for sale. There are several regulatory notices from FINRA that speak directly to this obligation, including Regulatory Notice 10-22, NASD Notice to Members 03-71 which discussed vetting of “non-conventional investments”, NASD Notice to Members 05-26, which discusses the vetting of “new products” and more recently, FINRA Regulatory Notice 13-31 which addresses supervision issues specific to advisors who sell a lot of these same products to several clients. Fundamentally, the due diligence and vetting process is rooted in FINRA’s Suitability Rule, specifically, FINRA Rule 2111.05(a).
Conservation Easements are paper-intensive investments and include an offering memorandum, a lengthy law firm tax opinion, and a much lengthier appraisal report. Brokerage firms incorrectly believe all of this paper provides it cover especially when on its face the Hammersmith easement offered a 4.1 – 1 tax write-off to investment ratio. That is more than double the ratio the IRS considers to be indicative of an illegal structure. Brokerage firms who sold Hammersmith or any other conservation easement with such a high write-off to investment ratio were on notice that the investment structure lacked legitimacy. Now investors will pay the price when the IRS comes knocking for its back-taxes owed plus penalties.
If you of someone you know invested in the Hammersmith Landing Holdings, LLC conservation easement, please contact Stoltmann Law Offices at 312-332-4200 for a free, no-obligation consultation with a securities attorney. We offer representation to defrauded investors nationwide on a contingency fee basis, which means we do not get paid until you do!