Articles Tagged with 2011

Many investors in the Desert Capital REIT are wondering if there is a class action lawsuit pending at this time. The answer is NO. Burned clients at firms like Royal Alliance have no choice but to seek recovery though the FINRA arbitration process. Clients who lost money in Desert Capital are making two primary claims for recovery: suitability claims and misrepresentation/omission claims. The suitability claims relate to the clients age, actual investment objectives, net worth and other similar factors. For many purchasers of Desert Capital, they simply had too much of their liquid net worth in the investment. The other claims are fraud based claims like to misrepresentations and omissions. We believe for some of the purchasers of the REIT, the true risks were not made known. Given the recent bankruptcy, it appears as though the Desert Capital investment is a complete loss for purchasers. Arbitration claims have already been filed to recover these losses.

UPDATE 1: In June of 2011, Attorney Gerald Gordon told bankruptcy Judge Linda Riegle that Desert Capital Real Estate Investment Trust was withdrawing its objection to involuntary bankruptcy. The Henderson-based company will continue operations while the bankruptcy case proceeds under Chapter 11.

Update 2: Todd Parriott resigned as chief executive officer of Desert Capital effective May 31. The company agreed to contract with Morris Anderson & Associates of Chicago for management.

The Financial Industry Regulatory Authority (FINRA) fined Morgan Stanley $2.2 million after it was alleged that the firm submitted millions of inaccurate reports to the Options Clearing Corp. This is a violation of FINRA rules. Allegedly, in over 13 million situations, the wealth management firm sent reports on its large options positions, which missed details such as tax identification numbers, had wrong account type details and incomplete address fields. FINRA also fined the firm $650,000 last year after it warned the bank in 2011 that it had “significant gaps in systems,” noting that its monitoring of the transmittal of customer funds to third-parties was below standard. Morgan Stanley “failed to implement reasonable supervisory systems and procedures,” to monitor for wires from multiple customer accounts to in some cases, the same, third-party accounts. FINRA also found that three registered representatives were able to fraudulently transfer customer funds to their own bank accounts or other accounts.

The Securities and Exchange Commission’s (SEC) Atlanta office is conducting an inquiry into Global Ministries Foundation and the 2011 sale of $12 million worth of bonds to purchase the Warren and Tulane apartments. The apartments are allegedly infested with roaches and caked with sewage. The ministry owns two municipal bond financed low-income apartment complexes. The trustee, Bank of New York Mellon Corp, sued Global Ministries in May and won the appointment of a receiver after the bonds defaulted. Two months earlier, in March, the U.S. Department of Housing and Urban Development cut off rent subsidies for more than 1,000 residents that backed the bonds and relocated them because of health and safety violations. Subsequently, the bonds defaulted.

Richard Hamlet, a Baptist minister, ran GMF, which built a 10,500 unit low-rent real estate empire with money raised in the municipal-bond market. In 2011, GMF issued $12 million in bonds through Memphis Health, Educational and Housing Facility Board, to finance the purchase of Warrant and Tulane in an area where as many as 40 percent of the families live in poverty. The SEC has since told the receiver to preserve documents created on or after June 1st, 2010, concerning the bond issue.

Primus Pacific Partners, a private equity firm and the largest shareholder in Malaysian bank EON Capital, filed suit against Goldman Sachs for $510 million for fraud and breach of fiduciary duty. The suit goes against Goldman as the bank is being sued by a shareholder of one of its former clients over alleged fraudulent misrepresentations that involve links to the prime minister of Malaysia, Najib Razak. The suit claimed Goldman concealed a conflict of interest involving the Prime Minister while the investment bank was acting as financial adviser to EON, which was weighing a takeover bid by Hong Leong Bank. Talks on the deal began in 2009 but the bid was held up until 2011 as Primus fought the offer in Malaysia’s courts. One of the prime minister’s brothers, Nazim Razak, was a director at Hong Leong Bank, and another brother, Nazir Razak, was chairman of CIMB Group, which advised Hong Leong Bank on the bid. At the same time, Goldman was an adviser to 1Malaysia Development Berhad, also known as 1MDB, a development fund established by the prime minister. In a response to the suit, Goldman Sachs pointed out that Primus had already failed to block the deal.

Last week, Paul Burks was found guilty of masterminding one of the largest ponzi schemes in US history. Burks allegedly bilked more than one million investors worldwide out of $800 million. He was convicted on four counts of fraud and conspiracy. He faces up to 65 years in prison and $1 million in fines. His ponzi scheme was one of the largest ever prosecuted by the US Attorney’s office. Attorneys are still trying to recover an additional $225 million from Burks and ZeekRewards. ZeekRewards was an online marketing scheme that generated hundreds of millions of dollars in 2011-2012. Almost nine out of 10 investors in Burks’ scheme lost money. He and his team promised returns of up to 125 percent, manipulated records and exaggerated ZeekRewards’ cash flow to lure a “staggering” amount of investment.

ZeekRewards was started in 2011 to market an online auction site. It offered a share of profits to investors who promoted Burks’ auctions to other online sites or recruited others to take part. Investments were capped at $10,000 but participants could make payments for spouses, children and other relatives. During the first half of 2012, online users of ZeekRewards grew by more than twentyfold. In the end, ZeekRewards paid out more than half the $939 million it generated. Its actual obligations were more than $3.3 billion.

Stoltmann Law Offices is investigating Aequitas Capital and its affiliates and is interested in speaking to investors who may have invested money in the company. The firm managed $1.67 billion in assets last year, up from $250 million in 2011. The firm raised money from investors and allegedly used it to invest in various alternative investments, including student loans and unpaid hospital bills. The company recently provided an update to investors that indicated that it was having liquidity challenges and had engaged in restructuring. In 2013, Western Property Holdings LLC sued Aequitas Capital Management Inc. over a claim of alleged breach of duty. In 2014, a federal judge ordered Aequitas to set aside $2.5 million ahead of a trial in a civil lawsuit relating to commissions on a portfolio of student loans. Also in 2014, Aequitas was forced to answer questions about its link to embattled Corinthian Colleges Inc. Aequitas also offered Reg D private placements, which tend to be highly risky, illiquid, high-commission investments. Brokerage firms who recommended these investments may be liable for investment losses because they unsuitably recommended them. Please call us today to find out your options.

Stoltmann Law Offices is interested in speaking to investors who may hold non-purpose loans secured by their brokerage accounts and have suffered huge losses. Securities-backed lines of credit (SBLOCs) are often marketed by brokerage firms to investors as an easy way to cash out securities accounts by borrowing against the assets in a portfolio without actually having to liquidate securities. These particular lines of credit allow investors to borrow money using securities held in the investment accounts as collateral and allow the investor to continue to trade securities in the pledged accounts. Typically, an SBLOC requires monthly interest-only payments until repaid. Banks such as UBS, Bank of America, Merrill Lynch, Morgan Stanley, Wells Fargo and JP Morgan are all recommending that their high net-worth investors take out loans against their brokerage accounts. The Wall Street Journal reported that securities based loans increased by 28% at UBS between 2011 and 2013. Many brokers make large commissions on the sale of SBLOCs, but they may not be suitable for all investors. If you were recommended or sold a SBLOC, please call our securities law firm in Chicago today to speak to an attorney for free.

Stoltmann Law Offices is interested in speaking to any investors who may have invested with Byron A. Echeverria, a former broker with Morgan Stanley from 2011 until 2015. According to his Financial Industry Regulatory Authority (FINRA) Letter of Acceptance, Waiver and Consent (AWC), Echeverria allegedly falsified documents related to customer accounts by re-using original customer-signed signature pages from expired forms and altered tax withholding amounts on forms. Between September 2010 and May 2015, Echeverria falsified 10 documents related to 10 customer accounts, including disclosure forms, transfer forms and IRA distribution forms. He re-used original customer signatures and recycled customer-signed signature pages from expired forms, and altered tax withholding amounts to expedite transactions. These are all against securities rules and regulations. For this, he was suspended from the industry for three months. He was unable to pay a monetary amount, so no fines were imposed upon him.

According to his online FINRA BrokerCheck report, Byron A. Echeverria was registered with APS Financial Corporation in Austin, Texas from August 2005 until August 2006, Stanford Group Company in Houston, Texas from March 2007 until June 2007, UBS Financial in Houston from August 2007 until May 2011 and Morgan Stanley in Houston from May 2011 until May 2015. He is currently registered with Slavic Investment Corp in Boca Raton, Florida and has been since November 2015. If you are interested in speaking to an attorney for free about your options of suing Morgan Stanley for losses with Echeverria, please call our law offices in Chicago today.

The Securities and Exchange Commission (SEC) recently barred New Hampshire investment advisor, Nicholas Rowe, after charges surfaced claiming he allegedly used leveraged and inverse exchange-traded funds (ETFs) in a manner that was unsuitable for his clients. Rowe was the former owner of registered investment advisor Focus Capital Wealth Management. The state also alleged that he made misrepresentations regarding the fees to be charged and regarding his qualifications as an investment advisor, violating laws prohibiting advisors from engaging in unethical practices. The state launched an investigation into Rowe and his company in 2011, after claiming that they placed assets from elderly investors with low risk tolerances into unsuitable strategies without informing the clients. Many of the clients were widows between the ages of 60 and 74 who allegedly lost $1.9 million among them. The state then revoked Focus’s registration in March 2013 and ordered Rowe to pay $20,000 in fines and investigation costs, as well as more than $2 million in restitution to investors. Other investor claims against Rowe and Focus included Financial Industry Regulatory Authority (FINRA) claims alleging negligence and civil fraud, resulting in one ruling against the RIA that forced it to pay $1.8 million in restitution payments. Rowe was also registered with Jefferson Pilot Securities Corp in Bedford, New Hampshire from December 1990 until January 2006 and he has one customer dispute against him. The SEC permanently barred him from the industry.

Stoltmann Law Offices is looking to speak to investors who have money in the The Charles, a Bluerock Real Estate property located at 1355 1st Ave. in New York, New York. These are tenant-in-common, or TIC, investments which are properties in which each individual owns a separate and undivided interest in the same real property and each has an equal right to the possession and use of the property. In 2008, investors in the property had the opportunity to invest in two offerings. Both gave investors an opportunity to invest in commercial real estate through TIC interests, or through the purchase of 12% Subordinates Notes. The Charles was scheduled to finish construction in the spring of 2011, but was stalled for several years. It was finished in 2014. It is a 32 story condo building. Investors should be warned that TIC investments can be very risky and speculative, and typically garner returns as high as 10% for the broker who recommends them. Your broker must disclose the risks associated with any investment, and, if he does not, his brokerage firm can be held liable for investment losses. We are a securities law firm located in Chicago, Illinois and we can help you recover your money on a contingency fee basis. Please call us toll free today.

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