Articles Tagged with Promissory Notes

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.

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