Arbitration

Published on: November 1, 2012

Recovery of Behringer Harvard Opportunity REIT I Losses

Many investors have suffered significant REIT losses as a result of their investment in the Behringer Harvard Opportunity REIT I. The investment’s $10 per share offering price in 2009 fell significantly to an approximate value of $4.12 per share at the end of last year, representing a 58 percent loss. This figure includes the 46 percent drop experienced at the end of 2010, when it was valued at around $7.66 per share.

Recovery of Behringer Harvard Opportunity REIT I Losses

In the period beginning in December 2010 and ending in September 2011, Behringer Harvard Opportunity REIT I’s assets declined to $580 million from $697.6 million. The REIT reported an $83 million net loss.

According to investment fraud lawyers, many investors believed their non-traded REIT’s share price was stable. However, it only appeared stable because the manager reports the par value, which does not necessarily take into account the underlying assets deterioration. Furthermore, typically the initial pricing does not include fees and other expenses, which can result in a loss because these dollars are not actually invested.

Published on: October 31, 2012

Behringer Harvard Multifamily REIT I Loss Recovery

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who have experienced significant losses as a result of their investment in Behringer Harvard Multifamily REIT I.

Behringer Harvard Multifamily REIT I Loss Recovery

“With an unlisted REIT, it’s generally understood that distributions must be paid to investors before assets are acquired, and therefore, before operating income covers distributions,” says Robert S. Aisner, president and CEO of Behringer Harvard Holdings, Behringer Harvard’s parent company. “Distributions at that phase are largely a return of the investor’s capital.”

However, many stock fraud lawyers would argue that this fact is not “generally understood” by, or explained to, investors by their financial advisor or brokerage firm.

Published on: October 29, 2012

Recovery of Inland Western REIT Losses

by InvestorLawyers

Earlier in October, another claim was filed in an effort to help investors recover REIT losses. This claim was against LPL Financial and its goal is to recover losses sustained in Retail Properties of America, formerly known as Inland Western Real Estate Investment Trust. This claim, which was filed with FINRA, also involves eight other alternative, illiquid investments, and is seeking $1,000,000 in damages.

Recovery of Inland Western REIT Losses

Typically, REITs carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is.

Reportedly, LPL Financial and its advisor, used an over-concentration of illiquid investments in the client’s portfolio. Furthermore, these investments carried a high level of risk because the securities recommended to the claimant didn’t trade freely. In addition to the Inland Western REIT, the portfolio also consisted of KBS REIT, Inland American REIT, LEAF Fund, Hines REIT, Atlas, ATEL Fund X, PDC 2005A, and ATEL Fund XI

Published on: October 26, 2012

Fraud Victims of William T. Johnson Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of the customers of William T. Johnson. A resident of Palm Beach Gardens, Fla., Johnson is accused of stealing around $500,000 from 13 clients. Johnson allegedly informed his clients that he would invest their money in Certificates of Deposit (CDs), Individual Retirement Accounts (IRAs), short-term commercial paper and various other products. However, according to the allegations against him, Johnson actually used the money he received from clients to benefit his family and himself. The fraud allegedly took place between July 2003 and September 2011.

Fraud Victims of William T. Johnson Could Recover Losses

Johnson’s attorney reportedly said that Johnson would likely plead guilty. Securities regulators in Maine and Florida have apparently scrutinized Johnson in the past and, in addition, the Financial Industry Regulatory Authority has already barred him from association with FINRA-registered firms. Securities arbitration lawyers say Johnson previously was associated with Kovack Securities and Next Financial Group Inc.

If Johnson defrauded clients through his company while also registered with Kovack Securities or Next Financial group, he may have been “selling away.” From 2002 until 2009, Johnson was registered with Kovack Securities, and was registered with Next Financial Group from May 2010 to June 2010. According to securities fraud attorneys, “selling away” occurs when a FINRA-registered broker-dealer executes transactions outside his or her registered firm. Investment firms can still be held liable for a broker that is “selling away” if their supervision of that broker is deemed to have been negligent. As a result, it is possible for investors to recover their losses through securities arbitration.

Published on: October 25, 2012

Investors Allegedly Overcharged Customers $18.7 Million; Four Brokers Facing Charges

by InvestorLawyers

According to stock fraud lawyers, four brokers were recently charged by the Securities and Exchange Commission with securities fraud. The SEC’s allegations state that the four brokers illegally overcharged their customers $18.7 million. Reportedly they perpetuated their fraud by keeping a portion of profitable trades executed in customer accounts and using hidden markups and markdowns. The brokers named in the charges are Henry Condron, Benjamin Chouchane, Marek Leszczynski and Gregory Reyftmann.

Investors Allegedly Overcharged Customers $18.7 Million; Four Brokers Facing Charges

The clients of these brokers may have thought they were getting a great deal as, according to the SEC’s complaint, the brokers purported incredibly low commissions, often fractions of pennies or pennies per transaction. However, in actuality, when executing customers’ purchase and sell orders, they were reporting false prices. Reportedly, the hidden markups and markdowns were intentionally charged at times when the market was volatile. Investment fraud lawyers say this made the fraud particularly difficult to detect. The markups and markdowns occurred over a period of four years, involved over 36,000 transactions and ranged from only a few dollars up to $228,000. This resulted in fees that were sometimes altered from what had been reported to customers by over 1,000 percent.

In another part of the scheme, a customer sought to buy shares and specified a limited price. The brokers allegedly filled the order at the maximum price, but sold part of the order in order to obtain a profit for their firm. Next, they informed the customer that they were unable to complete the order at the maximum price set. During this time, millions of dollars were being made by these brokers through performance bonuses based on fraudulent earnings. In total, the brokers received over $15.6 million in performance bonuses, part of which resulted from earnings related to fraud.

Published on: October 24, 2012

Domin-8 Private Placement Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in a Domin-8 private placement. Domin-8 is a provider of “advanced enterprise software applications and related services to the U.S. multi-family housing property management industry” based out of Ohio, according to its filing with the Securities and Exchange Commission.

Domin-8 Private Placement Investors Could Recover Losses

Because private placements like Domin-8 are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors, according to investment fraud lawyers. Private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission. One Domin-8 private placement, Domin-8 7 percent Series C Senior Subordinated Convertible Dentures, began its attempt to raise $10,000,000 in the latter part of 2007.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, has stated that, “FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers.”

Published on: October 22, 2012

Elderly Investors Targeted by Pennsylvania Financial Advisor

by InvestorLawyers

David L. Rothman, a Pennsylvania resident, has been charged by the Securities and Exchange Commission for allegedly defrauding elderly clients. Stock fraud lawyers say the civil and criminal charges accuse Rothman of sending his clients falsified account statements that inflated the value of their accounts. Then, in a repayment scheme, Rothman took funds from another client in order to repay those who received phony statements.

Elderly Investors Targeted by Pennsylvania Financial Advisor

According to the SEC’s complaint, the two clients were “elderly and unsophisticated investors” which, securities arbitration lawyers say, made them ideal targets for Rothman’s fraud. The complaint further alleges that the fraud occurred from 2006-2011 and the falsified statements “materially overstated” the value of the clients’ investments. In addition, allegations against Rothman state that once the investors realized the fraud had taken place, the financial advisor stated that he would repay the statements’ reported value. However, his financial resources eventually ran short.

Apparently, Rothman was previously censured by the CFP Board in 2004. This separate matter involved the purchasing of mutual fund Class S shares.

Published on: October 19, 2012

Geneva Organization TIC Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in a Geneva Organization tenant-in-common, or TIC.

Geneva Organization TIC Investors Could Recover Losses

A real estate investment company founded by Duane Lund in 2003, the Geneva Organization specializes in pooling individual investors into larger groups to buy commercial real estate. According to investment fraud lawyers, many broker-dealers’ may have improperly recommended Geneva Organization TIC investments to investors. Specifically, these TIC investments granted investors interests in One Southwest Crossing, a building in Eden Prairie.

TICs are complicated deals that allow real estate sellers to avoid capital-gains tax by rolling their proceeds into other properties, receive a regular income from the investment — and, in the event of the investor’s death, the asset can be bequeathed to heirs. TICs are also known as 1031 exchanges and, despite these attractive benefits, they are not appropriate for many investors but, rather, are only suitable for some specialized clients.

Published on: October 18, 2012

Layton Energy Wharton LP Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in a Layton Energy Wharton LP product. As a Texas-based energy company, Layton Energy Wharton offers various private placements, one of which is Layton Energy Wharton LP. Launched in 2007, this investment’s aim was to raise $10,000,000 for the purpose of acquiring interests in oil and gas deals, according to its filing with the Securities and Exchange Commission.

Layton Energy Wharton LP Investors Could Recover Losses

According to securities arbitration lawyers, because private placements like Layton Energy Wharton LP are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors. Private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, has stated that, “FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers.”

Published on: October 17, 2012

First Midwest Securities, Scott & Stringfellow Customers Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of the customers of First Midwest Securities Inc. and Scott & Stringfellow LLC in light of recent fines and censures by the Financial Industry Regulatory Authority. Both firms were censured; in addition, First Midwest Securities was fined $75,000 and Scott & Stringfellow was fined $350,000. Both firms submitted a Letter of Acceptance, Waiver and Consent but did not admit or deny FINRA’s findings.

First Midwest Securities and Scott & Stringfellow Customers Could Recover Losses

In the case of First Midwest Securities, securities arbitration lawyers say FINRA’s findings indicated that the firm failed to provide an adequate supervisory system and enforce adequate supervisory procedures to prevent excessive trading and ensure the suitability of equity transactions. Furthermore, the firm allegedly failed to utilize exception reports that would help in detecting excessive and unsuitable trading. Instead, according to the allegations, the firm relied on turnover ratio reports and daily trade blotter reviews that were prepared manually. However, these reports failed to address accounts’ cost-to-equity ratios.

Investment fraud lawyers are also investigating claims against Scott & Stringfellow based on FINRA’s findings that indicated the firm failed to maintain an adequate supervisory system related to the sale of Non-Traditional ETFs, or Non-Traditional Exchange Traded Funds. In addition, the firm allegedly allowed the recommendation of a Non-Traditional ETF by its registered representatives to customers without performing adequate due diligence. FINRA stated that some of the firm’s customers received unsuitable recommendations of the investment. The firm’s supervisory system, according to FINRA, was not reasonably designed for compliance with applicable FINRA and NASD rules and did not provide adequate guidance, tools, or adequate formal training to educate the firm’s supervisors and registered representatives about these investments.