Securities Fraud

Published on: September 21, 2012

Customers of Ray Lucia Sr. Could Recover Losses Through Arbitration Following SEC Allegations

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment with Ray Lucia Sr. and his affiliated broker-dealers. Reportedly, the Securities and Exchange Commission has charged Lucia and his company, formerly known as Raymond J. Lucia Companies Inc. (RJL), for using misleading information at a series of investment seminars when soliciting for his “Buckets of Money” strategy.

Customers of Ray Lucia, Sr. Could Recover Losses through Arbitration, Following SEC Allegations

According to the allegations issued by the SEC’s Division of Enforcement, Lucia claimed that this wealth management strategy had been thoroughly “backtested” over real bear market periods. He allegedly made these claims while promoting Buckets of Money at seminars where he presented a lengthy slideshow indicating that retires would receive inflation-adjusted income while protecting and increasing savings through his wealth management program. In truth, however, despite publicly made claims, little, if any, backtesting was done by RJL and Lucia on the Buckets of Money strategy.

These seminars were held in hopes of obtaining advisory clients, according to the SEC’s order which instituted administrative proceedings against RJL and Lucia. These clients would then be charged advisory services fees. Lucia’s radio show and personal and company website promoted the seminars.

Published on: September 20, 2012

JOBS Act for Hedge Fund Advertising Faces Criticism from Investor Protection Groups

by InvestorLawyers

In a recent 4-1 vote, SEC commissioners decided to invite public comment related to a proposal for how to put an end to decades of limits imposed on startups and private funds in their pursuit of investors. Together with the mutual fund industry and investor protection groups, stock fraud lawyers look upon the new JOBS Act with criticism. The Act will essentially, as part of an effort to increase fledgling companies’ funding options, end the advertising ban on hedge funds. Reportedly, hedge funds will possibly be able to conduct wide advertising campaigns, as opposed to the current strategy of closed-door solicitation to individual investors.

JOBS Act for Hedge Fund Advertising Faces Criticism from Investor-Protection Groups

According to securities arbitration lawyers, concern related to the JOBS Act comes from the possibility that a restriction-free lift of the ban could result in some private funds exposing investors to misleading advertisements. Securities laws have previously only allowed firms to solicit non-public securities to “accredited” investors, who were usually wealthy, frequent investors. Furthermore, these investors would have needed an existing relationship with the firm.

While individuals who qualify for the investments will still need to have over $1 million in assets or a minimum income of $200,000 a year, a lack of advertising restrictions would still expose individuals for which these investments are unsuitable to misleading solicitation. Furthermore, those individuals may not have the investment sophistication required to understand the risks of these products. According to stock fraud lawyers, this could be a situation that leaves investors susceptible to securities fraud.

Published on: September 19, 2012

Louis V. Schooler, Western Financial Planning Accused of Investment Scam by SEC

by InvestorLawyers

Investment fraud lawyers are currently investigating potential claims on behalf of the investors of Western Financial Planning Corp., based in San Diego. Reportedly, Western Financial Planning has been accused by the Securities and Exchange Commission of running a real estate investment scam. The alleged scam raised around $50 million from hundreds of investors around the nation.

Louis V. Schooler and Western Financial Planning Accused of Investment Scam by SEC

Early this month, a temporary asset freeze against the financial planning firm and Louis V. Schooler, the firm’s owner, was obtained by the SEC. Securities arbitration lawyers say the SEC’s allegations state that Schooler and Western Financial sold units in partnerships, organized by Western, for the purchase of vacant land located in Nevada. Reportedly, the land would then be held to be sold at a later date for a profit.

According to the SEC’s claims, Western neglected to tell investors that they (the investors) would be paying outrageous mark-ups on the land. Investment fraud lawyers say that in some cases, mark-ups amounted to over five times the fair market value of the land. Furthermore, allegations state that Schooler failed to tell investors that the initial land purchase was financed by mortgages, which later encumbered the property.

Published on: September 17, 2012

What Went Wrong with Dividend Capital REIT: What Many Investors Didn’t Know

by InvestorLawyers

Securities fraud attorneys have been investigating claims on behalf of investors who suffered Dividend Capital Trust investment losses, but what exactly went wrong?

What Went Wrong with Dividend Capital REIT: What Many Investors Didn't Know

According to investment fraud lawyers, while most REITs experience value changes every day because they are traded on stock exchanges, “non-traded,” “private,” or “unlisted” REITs were not traded on exchanges with regulations. Furthermore, these investors of non-traded REITs paid additional layers of fees because the investments were mostly sold by brokers. Generally, investors were promised stable prices and healthy income generation from these investments, but the decline in the commercial real estate market and management problems have resulted in a significant decline in the value of many non-traded REITs.

Many brokers unsuitably recommended non-traded REITs; after all, they were extremely profitable to them thanks to the hefty fees associated with the investment. Many brokers told investors that the REITs values would remain the same while providing income, but many non-traded REITs have temporarily — or indefinitely — suspended payments to investors. That said, securities fraud attorneys note that most public REITs that have been responsibly managed are providing reliable income to their investors.

Published on: September 14, 2012

Cole Credit Property Trust II May be Following in the Footsteps of Other Non-traded REITs

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who were improperly sold various non-traded REIT investments and suffered significant losses as a result. Reportedly, Cole Credit Property Trust II is currently in the process of executing its “exit event.” In this event, a non-traded Real Estate Investment Trust either performs an initial public offering or sells its assets.

Cole Credit Property Trust II May be Following in the Footsteps of other Non-Traded REITs

In recent events, other non-traded REITs have gone through this process and securities fraud attorneys say that, in most cases, the event does not go well for investors. As a result of the exit event, many REITs have experienced a significant decline in the offering — often amounting to 30 percent or more of the investment’s value.

As the seventh-largest non-traded REIT in the industry, Cole Credit Property Trust II has invested assets amounting to nearly $3.4 billion. Reportedly, Morgan Stanley and UBS Investment Bank have been hired by Cole Credit Property Trust II to explore their options for the exit event. Investment fraud lawyers encourage Cole Credit Property Trust II investors to closely monitor the REIT’s valuation as, despite an estimated valuation of $9.35 per share, the trend in previous non-traded REITs indicates that the market may not be so kind to the per share valuation.

Published on: September 12, 2012

Victims of Clinton D. Fraley Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of former clients of Northwestern Mutual Investment Services LLC, MML Investors Services LLC, Wealth By Design Inc. and Clinton D. Fraley. In August, an emergency law enforcement action was filed by the Colorado Securities Commissioner to enjoin Wealth by Design and Clinton Fraley from violating the Colorado Securities Act. According to the allegations, Fraley violated the Colorado Securities Act by accessing investors’ mutual fund accounts without authorization, converting their securities into cash illegally and forging checks in order to access funds for personal use.

Victims of Clinton D. Fraley Could Recover Losses

“Fraley, who was a licensed securities professional employed with licensed broker-dealers until he was terminated in 2011, solicited hundreds of thousands of dollars from Colorado investors, promising the investors that their money would be invested in ‘a well-balanced portfolio of investments’ consisting of Roth IRAs, traditional investments such as stocks and bonds, mutual funds and non-qualified investments,” says the statement from Colorado enforcement officials. However, “Fraley gained unauthorized access to the investors’ accounts, forged the investors’ signatures on checks, deposited the money in a Wealth bank account and converted the money for his own personal benefit, including the purchase of a house.”

Stock fraud lawyers say Fraley was registered from March 2007 to May 2011 with Northwestern Mutual Investment Services, a FINRA-registered broker-dealer. Fraley was registered with another FINRA-registered broker-dealer, MML Investors Services, from May 2011 to October 2011. All FINRA-registered broker dealers are, according to securities fraud attorneys, required to properly supervise the activities of their brokers during the time in which they are registered with the firm. As a result, these firms may be held liable for failing to adequately supervise Fraley.

Published on: September 10, 2012

Dividend Capital REIT and Seven Other Non-traded REITs Suffer Significant Losses

by InvestorLawyers

Securities arbitration lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in eight of the biggest non-traded REITs, including Dividend Capital Total Realty Trust Inc. According to a recent analysis, over the last seven years, eight of the biggest REITs have lost 37 percent of their equity value, or around $11.3 billion.

Dividend Capital REIT and Seven Other Non-Traded REITs Suffer Significant Losses

In July, Dividend Capital Total Realty Trust Inc. revised its per share value to $6.69, down from its March value of $8.45 per share. The Dividend Capital REIT raised $1.8 billion at a $10 per share price. Dividend Capital REIT president, Guy Arnold, failed to return calls seeking comment on the REIT’s performance. For more information about the Dividend Capital REIT, see the previous blog post, “Dividend Capital REIT Restructuring Could be a Sign of Trouble.”

Another non-traded REIT, CNL Lifestyle Properties Inc., experienced a share price drop to $7.31. The CNL Lifestyle Properties REIT raised $2.7 billion at a $10 per share price, according to investment fraud lawyers.

Published on: September 7, 2012

Defrauded Investors of James Ryan Lanier, Recently Arrested Merrill Lynch Financial Advisor, Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of victims of James Ryan Lanier, a financial advisor for Merrill Lynch. Reportedly, Lanier was arrested on fraud, identity theft and money laundering related to embezzlement. Allegedly, Lanier, 33, embezzled over $800,000 from Merrill Lynch clients and was arrested in San Diego, California.

Defrauded Investors of James Ryan Lanier, Recently Arrested Merrill Lynch Financial Advisor, Could Recover Losses

According to the allegations listed in the 65-count indictment against Lanier, while he was working for Merrill Lynch as a financial advisor between 2008 and 2010, Lanier forged client signatures on fraudulent letters of authorization to Merrill Lynch client associates. These client associates were responsible for processing client funds through wire transfers. Purportedly, these letters also contained misleading and false statements that were intended to persuade the client associates to transfer funds from the investment accounts of clients to bank accounts under Lanier’s control.

According to the indictment, stock fraud lawyers say that Lanier deliberately sought out assistance from client associates who were not familiar with his clients to direct funds transfers. Lanier allegedly claimed Merrill Lynch clients had given voice approval on a recorded telephone conversation, though no such approval was given. Choosing client associates who were unfamiliar with his clients aided Lanier in his scheme.

Published on: September 6, 2012

CNL Lifestyle Properties REIT Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in CNL Lifestyle Properties Inc. Reportedly, a recent announcement from CNL Lifestyle Properties stated that its per share value estimate has dropped from its original share price of $10 to $7.31. This decline represents a drop of 27 percent, which could mean significant losses for many investors. Furthermore, the REIT is reportedly cutting investor dividends, or distribution.

CNL Lifestyle Properties REIT Investors Could Recover Losses

Financial Industry Regulatory Authority rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

The CNL Lifestyle Properties REIT is, according to investment fraud lawyers, another in a long line of non-traded REITs currently under investigation. REITs typically 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, such as the CNL Lifestyle Properties REIT, carry a relatively high dividend or high interest, making them attractive to investors. However, these investments are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises. For more information on REITs, see the previous blog post “FINRA Investor Alert: Public Non-Traded REITs.”

Published on: September 5, 2012

Behringer Harvard Strategic Opportunity Fund I 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 Behringer Harvard Strategic Opportunity Fund I. Reportedly, this investment is in serious trouble, with its assets being far outweighed by its liabilities. Behringer Harvard Strategic Opportunity Fund I was initially offered in 2005 and, since then, has raised $65 million. Six properties were involved in the fund’s investing, including a hotel in Los Angeles and an office building in Amsterdam. It has been reported that, around the middle of August, Behringer Harvard informed brokers of the fund’s problems.

Behringer Harvard Strategic Opportunity Fund I Investors Could Recover Losses

Allegedly, many brokers recommended Behringer Harvard Strategic Opportunity Fund I to their clients, misrepresenting the investment as low risk and safe. Furthermore, investment fraud lawyers say some brokers unsuitably placed an overconcentration of client assets in the product.

Chief executive of the funds of which Behringer Harvard’s opportunity platform consist, Michael O’Hanlon, stated that Behringer Harvard Strategic Opportunity Fund I’s “liabilities are greater than its assets.” O’Hanlon also stated that a “swing issue” is in effect over the Los Angeles hotel and the fund is currently negotiating with banks on the issue.