stock fraud lawyer

Published on: November 30, 2012

More Arbitration Claims Against Brokers, Firms in Inland Western REIT and KBS REIT I

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant REIT losses as a result of unsuitable recommendations of non-traded REITs. Recently, new arbitration claims have been filed on behalf of investors in Inland Western REIT, KBS REIT I and other risky investments.

More Arbitration Claims Against Brokers, Firms in Inland Western REIT and KBS REIT I

In one recent claim, securities arbitration lawyers say the claimants opened accounts with Multi-Financial and, despite the fact that the claimants indicated to the adviser they wanted to generate principal while protecting their income, the adviser proceeded to recommend a substantial investment in speculative and illiquid Real Estate Investment Trusts, or REITs and Limited Partnerships, or LPs. Based on the Multi-Financial adviser’s recommendation, the Claimants invested in Inland Western REIT, Wells REIT II, PDC 2005-B Oil & Gas, Reef Global Energy VII Oil & Gas, Cronos Containers Partners I, Hines REIT, Reef Global Energy VI Oil & Gas, Crowne Hattiesburg Bluffton Holdings, Mewbourne 2008-A, Oil & Gas, LEAF Commercial Finance Fund LLC, Atlas Resources 2008, Oil & Gas and Behringer Harvard Strategic Opportunity Fund II REIT.

Another recent filing was against one of the brokerage firms responsible for the supervision and actions of Paul Larsen, a former broker with VSR, ProEquities and six other firms before being permanently barred by FINRA in 2011. According to the allegations, Larsen made unsuitable recommendations of non-traded REITs, coal and natural gas speculation and other risky investments. A claim filed on November 21, 2012 alleges Larsen made improper recommendations of KBS REIT I, Atlas 14 and Atlas 15. Atlas 14 and 15 are both speculative natural gas and oil drilling ventures. For more information on KBS REIT I, see the pervious blog post, “KBS REIT I Investors Could Recover Losses.” Stock fraud lawyers say the brokerage firms could be held liable for REIT losses suffered by Larsen’s clients because they have a responsibility to adequately supervise their brokers.

Published on: November 26, 2012

Clients of Jeffrey A. Cashmore, LPL Financial 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 financial investments with Jeffrey A. Cashmore and LPL Financial. According to the Financial Industry Regulatory Authority allegations against him, Cashmore prepared and distributed sales literature to prospective and current customers that was misleading. Furthermore, he allegedly failed to retain copies of the misleading sales literature, a violation of NASD Conduct Rules. The alleged misconduct reportedly occurred between November 1994 and October 2012, while Cashmore was registered with LPL.

Clients of Jeffrey A. Cashmore and LPL Financial Could Recover Losses

According to FINRA’s findings, Cashmore distributed “Power Optimizer” packages during the relevant period, which is at least from January 2006 through December 2010. These packages consisted of documents that contained investment information and portfolio recommendations and typically included a Cash Flow Report, a Power Optimizer Report, a Portfolio Recommendations/Asset Allocation page, a Fee and Asset Summary Report and Morningstar Reports for each recommended mutual fund. These packages were distributed to at least 100 clients and potential clients. However, according to stock fraud lawyers and FINRA, these packages contained misleading information. Specifically, FINRA says the documents provided incomplete and oversimplified information which did not provide a sound basis for investors to be able to evaluate facts about the information provided by the package.

Reportedly, the Cash Flow Report’s cash flow summary was based on only one projected rated of return, rather than including alternate cash flow scenarios, and did not include any possible cash flows that would illustrate a negative rate of return. Furthermore, the Morningstar Reports allegedly included in the package all addressed Class A investments while Cashmore recommended and sold Class C investments almost exclusively. Securities fraud attorneys say that Class A and C investments have differing rates of return, surrender charges and fees, despite being similar investments when in the same mutual fund.

Published on: November 23, 2012

Clients of WR Rice, Joel Wilson Could Recover Losses

by InvestorLawyers

Following a Financial Industry Regulatory Authority news release issued on November 5, 2012, securities arbitration lawyers are investigating potential claims on behalf of the customers of WR Rice Financial Services and Joel Wilson. According to the release, a Temporary Cease-and-Desist Order has been filed against WR Rice Financial Services, a Michigan-based firm, and its owner Joel Wilson in order to prevent conversion of investors’ assets or funds and further fraudulent sales activities.

Clients of WR Rice and Joel Wilson Could Recover Losses

A complaint against Wilson and WR Rice was also issued by FINRA that charges Wilson and his firm with fraud related to the sales of limited partnership interests. These interests are affiliated with the American Realty Funds Corporation and Diversified Group, both of which are companies that Wilson controls and in which he has ownership interest. The Temporary Cease-and-Desist Order is based on the belief that ongoing depletion of customer assets and customer harm is likely to continue before the completion of a formal disciplinary proceeding.

According to the allegations in FINRA’s complaint, “WR Rice, Wilson and other registered representatives at the firm sold more than $4.5 million in limited partnership interests to approximately 100 investors from predominantly low- to moderate-income households, while misrepresenting or omitting material facts.”

Published on: November 21, 2012

Berton Hochfeld Charged with Securities Fraud, Allegedly Stole $1 Million from Investors

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of customers of Berton Hochfeld, following the announcement that Hochfeld has been charged with securities fraud and wire fraud. Hochfeld, the 66-year-old manager of Hochfeld Capital Management LLC, allegedly stole over $1 million from investors. According to an article in Bloomberg, Hochfield was arrested the morning of November 9, 2012 at his home in Stamford, Connecticut.

Berton Hochfeld Charged with Securities Fraud, Allegedly Stole $1 Million from Investors

Hochfeld Capital Management LLC had an office at Park Avenue in New York that reportedly functioned as a Heppelwhite Fund general partner. According to the allegations against Hochfeld, he stole investor funds for his own use during the period of April 2011 to October 2012. The complaint also states that a private placement memorandum for the Heppelwhite Fund stated it would not purchase debt obligations issued by, or make loans to, Hochfeld Capital Management and/or principals of the LLC. Furthermore, according to the sworn complaint by U.S. Federal Bureau of Investigation Special Agent Michael Howard, in monthly statements provided by Hochfeld, the value of the fund was falsely inflated, concealing his withdrawals from investors. Private placement fraud like this is routinely investigated by stock fraud lawyers in order to recover stolen funds from investors.

Customers of Berton Hochfeld and/or Hochfeld Capital Management LLC who were customers of the firm during the time period stated above are encouraged to contact a securities fraud attorney as soon as possible. If convicted of both charges, Hochfield could face as many as 40 years in prison.

Published on: November 9, 2012

Recovery of Wells REIT Losses

by InvestorLawyers

Individuals who suffered significant REIT losses in Wells Timberland REIT and Wells REIT II could recover their losses through securities arbitration. In the latter part of 2011, the Financial Industry Regulatory Authority fined an affiliate of Wells Real Estate Funds, Wells Investment Securities Incorporated, for the use of misleading marketing materials. The $300,000 fine was related to the sales practices of the firm in relation to Wells Timberland REIT from May 2007 until September 2009. According to FINRA, 116 “improper, unwarranted or exaggerated statements” were included in the advertising literature. Some of these statements were about the distributions, redemption and diversification of the non-traded REIT. As a result, many of the individuals who invested in this REIT were investing in a product that was unsuitable for them, given their age, risk tolerance and investment objectives.

Recovery of Wells REIT Losses

Furthermore, in June of 2011, Wells REIT II was allegedly offered as a “safe, income-producing” investment. But by November of that year, it had reportedly lost over 25 percent of its initial value with its estimated per share value dropping from $10 to $7.47. Reportedly, this decline occurred even though the REIT’s properties are “some of the most prestigious office addresses and tenant corporations in the U.S.,” according to Wells officials, and despite the fact that these properties had an occupancy rate of 94.3 percent.

The 2010 annual report filed with the SEC for Wells REIT II stated that during that year, distributions to investors totaled approximately $313.8 million. This number includes monies paid to investors who decided to redeem their shares. However, Wells REIT II reported a net income of just over $23 million and total cash from operations of $270.1 million. With distributions exceeding cash from operations by nearly $44 million, investors should be asking themselves where the financing for distributions is coming from. According to the investment’s third quarterly report for 2011, Wells REIT II has paid over $1.1 billion in excess of earnings for cumulative distributions since its beginnings in 2004.

Published on: November 7, 2012

Recovery of Behringer Harvard REIT I Losses

by InvestorLawyers

Many investors are seeking avenues for recovery of REIT losses sustained in Behringer Harvard REIT I. This is only one of the Behringer Harvard REIT investments currently under investigation by stock fraud lawyers. Retired investors in particular have suffered unnecessary losses due to the unsuitability of this investment.

Recovery of Behringer Harvard REIT I Losses

Recently Behringer Harvard itself discovered it was being sued when an investor filed a class action in the U.S. District Court for the Northern District of Texas in September. The investor, Lillian Hohenstein, purchased 1,275 shares between 2004 and 2008. The case alleges breach of fiduciary duty and negligence by the trust, members of its board and its executives. In addition to the class action, many brokerage firms who sold the investment are facing arbitration panels for their unsuitable recommendation of Behringer Harvard REIT I.

The main problem with Behringer Harvard REIT I is that many investors were led to believe the investment was safe and similar to high quality, fixed income securities and chose to invest because they believed it was a low-risk, income-producing investment. However, these investors were not aware of the high risks and illiquidity associated with non-traded REIT investments. Many investors also did not realize that they were not guaranteed distributions and some of the distributions that were made before distributions ceased came from loans, and not cash flows generate by the REIT. Furthermore, many retired individuals were overconcentrated in this investment because of its perceived income-producing feature. As a result, many investors have suffered significant REIT losses.

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 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 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 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.”