Financial Counsel by Eccleston Law

New Non-Traded REITs May Still Pose Risk to Retail Investors

Non-traded real estate investment trusts (REITs) have become a lightning rod for criticism over the past few years following the economic collapse of 2008.  Non-traded REITs have suffered from a decline in book value which has forced many of them to suspend their dividends and share redemption programs, leaving investors stuck in a devalued investment.  Even worse, some non-traded REIT families have spurred regulatory enforcement actions and investigations, such as the FINRA enforcement action against David Lerner Associates for its sales of the Apple REITs.

To combat this problem and overcome the negative publicity non-traded REITs have received, some non-traded REIT sponsors have created a new breed of non-traded REITs that offer increased liquidity and daily valuation of the shares.

However, despite these improvements investors should excercise great caution when investing in any non-traded REITs, including this new breed.

 

Real estate is still an illiquid asset class, and despite rumors that up to 20% of the REITs assets would be reserved for redemptions, redemptions are still tightly controlled by the REIT sponsor and the risks of investing in an illiquid investment may be minimized or overlooked by financial advisors selling these product.s  Moreover, commissions and fees for these non-traded REITs will still come out of the investors principal.  Investors who purchase shares for $10/unit may think otherwise if they later see their shares listed on an account statement for $8/unit, meaning that $2.00/unit went to the brokers and their firms. 

As the old adage goes, non-traded REITs are made to be "sold, not bought".  Investors therefore should continue to exercise great caution when investing in non-traded REITs, regardless of their structure.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you have suffered losses in non-traded REIT or other illiquid real estate investment, please contact Eccleston Law Offices to discuss your recovery options at (312) 332-0000.

 

 

Behringer Harvard REIT I Recovery Options

Investors in Behringer Harvard REIT I have suffered signifiant losses following the decline of the value of its shares from $10 to $4.55 per share.  Recent tender offers for Behringer Harvard REIT I shares on the secondary market are only paying $1.80 for these shares, which are currently illiquid following the suspension of the REIT's share repurchase program.  Moreover, Behringer Harvard currently has $122.8 million of debt in default, and $702.1 million of debt coming due in 2011. 

However, investors may be able to recover their losses and rescind (get out of) their investment in Behringer Harvard through securities arbitration. 

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you have suffered losses in Behringer Harvard, please contact our attorneys at 312-332-0000 to discuss your recovery options.

Consolidation and IPO of Apple REITs Considered by Board of Directors

On August 19, 2011, Apple REIT Eight announced that its board of directors had authorized the evaluation of a possible consolidation with Apple REIT Six, Seven, and Nine which may ultimately conclude in an IPO for the new combined enterprise.  The full SEC filing is as follows:

"Apple REIT Eight, Inc. (the “Company”) announced today that its board of directors has authorized the evaluation of a potential consolidation transaction in which the Company, Apple REIT Six, Inc., Apple REIT Seven, Inc. and Apple REIT Nine, Inc. would be combined, which consolidation transaction could also include a listing of the stock of the combined enterprise for trading on a national exchange at the time of such combination or at a future date.

The Company has not made a decision to pursue any particular transaction, and there can be no assurance that the evaluation of a potential consolidation transaction will result in such transaction being accomplished, or that the potential consolidation transaction or any other strategic alternative will be pursued. The Company has not set a timetable for completion of the evaluation process, and it does not expect to comment further unless and until its board of directors has approved a specific transaction, or it otherwise deems further disclosure is appropriate or required by law."

 

 Unfortunately for Apple REIT investors, a consolidation and IPO will likely not alter the fact that these REITs are worth significantly less than what investors purchased them at.  For an investor to break even, the consolidated Apple REIT must IPO at what the investor purchased the shares at (usually $11/share).  Anything less than that would cause investor to suffer losses, and those investor who sell their shares on the open market would actually realize these losses.

 

Even in light of this development, there may hope for Apple REIT investors. If you are an investor who is trying to get out of the Apple REITs, please contact one of our attorneys at 312-332-0000 to discuss your recovery options. Our attorneys are representing investors who have suffered losses investing in the Apple REITs along with those who are seeking to rescind (get out of) their investment in these products.

 

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

 

n August 19, 2011, Apple REIT Eight announced that its board of directors had authorized the evaluation of a possible consolidation with Apple REIT Six, Seven, and Nine which may ultimately conclude in an IPO for the new combined enterprise.  The full SEC filing is as follows:

UPDATE: Eccleston Law Continues Investigation of Select Asset Management, Brian A. Bjork, and Affiliated Parties Following SEC Fraud Charges and Receiver Appointment

Following the appointment of Steven A. Harr as Receiver in the $52 million Houston, Texas-based fraud, the attorneys at Eccleston Law have expanded their investigation of Houston-based investment adviser Select Asset Management LLC, its principal Brian A. Bjork, Select Asset Fund I, LLC, Select Asset Prime Index Fund, LLC, and others following SEC offering fraud charges. Investors are encouraged to contact our attorneys to discuss their recovery options.

On August 1, 2011, the SEC announced that it obtained a temporary restraining order, asset freeze, appointment of a receiver and other emergency relief against Houston investment adviser Select Asset Management LLC (“Select Asset”), its principal Brian A. Bjork, Select Asset Fund I, LLC, Select Asset Prime Index Fund, LLC, the J. David Group of Companies, Inc. ("J. David Group"), J. David Financial Group LP ("J. David Financial"); Select Capital Management, LLC and the Estate of Joel David Salinas ("Salinas Estate") on charges of offering fraud.

Specifically, the complaint alleges that from 2004 through the present, Brian Bjork offered securities in two fraudulent securities schemes, raising a total of $52 million. The SEC also alleges that in the first scheme, Brian Bjork, alongside business associate Joel David Salinas, offered investors corporate and other bonds through J. David Group of Companies, and J. David Financial Group, and raised approximately $39 million from more than 100 investors. According to the SEC complaint, Bjork and Salinas promised investors safe, fixed income from highly-rated corporate and other bonds, but in reality they never acquired the bonds as promised.

The SEC complaint alleges that in the second scheme, Brian Bjork—through Select Asset and its subsidiary defendant Select Capital Management —offered securities issued by two private funds and raised approximately $13 million from at least 52 investors since August 2007. According to the SEC complaint, the two funds, which were controlled by Brian Bjork, Select Asset and Select Capital, commingled investor money, failed to provide promised financial statements, and transferred money to fund-affiliated entities in related-party transactions undisclosed to investors.

The SEC complaint further alleges that in making the affiliated loans, certain defendants failed to conduct required due diligence and loan-approval procedures that had been promised to investors in the private placement offering memoranda.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you have suffered losses investing with Select Asset Management, Brian A. Bjork, Select Asset Fund I, Select Asset Prime Index Fund, the J. David Group of Companies, J. David Financial Group, or Select Capital Management, you may be entitled to seek recovery through securities arbitration.

Please contact one of the attorneys at the Eccleston Law Offices at (312) 332-0000 for a free, no obligation consultation to discuss your recovery options.

Eccleston Law Actively Seeking Current or Former David Lerner Associates or Apple REIT Employees

The attorneys at law are interested in speaking with current or former employees of David Lerner Associates or any of the Apple REITs, holding companies or related entities, who purchased shares in a retirement plan such as a 401(k) plan. Please contact one of our attorneys at 312-332-0000 for important information about the implications of having Apple REIT shares in your retirement plan.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

SEC and CFTC Launch Whistleblower Programs; Eccleston Law Helps Advisers File Claims Anonymously

Both regulators now have adopted landmark regulations that give advisers powerful rights to blow the whistle on impermissible conduct on the part of their current or former employers.

Advisers likely will find attorney representation to be beneficial for a host of reasons. Due to its familiarity with the securities industry, Eccleston Law is in a unique position to assist advisers file and document their whistleblower claims, meet critical deadlines, and deal with the SEC.

Moreover, the SEC in its final rule has acknowledged that “many whistleblowers may wish to provide information anonymously”, and specifically recognizes (indeed requires) representation of an attorney in that regard. 

Eccleston Law welcomes all inquiries and will evaluate all possible whistleblower claims – at no charge of course.  Should Eccleston Law file a claim on behalf of a whistleblower (anonymously or not), Eccleston Law will only be paid only on a contingency fee basis from any recovery when the claim is concluded. We look forward to assisting you.

 

Eccleston Law Investigates New York Businessman and Two Houston-area Firms Following SEC Charges of Fraudulent $10 Million Note Offering

The attorneys at Eccleston Law have launched an investigation of Damian Omar Valdez and his firms Evolution Capital Advisors ("Evolution Capital") and Evolution Investment Group I ("EIGI") following charges that the firm and Valdez raised more than $10 million from over 80 investors through several fraudulent note offerings.

On August 10, 2011, the Securities and Exchange Commission ("Commission") filed suit in the United States District Court for the Southern District of Texas against Damian Omar Valdez and his firms for their roles in the fraudulent note offering.  Evolution Capital was an investment adviser registered with the Commission until June 2010. 

The SEC alleges that, in the offerings, Valdez, Evolution Capital, and EIGI falsely promised that the notes were safe and secured by assets guaranteed by the United States government. Valdez and his firms also falsely promised that they would use leverage to purchase the assets securing the notes. In fact, according to the SEC's complaint, the assets securing the notes were subject to significant, undisclosed default and prepayment risk. Moreover, the defendants never obtained leverage to purchase the assets. The SEC further alleges that the defendants paid themselves more than $2.4 million in fees and expenses and used approximately $2.7 million from the second note offering to make Ponzi-like payments to investors in the first note offering. As a result of defaults and prepayments on the underlying assets, the failure to obtain leverage, and the excessive Ponzi-like payments and fees, the SEC alleges that the defendants do not have sufficient assets to repay investors in accordance with the notes.

If you are an investor that has suffered losses investing with Damian Omar Valdez, Evolution Capital Advisors or Evolution Investment Group I,  please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

CNN Money References Apple REITs and David Lerner Associates in Article Entitled "Protecting your Parents: Keep the Sharks at Bay"

A recent CNN Money article entitled "Protecting your parents: Keep the sharks at bay" on inappropriate investments sold to seniors discusses the Apple REITs sold by David Lerner Associates.

A full link to the article is here: http://money.cnn.com/2011/08/10/retirement/protecting_parents.moneymag/index.htm?iid=HP_River

The fourth section of the article entitled "PITCH NO. 4: "I can get you 8%."' discusses the promise of guaranteed, high returns that are used to attract older investors to risky, complicated financial products that may not be suitable for their investment needs.  The article goes on to discuss how David Lerner Associates have made over $600 million selling non-traded REITS over the past fifteen years, and how FINRA recently filed an enforcement action against the firm for allegedly targeting "unsophisticated and elderly" investors and using misleading information in connection with these potentially unsuitable investment recommendations.

Although founder David Lerner told Money Magazine that FINRA that his firm discloses the risks of a non-traded REIT in hundreds of pages of prospectuses, these risk disclosure documents may be overshadowed by the oral misrepresentations of its investment counselors.  David Lerner even goes as far to say that "In 18 years, I don't recall one client complaint", which is certainly a stretch to say the least.  The FINRA has disciplined the firm on at least five occasions for various infractions, including in 2005 when FINRA disciplined the firm for misleading investors in marketing materials that overstated its investment prowess.

Even in light of this article, there may hope for Apple REIT investors. If you are an investor who is trying to get out of the Apple REITs, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.  Our attorneys are representing investors who have suffered losses investing in the Apple REITs along with those who are seeking to rescind (get out of) their investment in these products.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

Florida Principal Barredby FINRA for Multiple Sales Practice Violations

Manuel Jose Leon Jr., a Registered Principal with Investors Capital Corp. has been found to have committed several violations by FINRA relating to the recommendation and sale of private securities through a company he formed to look like an independent branch of a broker-dealer. FINRA found that Leon did not properly notify his member firm that he was engaged in the sale of a private placement. He also did not have reasonable grounds to believe that the recommended private investment in the company was suitable and even recommended the investment to a retired couple of limited means. Leon recommended and allowed the couple to invest most of their investable assets, which amounted to $167,000.00 solely in the private placement investment resulting in over concentration in their portfolio. Prior to the dissolution of the investment, the company made interest and principal payments totaling some $26,000.00 to the couple, leaving them with a $141,000.00 loss. As a result of Leon failing to respond completely to FINRA requests for information and documents he has been barred from the industry.

If you have suffered losses investing any Manuel Jose Leon Jr. or Investors Capital Corporation, please contact Eccleston Law Offices to discuss your recovery options at (312) 332-0000.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

LaeRoc Income Fund Investor Recovery Options

The attorneys at Eccleston Law have expanded their investigation of the LaeRoc Funds, including the LaeRoc 2002 Income Fund and the LaeRoc 2005-2006 Income Fund.  Investors are encouraged to contact our attorneys to discuss their recovery options.

In addition to the notice of dissolution that was recently issued to investors in the LaeRoc 2002 Income Fund, L.P., Investment News recently reported that the Laeroc 2005-2006 Income Fund is seeking to raise up to $15 million to help reduce the $49 million of debt the fund has outstanding.  In June, LaeRoc Partners, Inc. is reported to have isseud a "cash call" notification to investors who purchased the LaeRoc 2005-2006 Income Fund.  Cash calls in a real estate fund in some cases can indicate that the fund could be in trouble.  According to Investment News, the fund's lenders are considering foreclosure if new cash cannot be raised through the cash call. 

According to its website,the LaeRoc Funds is a real estate investment firm managing over $650 million in assets in the last 23 years. The Company focuses on income producing properties in the western US with a concentration in southern California. The company has purportedly created 14 different real estate funds. 

Some of the real estate funds that it has created include the following:

• LaeRoc 2002 Income Fund
• LaeRoc 2004-2005 Income Fund
• LaeRoc 2005-2006 Income Fund
• LaeRoc Edge Fund
• LaeRoc Income Fund 007

SEC filings reveal that the following broker-dealers may have helped the various LaeRoc Funds raise capital by soliciting (or intending to solicit) investors:

• Unison Capital Group
• Allegheny Investments, Ltd.
• Chauner Securities
• Capital Strategies Limited
• Gramercy Securities
• CommonWealth Equity Services
• CFG/H.Beck
• Kendrick, Stimpfig, & Ryu
• TriEqua Capital Corp.
• Manarin Securities Corp.
• Northstar Securities
• Hagen Securities
• American Investors Co.
• Burch & Co.
• La Salle Scurities
• Metropolitan Investment Securities
• Rushmore Securities
• Linsco Private Ledger (LPL)
• Empire Financial Group, Inc.
• May Management
• J.P. Turner & Company
• VSR Financial Services, Inc.
• CAPWEST SECURITIES, INC.
• Mid Atlantic Capital Corporation

Investors who have suffered losses investing in any of the LaeRoc Funds upon the recommendation of their broker or financial advisor may be able to recover their losses through securities arbitration.

If you have suffered losses investing any LaeRoc Fund or in the LaeRoc 2002 Income Fund, L.P. or the LaeRoc 2005-2006 Income Fund, please contact Eccleston Law Offices to discuss your recovery options at (312) 332-0000.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

 

 

Eccleston Law Launches Investigation of Select Asset Management, Brian A. Bjork, and Affiliated Parties Following SEC Fraud Charges

The attorneys at Eccleston Law have launched an investigation of Houston-based investment adviser Select Asset Management LLC, its principal Brian A. Bjork, Select Asset Fund I, LLC, Select Asset Prime Index Fund, LLC, and others following SEC offering fraud charges.  Investors are encouraged to contact our attorneys to discuss their recovery options.

On August 1, 2011, the SEC announced that it obtained a temporary restraining order, asset freeze, appointment of a receiver and other emergency relief against Houston investment adviser Select Asset Management LLC (“Select Asset”), its principal Brian A. Bjork, Select Asset Fund I, LLC, Select Asset Prime Index Fund, LLC, the J. David Group of Companies, Inc. ("J. David Group"), J. David Financial Group LP ("J. David Financial"); Select Capital Management, LLC and the Estate of Joel David Salinas ("Salinas Estate") on charges of offering fraud.

Specifically, the complaint alleges that from 2004 through the present, Brian Bjork offered securities in two fraudulent securities schemes, raising a total of $52 million. The SEC also alleges that in the first scheme, Brian Bjork, alongside business associate Joel David Salinas, offered investors corporate and other bonds through J. David Group of Companies, and J. David Financial Group, and raised approximately $39 million from more than 100 investors. According to the SEC complaint, Bjork and Salinas promised investors safe, fixed income from highly-rated corporate and other bonds, but in reality they never acquired the bonds as promised.

The SEC complaint alleges that in the second scheme, Brian Bjork—through Select Asset and its subsidiary defendant Select Capital Management —offered securities issued by two private funds and raised approximately $13 million from at least 52 investors since August 2007. According to the SEC complaint, the two funds, which were controlled by Brian Bjork, Select Asset and Select Capital, commingled investor money, failed to provide promised financial statements, and transferred money to fund-affiliated entities in related-party transactions undisclosed to investors.

The SEC complaint further alleges that in making the affiliated loans, certaindefendants failed to conduct required due diligence and loan-approval procedures that had been promised to investors in the private placement offering memoranda.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you have suffered losses investing with Select Asset Management, Brian A. Bjork, Select Asset Fund I, Select Asset Prime Index Fund, the J. David Group of Companies, J. David Financial Group, or Select Capital Management, you may be entitled to seek recovery through securities arbitration.

Please contact one of the attorneys at the Eccleston Law Offices at (312) 332-0000 for a free, no obligation consultation to discuss your recovery options.

SEC Sues Sam Otto Folin and Benchmark Asset Managers Over $8.7 Million in Misappropriated Client Funds

On July 12, 2011 the SEC charged Sam Otto Folin, Benchmark Asset Managers and its parent company, Harvest Managers with misappropriating approximately $8.7 million from advisory clients, friends and family through material misrepresentations and omissions.

From 2002 through 2010, Folin, Benchmark and Harvest offered and sold securities in Harvest, Benchmark, and Safe Haven Portfolios, a pooled investment vehicle, promising investors that their funds would be invested in public and private companies with “socially responsible” goals. Instead, the complaint alleges that Folin, diverted a portion of the invested funds to pay previous investors as well as sustain Benchmark’s and Harvest’s expenses which included paying Folin’s salary.

Allegedly Benchmark and Harvest issued various “notes” to advisory client, friends and family promising guaranteed above-market interest rates.  Folin assured investors that such notes were conservative and safe. According to the complaint, Folin failed to disclose the true uses of those funds and continually misrepresented the value of the notes on quarterly statements.

In addition, the complaint alleges that in 2004 Folin formed Safe Haven. Allegedly Folin caused Benchmark’s advisory clients to invest in Safe Haven and that Folin also acted as investment advisers to Safe Haven. From 2006 through 2009, allegedly Folin caused Safe Haven to pay $1.7 million to Benchmark and Harvest under the guise of “development costs.” The complaint alleges that these “development costs” do not relate to any actual expenses incurred by Harvest or Benchmark. Rather, the complaint alleges, the payments coincide with Harvest’s and Benchmark’s need for funds to pay previous investors, expenses, and Folin’s salary.

The complaint also alleges that Folin and Benchmark caused Safe Haven to make loans to Harvest and Benchmark in excess of $3.9 million. Neither Benchmark nor Folin disclosed the loans. The loans allegedly violate several provisions of Safe Haven’s investment criteria including, that: (1) they were not supported by adequate collateral, (2) they voided the 5% net exposure requirement, and (3) they caused the portfolios to violate the “no leverage” provision.

Finally, the complaint alleges that Folin and Benchmark failed to disclose their advisory clients Benchmark’s dire financial situation and inability to sustain itself but for the monies it received under the guise of “development cost” and the loans from Safe Haven.

Eccleston Law represents individual and institutional investors to recover their investment losses caused by securities and investment fraud. Our attorneys also help victims of Ponzi schemes pursue recovery by submitting claims with receiverships established by the SEC or by assisting victims with the filing of a Theft Loss Tax Deduction with the IRS.

If you have lost money investing with Sam Folin, Benchmark, Harvest, or Safe Haven, your losses may be recoverable through securities arbitration. Please contact the Eccleston Law Offices at 312-332-0000 for a free, no obligation consultation.