Financial Counsel by Eccleston Law

Potential Authority is Sufficient to Compel FINRA Arbitration

The Fourth Circuit Court on June 21^st held that to have indirect control of a person, such that he is an “associated person” under FINRA Rule 12200, a member firm need only have the potential power to influence the person, rather than exercise any actual control over him.  The case involved two broker-dealers.  First was Waterford Investment Services ("Waterford"), which is a Florida corporation and is a registered securities broker-dealer with the Securities and Exchange Commission ("SEC") and has been a FINRA member since March 1999.  Community Bankers Securities ("CBS") is a Virginia corporation and is also a registered broker-dealer with the SEC and was a member of FINRA from July 1997 to February 2010.  In 2005, AIC became the majority owner of both Waterford and CBS.  Investors alleged that they received bad advice from George Gilbert and they named Waterford and CBS, which were his current firm and prior firm, respectively.

Waterford argued that it should not be required to arbitrate an investor dispute because the adviser who allegedly gave the bad advice was an associated person with CBS and not Waterford.  In this case, Waterford and CBS had a common majority of owner, officers and directors, and shared resources, which the Court found to be a significant overlap.  Thus, Waterford had the potential power to control the advisor at issue and can be compelled to arbitrate the investor dispute. 

Eccelston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, and breach of fiduciary duty, negligence or other misconduct.

The Proposed FINRA Arbitration Rule Amendments Approved by SEC

On June 22, 2012, FINRA announced that the SEC approved FINRA Rules 12800 and 13800 (Simplified Arbitration) of the Customer and Industry Codes of Arbitration Procedure.  For claimants seeking damages of $50,000 or less, the amended rules provide streamlined arbitration procedures.  These amendments will be effective July 23, 2012 for all cases filed on or after the effective date.

Florida Broker Charged by SEC for Constructing Astrology Influenced Ponzi Scheme

The attorneys at Eccleston Law have launched an investigation of Florida broker Gurudeo “Buddy” Persaud.  The SEC claims that he lured investors into investing in his firm White Elephant Trading Company LLC by making misleading and false guarantees, and not revealing his eccentric trading strategies. 

Following the classic attributes of a Ponzi scheme, Persaud used investors’ money to fund payments to other investors. He also lost $400,000 of investor funds through trading while spending at minimum $415,000 on personal expenses. Persaud continued to create phony account statements to hide losses, and blatantly lied to his investors, leading them to believe they were secure.

According to the SEC, Persaud’s mystical way of determining trade decisions was intentionally hid from his investors. Persaud relied completely on a website that predicted market forecasts based on lunar cycles and gravitational pull. This premise is based on the idea that these astrological forces affect human behavior, and therefore also the stock markets. For instance, Persaud assumed people were more inclined to sell securities when the felt dispirited by the moon’s strong gravitational pull. It was these sorts of assumptions that Persaud used to develop his trade tactics.

Persaud was a registered representative at a Florida-Based broker-dealer, but ran his own firm “White Elephant Trading Company LLC” on the side. He raised more than $1 million dollars from at least 14 investors between July 2007 and January 2010.

If you are an investor that has suffered losses investing with Gurudeo “Buddy” Persaud or White Elephant Trading Company LLC, 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.

Non-traded REITs Under Pressure; Summit Heads Towards the Exits

Since May, Brokerage Services Inc. has suspended selling agreements with KBS Holdings LLC after a prospective class action complaint was filed against one of KBS’s REITs. The lawsuit was brought against KBS by investors who claimed that they had been misled about KBS REIT I’s investment objectives, dividend payment policy and the value of its investments. While KBS spokesman referred to the lawsuit as “frivolous,” KBS did devalue the price per share of KBS REIT I, and lowered its distribution to zero.

Commenting on Summit’s decision to suspend selling agreements with KBS, the firm’s owner and chief executive Marshall Leeds stated, “we are doing additional due diligence,” although he went on to affirm that the two companies continue to maintain good relations and stated that this is not the first instance in which summit has suspended selling agreements with a sponsor. Leeds did maintain that completely ending the selling agreement with KBS is still an option.  Leeds also made statements about the REIT marker as a whole saying, “I think that firms that are heavily loaded in REITs might have some issues,” and also commenting that an overall weakening of the commercial real estate market has contributed to the depreciation of certain REITs.

Similarly, Paladin Realty Income Properties Inc. is also moving away from REIT sales. It recently informed investors of its decision to conclude the sale of its REIT due to its lack of scale, which was preventing the company form covering expenses. Additionally, Wells Real Estate Funds, which is in possession of Wells REIT II, cut a number of its sales staff in order to help promote cost reduction.

If you are an investor that has suffered losses investing with KBS Holdings LLC, or other non-traded REITs, 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.

Eccleston Law Investigates Brookstone Securities Following FINRA Fines for Fraudulent CMO Sales to the Elderly

The attorneys at Eccleston Law have initiated an investigation of Brookstone Securities due to alleged fraudulent sales to customers. In particular, the alleged sales made were of collateralized
mortgage obligations (“CMOs”) to retired, elderly and inexperienced investors.

The firm was fined $1 million in addition to restitution of more than $1.6 million to customers. FINRA also barred CEO Anthony Turbeville and broker Christopher Kline from the securities industry. David Locy, Brookstone’s former chief compliance officer, was banned from acting in a supervisory role, fined him $25,000 and suspended him from the industry for two years.

According to FINRA, from July 2005 to July 2007, Turbeville and Kline misrepresented the risks involved with investing in CMOs to customers. All sought “safer alternatives” to equity investments. According to the ruling, the duo “preyed on their elderly customers’ greatest fears,” causing their customers to purchase disagreeable CMOs.

In 2005, interest rates were increasing, and the CEO and broker were aware of the negative consequence on CMOs. However, they did not illustrate the changing circumstances to their customers, instead opting to insinuate that the CMOs were government-guaranteed bonds that preserved capital and generated 10% to 15% returns. Brookstone made $492,500 in commission on the
CMO transactions from the seven customers named in the complaint, while the customers lost $1,620,100.

The FINRA panel also mentioned that Locy “ignored his responsibility” and “looked the other way” while Turbeville and Kline traded CMOs that were inappropriate for their customers.

If you are an investor that has suffered losses investing with Brookstone Securities, 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.

Eccleston Law Investigates OppenheimerFunds Inc. Following SEC Charges of Bond Fund Misstatements

The attorneys at Eccleston Law have launched an investigation of OppenheimerFunds Inc. in response to the firm being ordered by the Securities and Exchanges Commission (“SEC”) to pay over $35 million in fines for making misleading statements to investors about struggling mutual funds during the 2008 credit crisis.

OppenheimerFunds used derivative instruments called “total return swaps” to add substantial commercial mortgage-backed securities (“CMBS”) exposure in a high-yield bond fund called the Oppenheimer Champion Fund as well as an intermediate-term portfolio called the Oppenheimer Core Bond Fund.

The SEC charges that the 2008 prospectus of the Champion Fund did not disclose the fund’s practice of assuming substantial leverage in using derivative instruments and the losses that it and the Oppenheimer Core Bond Fund incurred. Therefore, when the decline in the CMBS market left the swap
contracts in both the Oppenheimer Champion Fund and the Oppenheimer Core Bond Fund with sizable liabilities, Oppenheimer was forced to reduce CMBS exposure, and the firm circulated misleading statements about losses and recovery.  

In addition to this, the SEC claims that Oppenheimer made misleading statements about the funds’ predicament, telling both shareholders and financial investors that the funds suffered only paper losses. The SEC stresses that mutual fund providers should rely on honesty, not hopes, while
communicating with investors.

If you are an investor that has suffered losses investing with OppenheimerFunds Inc., please contact one of our attorneys at 312-332-0000 to discuss your recovery option.

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 Charges 14 Individuals With Misleading Investors and Illegally Sold Securities for Agape World Inc.

The attorneys at Eccleston Law have launched an investigation of Agape World Inc. following charges that 14 sales agents engaged in a $415 million Ponzi scheme in a Long Island-based investment firm.

It was alleged that these agents falsely promised investors high returns of 12 to 14 percent when they sold investments offered by Agape World Inc.  The agents also allegedly misled investors to believe that only 1 percent of their investment was at risk.  In reality, these Agape securities were non-existent and these investors were merely lured into a Ponzi scheme.  These agents ignored all red flags with Agape fraud, sold the investments regardless and ended up receiving more than $52 million in commissions and payments of of their investors' funds.  What's more, none of these agents were registered with the SEC to sell securities and were not associated with a registered broker or dealer.  Agape was not registered with the SEC either.

According to the SEC's complaint, between 2005 and January 2009, more than 5,000 investors nationwide were effected by this scheme.  Agape's president and organizer, Nicholar J. Cosmo, was ultimately arrested in January 2009.  Subsequently, he was sentenced to 300 months in prison and ordered to pay more than $179 million in restitution.

Further, the SEC complaint alleges that these 14 sales agents misrepresented to investors that their money would be used to make high-interest bridge loans to commercial borrowers or businesses that accepted credit cards.  However, this was not the case.  Instead of using the money for that purpose, the investor funds were used for Ponzi scheme payments and the agents' sales commissions.  Moreover, Cosmo lost $80 million while trading futures in personal accounts.  The agents continued to sell these securities even after Cosmo's prior conviction for fraud, the too-good-to-be-true returns, and the incredible safety of principal promised to investors (1% of their investment at risk).  Also, Agape's securities offerings were not registered with the SEC.

If you are an investor that has suffered losses investing with Agape World Inc., please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

Eccelston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, and 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.

Non-traded REIT Underperformance Attributed to Fees

A recent study reported the results of a study assessing the current state of non-traded REITs.  According to the piece, the study, published on June 1, contains research conducted by consulting group Blue Vault Partners LLC and the University of Texas at Austin’s McCombs School of Business that attributes the recent underachieving of most non-traded REITs to the high fees associated with such investments.

Entitled “Nontraded REIT Industry Full-Cycle Performance Study,” the report uses two benchmarks to analyze the investments. As Kelly states, these benchmarks were created specifically for the study using “a portfolio of properties from the National Council of Real Estate Investment Fiduciaries,” along with “broad indexes of publicly traded REITs.” While these benchmarks returned 11.7%, Kelly states that the non-traded REITs analyzed had “an average internal rate of return of 10.3%,” making them “140 basis points lower than the two customized benchmarks.” With seventeen REITs being analyzed, and five reporting returns over the benchmark, Kelly reports that this means 71% of investments “underperformed.”

As Kelly notes, the researchers who conducted the study feel that the fees assessed to non-traded REIT investors are to blame for such return rates, as the study alleges, “Clearly, the fees associated with non-traded REITs account for the performance difference.” Such fees can be up to 15%, but, as the study found, by lowering such rates to a more standard 12%, the investments being analyzed by the study went from having a 10.3% return rate to a 12.5% rate. Although able to make some conclusive statements, the study, as Kelly points out, has its limitations, as it only covers the non-traded REITs that were “fully liquid” due to having had “liquidity events between 1990 and May 2012.”

Kelly also characterizes the study as “timely” due to the fact that “the initial-public-offering market for non-traded REITs has heated up.” Furthermore, Kelly also points out a May 2011 “complaint” brought against David Lerner Associates Inc., a broker-dealer firm, by the Financial Industry Regulatory Authority Inc. The complaint claims that the firm misinformed investors about the status of Apple REIT 10, a non-traded REIT put forward by the Apple, which also had a number of non-traded REITs analyzed by the Blue Vault/University of Texas study.

If you are an investor that has suffered losses investing with David Lerner Associates Inc., or investing in non-traded REIDs, please contact one of our attorneys at 312-332-0000 to discuss your recovery option.

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.  

Eccleston Law Continues Investigation of Robert Van Zandt Ponzi Scheme

The attorneys at Eccleston Law are continuing their investigation of Robert Van Zandt, Kimmarie Van Zandt, and Van Zandt Agency following recent allegations that the Robert H. Van Zandt, through the Blondell Avenue-based Van Zandt Agency, was running a Ponzi scheme that defrauded more than 250 investors.

Through the Van Zandt Agency, Robert H. Van Zandt is believed to have sold unregistered promissory notes that appeared to be a secured real estate investment.  Van Zandt allegedly lured investors into the Ponzi scheme by guaranteeing returns of up to 12% on these promissory notes.  Through a series of shell corporations such as Burke and Grace Avenue Corporation, Van Zandt allegedly operating this Ponzi scheme targeting residents of Bronx, New York.  Robert H. Van Sandt is believed to have targeted the investors who had their tax returns prepared at the Van Sandt Agency.

Investors are believed to have lost most, if not all of their money in the Van Zandt Ponzi scheme.  However, such investors may be able to recover their losses through securities arbitration. 

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.

If you are an investor that has suffered losses investing with Robert Van Zandt, Kimmarie Gervasi Van Zandt, or with the Van Zandt agency, please contact one of our attorneys at 312-332-0000 for a FREE, NO OBLIGATION to discuss your recovery options.

 

 

 

http://robertvanzandtlosses.com/

$35 Million Civil Lawsuit Filed Against Bronx Fraudster Robert Van Zandt Sr.

Bronx resident, Robert “Bob" Van Zandt’s, lavish lifestyle has finally come to a fault after he was indicted on May 14, 2012 on fraud, money laundering and grand larceny charges for running a $4.6 million Ponzi scheme that cheated dozens of innocent local investors out of their money.  He now faces a maximum sentence of up to 25 years.

Van Zandt, 68, was the owner of The Van Zandt Agency, which was a well-known tax preparation firm in Westchester Square.  His business partner and son, Robert Van Zandt Jr. was found dead floating in his swimming pool in Yonkers last fall with a bullet in his head.  Van Zandt Jr. was tied to former Mafia boss Vincent “Vinny Gorgeous” Basciano.  Van Zandt Sr. is blaming the scam on his son but many believe the father was behind it.

Prosecutors said that in 2007 Van Zandt Sr. began to take investments from tax preparation clients.  He targeted clients with large retirement savings and funds and ripped off his blue collar clients.  According to the indictment and statements made by prosecutors at the arraignment, Van Zandt Sr. guaranteed high rates or return to the new investors and promised to invest their money in lucrative securities, including real estate projects.  These real estate projects were, in fact, impossible to build.  Specifically, he would guarantee high rates of return to these unsuspecting clients and then take the cash to pay previous investors and his own personal expenses.  In reality, their money was never invested as promised in the promissory notes or shareholder agreements that he gave to his victims.  From February 2008 to January 2011 Van Zandt Sr. stole more than $4.6 million from his investors.

Dozens of hard-working New Yorkers put their individual life savings into the hands of Bob Van Zandt only to see it destroyed by his greed.  Since their life savings have been depleted, many of Van Zandt’s former clients have been forced to re-enter the workplace or rely on government assistance.  Some of his former clients even face foreclosures on their homes or bankruptcy.

Van Zandt Sr. was also a broker with the Manhattan firm Metropolitan Life Securities Inc.  He first became registered in the securities industry in December 1973.  He was associated with FINRA registered firms from 1979 to 1997 and then joined American General Securities Incorporated.  In November 2004, he joined MetLife where he stayed until January 2007.  Currently, Van Zandt Sr. is not registered or associated with any member firm.

While he was at MetLife he sold more than $20 million in unregistered promissory notes to over one hundred unwitting customers allegedly for the purpose of funding his own real estate ventures (for example, Burke & Grace Avenue Corporation and Empire Builders of New York Corporation) and gambling debts.  He misrepresented to these investors that their funds were invested in real estate investments, that their promissory notes would pay generous interest rates and that their principal was “secure” because the investments were backed by real estate.  These promissory notes were unsuitable for these investors in light of their financial position, risk tolerance and investment objectives and these investments sold and recommended by Van Zandt Sr. eventually deteriorated into a full-blown Ponzi scheme. It has been alleged that MetLife failed to supervise Van Zandt Sr. and failed to overlook his solicitations to investors to purchase the promissory notes by openly displaying brochures in his office.

Van Zandt Sr. is currently being held on $500,000 bail on Rikers Island.

If you are an investor that has suffered losses investing with Robert Van Zandt and/or MetLife, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.

Eccelston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, and 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.

 

 

http://robertvanzandtlosses.com/