Securities Lawyer Blog | Victim of Fraud?

TAG | elder abuse awareness

Jan/13

23

Complaint Filed Against Florida Rep for Misappropriation of Funds Against Elderly

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary and Other FINRA Actions, January, 2013.”

Kenneth Andrew Mauchin (CRD #2366345, Registered Principal, Sanford, Florida)

was named a respondent in a FINRA complaint alleging that he misappropriated $23,750 from elderly customers’ accounts by converting their funds to cashier’s checks and depositing those checks into a bank account of an entity he controlled.

FINRA’s complaint alleges that Mauchin did so without the customers’ knowledge or authorization. The complaint also alleges that Mauchin prepared a customer’s application for a variable annuity and falsely listed his bank branch office address as the customer’s mailing address, which he knew to be false.

Also, a customer applied for a premiere select IRA brokerage account with Mauchin’s firm and, without the customer’s knowledge or authorization, he falsely listed his bank branch office address as the customer’s mailing address, which he knew to be false. These applications became part of the firm’s books and records, causing his firm’s books and records to be false.

This complaint further alleges that Mauchin failed to appear for FINRA testimony.
(FINRA Case #2011028452701)

This ends the information from FINRA’s website.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, represents clients nationwide before FINRA. If you or a loved one have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Jan/13

8

Did You Invest in Private Placement Funds with Gramercy Securities?

Comments off · Posted by Securities Lawyer in FINRA

Securities Lawyer, Lars Soreide, of Soreide Law Group, is currently investigating Gramercy Securities, Inc. This brokerage has been alleged to have placed unsophisticated investors’ money into unsuitable investments. There have been claims, for example, of a recent widow losing her entire net worth by investing in risky private placements. Some of these risky private placements were in the Inland American Real Estate Investment Trust, LaeRoc Edge Funds, and Arciterra Whitefish Opportunity Fund.

LaeRoc funds are real estate private placements. LaeRoc Partners is a real estate investment firm managing over $650 million in assets. The LaeRoc private placement was promoted by brokers as a safe or conservative investment. These representations allegedly were misleading.

Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your private placement financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Oct/12

8

Protecting the Elderly from Financial Fraud

Comments off · Posted by Securities Lawyer in FINRA

In a recent MoneyWatch article, Steve Vernon writes that investment fraud and financial abuse targeting the elderly is a major problem today, according to a recent survey by the Investor Protection Trust and Investor Protection Institute. The top three ways in which seniors are exploited are:

Theft of diversion of funds or property by caregivers
Financial scams perpetrated by strangers
Theft or diversion of funds or property by family members

The IPT and IPI jointly surveyed a total of 756 experts with such cases, including state securities regulators, financial planners, health care professionals, social workers, adult protective service employees, law enforcement officers, elder-law attorneys and academics. The found the best way to prevent financial abuse — educational campaigns and counseling tailored to the financial needs of older Americans and their families or caregivers.

The MoneyWatch article asks, “How serious is elder abuse?” According to a bulletin from the National Adult Protective Services Association, 1 out of 9 U.S. seniors reported being abused, neglected or exploited in the past 12 months. Victims are three times more likely to die than those not subjected to abuse and four times more likely to go into a nursing home. They also use healthcare services at a higher rate than the general population.

So what can you do both for your parents now and for yourself down the road? Here are some suggestions:

Raise awareness of these issues with your parent(s) by finding one of the programs by experts as effective for prevention. Make it easy for your parents to attend. Make it an opportunity to do something social with your parents.

Put your parents’ finances on auto-pilot, with automatic deposit of Social Security, pension, annuity and investment income into checking accounts. Put as many of their bills as possible electronically. Find a financially savvy, “guardian angel” who will frequently visit or check in with your parents and will supervise any substantial financial transaction. This person will often be a family member, although this step can be a double-edged sword, given the prevalence of abuse by family members cited by the survey. If you don’t have any trustworthy family members living close by, see if you can find a trustworthy friend who lives close by.

If your parent(s) worked for a large, reputable company and have their savings with a 401(k) plan — consider keeping it there. Often you’ll get the best investment deals by keeping your money with your employer’s plan. These plans are strictly regulated, and employers operate these plan for the exclusive benefit of their employees.

A red flag goes up when a senior is isolated and their need for companionship makes them vulnerable to exploitation. This is one important reason why a careful choice of living quarters needs special attention. Arrange for daily contact with people who care about you and your parents/seniors.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, represents clients nationwide in arbitrations before FINRA. Call to speak to an attorney regarding your investment losses. For a free consultation on how to potentially recover those losses call: 888-760-6552, or you may visit our website at: http://www.securitieslawyer.com.

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Sep/12

18

Boynton Beach Broker Barred by FINRA for “Borrowing” Money from Elderly Client

Comments off · Posted by Securities Lawyer in FINRA

Stephen Nietsch (CRD #3111082, Registered Representative, Boynton Beach, Florida)

was barred from association with any FINRA member in any capacity and ordered to pay $20,000, plus interest, in restitution to a customer. The sanctions were based on findings that Nietsch borrowed $20,000 from an elderly customer contrary to his member firm’s procedures prohibiting him from borrowing from customers. Nietsch has not repaid the loan.

(FINRA Case #2009020385001)

The above information appears on FINRA’s website under “Disciplinary and Other FINRA Actions, September, 2012.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, represents clients nationwide. For a free consultation on how to potentially recover your financial losses call: 888-760-6552, or you may visit our website and complete the online form at: http://www.securitieslawyer.com.

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Sep/12

17

Litigating Financial Exploitation and Financial Elder Abuse in the State of Florida

Comments off · Posted by Securities Lawyer in FINRA

Florida has determined to fight abuse and exploitation by enacting a specific civil cause of action for exploitation, but the Florida action applies to the exploitation of “vulnerable adults.” As a result, the attorney must be prepared to offer testimony on both prongs of the action and prove that his client is both a “vulnerable adult” and a victim of “exploitation.”

A “vulnerable adult” is defined as a person 18 years of age or older “whose ability to perform the normal activities of daily living, or to provide for his or her own care or protection, is impaired due to mental, emotional, long-term physical, or developmental disability or dysfunctioning, or brain damage, or the infirmities of aging.”

“Exploitation” is defined as obtaining or using, or endeavoring to obtain or use the vulnerable adult’s funds, assets or property for the benefit of someone other than the vulnerable adult by: 1) a person “who stands in a position of trust and confidence with a vulnerable adult,” or 2) by a person who “knows or should know that the vulnerable adult lacks the capacity to consent.

Therefore, in order to take advantage of Florida’s direct civil cause of action, the attorney must first determine whether he representing a “vulnerable adult.” This requires a thorough investigation of the client’s capacity and should begin with an investigation of any previous assessment conducted by health care professionals. If no assessment has yet been performed, and the attorney believes that capacity issues exist, it will be necessary to obtain a professional assessment and be prepared to present evidence through expert testimony that the client is a
“vulnerable adult” as defined by Florida law. In addition, the testimony of family members, care givers, and friends would provide important testimony on this issue.

The next step is to determine if the facts constitute “exploitation” as defined under the statute. Here, the attorney must carefully analyze the relationship that existed between the client and the defendant to determine if a confidential or trusted relationship existed. If a confidential or trusted relationship existed, such as in a fiduciary relationship under a trust, power of attorney or guardianship, the remaining issue would be whether the funds were used for the benefit of someone other than the vulnerable adult. If no confidential or trusted relationship existed, an action may nevertheless be brought under the direct statute if the attorney can prove that the defendant knew or should have known that the client lacked the capacity to consent and thereafter used the funds for the benefit of someone other than the vulnerable adult. Lay testimony, as well as expert testimony from health care professionals, would be appropriate in establishing the lack of capacity to consent, and just as importantly, the red flags of incapacity that should have been evident even to a lay person.

The final question to be answered by the attorney before filing suit is who can bring the action on behalf of the vulnerable adult. Interestingly, the Florida statute provides that an action on behalf of a vulnerable adult who has been abused, neglected or exploited may be brought by the vulnerable adult, the guardian of the adult or a person or organization acting on behalf of the adult with consent. The fact that the cause of action may be brought by the vulnerable adult himself indicates a recognition that the capacity of the vulnerable adult does not have to be so diminished as to first require the appointment of a Guardian.

Additionally, allowing the action to be brought by a person or organization “acting on behalf of the vulnerable adult with the consent of that person,” presents an interesting issue if the attorney is attempting to establish exploitation by proving that the defendant knew or should have known that the vulnerable adult lacked the capacity to consent.

Nevertheless, it is clear that the civil trial attorney in Florida is not required to first establish a guardianship prior to bringing an action under the statute.

With respect to damages, the Florida statute provides that a vulnerable adult who has been abused, neglected or exploited may recover both actual and punitive damages “for any deprivation of or infringement on the rights of a vulnerable adult.” Like California, the prevailing party may be entitled to recover “reasonable attorney’s fees, costs of the action, and damages.”

As discussed above, allowing recovery of attorney fees is an important element of damages for elders who would not be made whole even in victory if contingent attorney fees are taken from the recovery.

In addition to the civil remedies expressed above, Florida statutes also provide elders with civil remedies for financial exploitation which also constitutes a criminal violation. Under this provision, where it is proven by clear and convincing evidence that the elder is a victim of “theft, robbery and crimes related thereto,” a cause of action with damages of “three-fold the actual damages sustained, together with reasonable attorney’s fees and court costs,” is available.

Is it important to note that the definition of “exploitation” within Florida’s civil statute, and the definition of “theft” under its criminal statute, are strikingly similar, yet with one critical difference. While within the definition of each, the offender “obtains or uses or endeavors to obtain or use the property of another for the benefit of someone other than the victim,” in the criminal statute, there is no requirement that the victim be a “vulnerable adult”, so an individual over the age of 65, who would otherwise not be defined as a “vulnerable adult” under the civil statute, may bring a civil action for exploitation under the criminal statute, as long as the facts otherwise meet the definition of “theft.”

The Florida attorney, then, is provided with options in presenting causes of action for the financial exploitation of individuals 65 years of age and older regardless of capacity. Florida also provides that in civil actions in which a party is over the age of 65, he may move the court to advance the trial on the docket. Like California, creating a direct civil cause of action for financial exploitation, and providing civil remedies for criminal violations, Florida has taken important steps in the fight against elder abuse, and has presented the civil trial attorney with effective tools in responding to financial abuse.

This information came from “Litigation Responses to Financial Exploitation” written by Brian H. Fant.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, represents clients nationwide in arbitrations before FINRA. Call to speak to an attorney regarding your investment losses. For a free consultation on how to potentially recover those losses call: 888-760-6552, or you may visit our website at: http://www.securitieslawyer.com.

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Sep/12

7

FINRA Awards 3xs Damages to “Elderly” Client in Florida

Comments off · Posted by Securities Lawyer in FINRA

Raymond James, FINRA ID # 11-03503 (Bradenton, FL, 8/21/2012)
A split FINRA arbitration panel awarded $985,700, including triple damages, to an elderly customer on his misappropriation claim. This award against Paul David Arnold, and Raymond James and Associates, Inc., of Bradenton, Florida, involved the purchasing of an annuity, electronic transfers and conversion of funds of an elderly person. Some of the charges were: unsuitablity, breach of fiduciary duty, common law conversion/theft, failure to supervise, and exploitation of an elderly person.

The FINRA award states, “exploitation of an elderiy person, Florida Statutes, Sections 825.103(1) and 772.11), Respondent Arnold is liable for $739,320.00 (representing three times the compensatory damages amount of $246,440.00) plus pre-judgment Interest on the compensatory damages amount of $246,440.00 at the Florida statutory rate running from September 12, 2011 through the date of the Award.” Fees were also recovered.

Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Jun/12

20

Joel Carlson, Vadnais Heights, MN, Barred by FINRA

Comments off · Posted by Securities Lawyer in FINRA

 Joel William Carlson (CRD #2844760, Registered Representative, Vadnais Heights, Minnesota) 

was barred from association with any FINRA member in any capacity. Carlson consented to the described sanction and to the entry of findings that he solicited his member firm’s customers to give him a total of at least $734,000, fraudulently misrepresenting to the customers that he would invest their money safely in securities, but used the money for his own personal use.

The customers gave Carlson personal checks made payable to an entity that he controlled and deposited the customers’ checks in a bank account he controlled in the name of the entity.  Carlson has not re-paid the customers their moneywith the exception of one customer.

FINRA’s findings also stated that the clients who gave Carlson money, were between 68 and 90 years old;  all but one of the investors were retired. 

(FINRA Case #2012031202901)

 This information appeared on FINRA’s website under, “Disciplinary and Other Actions, June, 2012″

If you have sustained investment losses due to your stock broker or financial advisor’s recommendations, please call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Jun/12

6

FINRA Fines Brookstone Securities Inc Over Sale of CMOs

Comments off · Posted by Securities Lawyer in FINRA

In May, a FINRA arbitration panel fined Brookstone Securities Inc., $1 million over the sale of risky CMOs (collateralized mortgage obligations) and said they made “fraudulent misrepresentation and omissions of material fact in selling complex, esoteric and risky tranches of [CMOs] to unsophisticated, elderly and retired investors.”  The FINRA panel also ordered its chief executive, Antony Lee Turbeville, along with a broker, Christopher Dean Kline barred from FINRA registered broker-dealers.

Brookstone and Antony Turbeville were jointly ordered to pay clients restitution of $440,600, while Brookstone and Christopher Kline were jointly ordered to pay $1,179,500 in restitution.

It was said in FINRA’s decision, that Turbeville and Kline “preyed on their elderly customers’ greatest fears,” such as losing their all of their savings to nursing homes and becoming penniless, thus enticing them into risky CMOs.

“Brookstone, Mr. Turbeville and Mr. Kline intentionally or recklessly misrepresented the CMO investments to their customers as a safe way, through government-backed bonds, to obtain a high rate of return on their investments,” according to the FINRA decision. “In reality, the CMOs the brokers purchased for the customers were high-risk investments whose returns were not assured, but instead, because of interest rate changes, were subject to dramatic changes in maturity, cash flow and value.”

According to FINRA, between July 2005 and July 2007,  Brookstone earned $492,500 in commissions over that time on CMOs, and investors lost $1.62 million.

Seven clients,  between 61 and 91, claimed they did not understand how CMOs worked and were not sophisticated investors, according to the FINRA decision.  FINRA has a long-standing warning to firms and advisers about selling CMOs, since 1993, when the CMO market collapsed. Finra, formerly NASD, warned that “in light of the complexity and the varying risk characteristics of CMOs, member must be conversant in all of the characteristics of CMOs to assess adequately the suitability of CMOs for their customers. Moreover, members must ensure that their customers understand the characteristics and risks associated with CMOs.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.  If you or a loved one experienced a loss through Brookstone Securities, Inc., or another broker/dealer on the sale of CMOs, for a free consultation with an attorney on how to potentially recover your losses, please call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Apr/12

20

Elderly Investors to Receive Only 2.8 cents on the Dollar after Getting Bilked by Insurance Agent

Comments off · Posted by Securities Lawyer in FINRA

In an InvestementNews.com article by Darla Mercado, she writes that a group of mostly elderly investors trapped in a $7 million scam involving so-called “private annuities” will be getting back only a sliver of their original investment.

The trustee overseeing the bankruptcy case of insurance agent John F. Langford of Amarillo, Texas, revealed that most of the clients in a fraud masterminded by the agent will be getting back only 2.8 cents for every dollar they had invested.

Langford is currently doing time — 15 years in prison — after pleading guilty last fall to 15 counts of securities fraud and other charges. The Texas State Securities Board said that he stole close to $7 million from dozens of clients through the sale of unregistered products, including phony “private annuities” and promissory notes that promised interest rates as high as 9%.

Ms. Mercado writes that after going through Mr. Langford’s assets, which included an $85,000 Jackson National Life Insurance Co. annuity and $2,600 in furs and jewelry, trustee Kent Ries was able to scrape up $212,126 from which to pay off unsecured creditors’ claims. The jailed insurance agent owes money to 111 individuals and companies.

The InvestmentNews.com article said that among the largest claims Mr. Langford is facing: a $1.24 million claim from Hazel Carter, guardian of investor Ruth Alice Roach–Worak. Ms. Carter pursued Mr. Langford in federal bankruptcy court in Texas, arguing that Mr. Langford had made misrepresentations to Ms. Roach-Worak when selling “private annuities” to her between 2004 and 2006. Ms. Roach-Worak, who was over age 80 at the time, had chipped in about $950,000 in purchasing the phony investments, many of which weren’t expected to come due until she was over 90. Ms. Carter is expected to net only $35,765 out of her million dollar claim, according to trustee documents.

Mercado writes that a spokesman for the Texas State Securities Board, noted that in many fraud cases, victims manage to get only a few cents on the dollar. “There’s generally little recovery in fraud cases,” he said. “This fraud has gone on for a while, and Mr. Langford made a number of Ponzi-type payments. The money disappeared, and this is why it’s critically important for investors to check if the person and the investment are registered before making an investment.” He  also noted that often victims make the mistake of purchasing unregistered investments from insurance agents, assuming that “because they’re involved in the financial field, they’re authorized to sell securities.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Apr/12

17

A Word of Caution When Buying REITs

Comments off · Posted by Securities Lawyer in FINRA

In an InvestmentNews.com article by Bruce Kelly, April 1, 2012, he writes that shortly after Susan Fox bought a nontraded real estate investment trust for her IRA, the REIT started to show quarterly losses. But when she met with her broker to discuss her concern, he sold her a second nontraded REIT.

Kelly writes that the first REIT, Inland American Real Estate Trust, has fallen in value in the last five years from $10 per share to $7.22 per share, a 28% decline. Last month, Ms. Fox, 63, was informed that the second, Cornerstone Core Properties REIT Inc., had been devalued to $2.25 per share, from $8, a drop of 72%. Ms. Fox claims that after watching the first REIT’s performance decline, she never intended to buy the second one.

The InvestmentNews.com article goes on to say that Ms. Fox, who was living in Plano, Texas, when she bought the REITs and now resides in Ramsey, Ill., sensed trouble in the summer of 2008 when the Inland REIT started to post losses. So she and her broker, John Potts, met at her home to discuss what to do with her IRA. During their conversation, Mr. Potts was squarely focused on the Cornerstone REIT, Ms. Fox said.

“I was concerned with Inland performing so poorly, and he sold me Cornerstone,” said Ms. Fox, who claims she did not know the investments were illiquid when she bought them.

“My recollection was that he deflected talking about Inland,” she said. “He was talking over my head and said that [Cornerstone] was a better investment with a better, reputable company, and it would pay dividends. He had a lot of paper spread out on the table. He had all the documents ready for me to sign, and I signed them.”

Kelly writes that she knew Mr. Potts and had worked for him, doing some bookkeeping for his firm, Signature Planning Inc., and was “impressed with his due diligence,” she said. During the real estate boom, such REITs were regularly touted as being stable, long-term investments because they invested in commercial real estate, which historically had performed well as an asset class. As some REITs’ values have plunged the opposite has proved true.

The REIT industry often puts the blame squarely on the real estate bubble rather than on any individual real estate investing strategy.

Additionally in Ms. Fox’s predicament, the REITs were part of her IRA, which in 2008 had $105,000 in it. The REITs accounted for $56,616 of the account, or almost 54%. Having such a large percentage of her IRA in illiquid investments alarmed Ms. Fox, and in July 2010, she told her broker to sell the investments. When he told her she was stuck, she began to complain.

“I purport that I was overallocated to nonliquid investments unsuitable for my short-time-horizon needs,” she wrote in a letter in July 2010 to Thomas Berthel, CEO and owner of Berthel Fisher & Co. Financial Services Inc., an independent broker-dealer that employed Mr. Potts.

In 2010, Ms. Fox also complained to the Financial Industry Regulatory Authority Inc., which looked into the matter but took no action.

Ms. Brady said the firm concluded that Mr. Potts acted appropriately and that there were no sales practice problems with Ms. Fox’s transactions. “We remain confident that the sales practices of our registered representative were appropriate,” Ms. Brady wrote.

One question from Ms. Fox’s dilemma is the appropriateness of investing in illiquid instruments in retirement accounts.

Kelly writes that the direct-participation-program industry, which includes nontraded REITs and other investments, is trying to make the REITs more palatable for investors, including those with retirement accounts, by creating products that have daily net asset values and increased liquidity, industry observers said. Most nontraded REITs are given a value only once a year, and that is after they finish their period of sales. Securities regulators recently have proposed rules that would tighten up the time for valuations.

“There’s confusion in people’s minds between the extent of an investment being liquid and safe,” said Tony Webb, a research economist with the Center for Retirement Research at Boston College. “A five-year [certificate of deposit] is not liquid but safe. A publicly traded share is liquid but not safe.”

“Clearly, in the face of the uncertainty of health care costs, households place a certain value on liquidity, but it’s not important that all the household’s wealth is liquid,” Mr. Webb said.

“This is one where the adviser should be faulted, not that the investment wasn’t liquid but that the level of risk wasn’t appropriate for the client,” he said. “I don’t know the client’s financial situation, but it strikes me, at first glance, of being an inappropriate investment.”

The InvestmentNews.com article says that while no figures are available for the overall percentage of illiquid investments in retirement accounts, industry executives said they are widely sold. At independent broker-dealers such as Berthel Fisher, two of the most popular types of illiquid investments are nontraded REITs and the more recently developed nontraded business development companies, or BDCs.

Such investments yield income, which is appealing for the long-term investor, said Kevin Hogan, president of The Investment Program Association, an industry association for the broker-dealers that market and sell such investments.

“Most IRA accounts run for 10 to 20 years, and that fits the long-term nature of nonlisted REITs,” he said. “I think you’ll see more nonlisted REITs in IRAs because of income and distribution potential.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

 
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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