Securities Lawyer Blog | Victim of Fraud?

TAG | Reg D Difficulities

Sep/11

14

Did You Invest In Laeroc Funds?

Soreide Law Group, PLLC, announced that they are currently investigating the sale of the Laeroc Funds, including the Laeroc 2002 Income Fund LP, Laeroc 2004-2005 Income Fund LP, Laeroc 2005-2006 Income Fund LP, Laeroc Edge Fund LP and Laeroc Income Fund 2007, LP.

These Laeroc funds were sold as real estate private placements (under Regulation D).  Typically, these funds were sold by brokerage firms such as LPL Financial, LLC, and Commonwealth Financial Network. Laeroc Funds is a real estate investment firm that has created 14 funds. Laeroc focuses on income properties with a high concentration in the western US.

The Laeroc funds have suffered substantial declines in value. The Laeroc 2002 Income Fund, L.P. announced the dissolution of the fund to the investors. The Laeroc 2005-2006 Income Fund LP is attempting to raise millions to pay off at least $49 million of debt. This fund recently issued a ‘cash call’ to its investors.

Many broker-dealers marketed these investments as safe and secure to their clients. FINRA has announced that it is monitoring the sale of real estate funds and, in particular, the ways in which broker/dealers marketed and sold the products to their investors. FINRA requires that brokerage firms perform reasonable due diligence on private placements.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have experienced a loss with the Laeroc Fund sold by Commonweath Financial Network, LPL Financial, or any other broker/dealer, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

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

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Bruce Kelly writes in a Sept. 13th, 2011, article in InvestmentNews.com that a broker-dealer who sold millions of dollars of failed private placements reached a $200,000 settlement with the Financial Industry Regulatory Authority Inc. last month, with the money going to the investors.

In a Finra letter of acceptance, waiver and consent, Capital Financial Services Inc. of Minot, N.D., “failed to have reasonable grounds to believe that private placements offered by Medical Capital Holdings Inc. and Provident Royalties LLC, pursuant to Regulation D, were suitable for any customer.”

Capital Financial Services Inc., also “failed to conduct adequate due diligence” on the two series of offerings and to put in place a supervisory system to achieve compliance when selling the private placements, according to the Finra letter. The firm has 332 affiliated registered representatives. John Carlson is the firm’s president.

The InvestmentNews.com article goes on to say that Capital Financial has recently drawn attention for its due-diligence policies. In April, the Securities and Exchange Commission alleged that Capital Financial’s due diligence on Provident Royalties private placements fell short, and the firm “never conducted independent verification of any of the offering materials provided by Provident.” The status of that case is still pending, according to the firm’s profile on Finra’s BrokerCheck system.

Those potential problems, according to Finra, included a custodian’s refusing to hold the MedCap notes, a clearing firm’s valuing the notes at zero on client account statements; the firm’s receiving two third-party due-diligence reports that highlighted Medical Capital’s recent failure to pay interest and a communication from a another third-party due-diligence analyst who indicated that MedCap executives weren’t allowing the analyst access to all its records.

Kelly writes that according to the SEC, the firm’s brokers sold $63 million of Provident Royalties preferred stock from 2006 to 2009. The Finra action focuses on 36 Capital Financial brokers who sold $11.8 million of MedCap notes in 2008 and 2009, allegedly after several “red flags” were raised about those notes.

Also stated was another alleged shortcoming of Capital Financial, was its failure to look at the financial records of Medical Capital and Provident Royalties. The firm “never obtained financial information about MedCap and its offerings from independent sources, such as audited financial statements,” according to the Finra letter, which uses similar language regarding sales of Provident Royalties.

By Sept. 1, the firm was to pay $80,000 to the court-appointed receiver for Medical Capital and $120,000 to the court-appointed receiver for Provident Royalties.

The firm consented to the Finra action without admitting to or denying its findings.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of Capital Financial Services, Inc., call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

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

 

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Sep/11

13

Laeroc Real Estate Fund Issues Cash Call, Foreclosure Threatened

In an article from InvestmentNews.com, Bruce Kelly writes that after avoiding the pitfalls of disastrous Regulation D deals during the past decade, Commonwealth Financial Network and LPL Financial LLC, are contending with potential fallout from a real estate private placement that faces pressure from its creditors.

The financial advisers from both Commonwealth and LPL sold the fund in question, the Laeroc 2005-2006 Income Fund LP, which wants to raise another $12 million to $15 million to pay off — at a steep discount — $49 million of debt.

The InvestmentNews.com article said that Laeroc Partners Inc., a real estate investor that focuses on Los Angeles and other parts of Southern California, in June issued a “cash call” notice to investors who bought the Laeroc 2005-2006 Income Fund.

The fund’s lenders have said that they will foreclose by the end of the year on a shopping center in Sacramento, Calif., if the fresh cash isn’t paid, according to the notice. The Laeroc fund has paid more than $180 million to buy eight properties and owes $105 million in mortgage debt. It wasn’t clear how much of the Laeroc 2005-2006 Income Fund Commonwealth and LPL brokers sold.

Reg D Difficulties

Many small to midsize independent broker-dealers became embroiled in the fallout from Reg D private placements after the Securities and Exchange Commission charged two sponsors, Medical Capital Holdings Inc. and Provident Royalties LLC, with fraud in 2009.

Leading independent firms such as Commonwealth and LPL sidestepped the toxic products, of which brokers sold $2.7 billion. About half of investors’ principal was wiped out in those two deals, and the steep legal costs associated with client arbitration claims and settlements have pushed dozens of independent broker-dealers to close or be sold.

Kelly writes that industry executives noted that real estate deals, including nontraded real estate investment trusts, which raised money and bought properties from 2006 to 2009, are struggling.

Laeroc Partners has at least $650 million in assets and has created 14 funds, according to its website. Founded in Manhattan Beach, Calif., in 1986, at first it was a workout specialist for distressed real estate.

In 1993, the company began offering income and equity funds, according to the website.

Kelly adds, Joseph Kuo, a spokesman for LPL, said that the firm’s reps and clients “have successfully avoided the most difficult product-related issues associated with the financial crisis.”

“The challenges currently faced by the Laeroc fund are driven by market forces resulting from the 2008 credit crisis and the stress to the commercial-real-estate markets from the ensuing recession,” he said, adding that the firm will keep a close watch as Laeroc works to address the issue.

Securities Attorney, Lars Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you feel you have become a victim of the Laeroc real estate fund by Commonweath Financial Network or LPL Financial, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com

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

 

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Aug/11

5

Real Estate Fund Could Face Cash Call

In an August 4, 2011, article by Bruce Kelly for InvestmentNews.com he writes that after avoiding the pitfalls of disastrous Regulation D deals during the past decade, Commonwealth Financial Network and LPL Financial, LLC, are contending with potential fallout from a real estate private placement that faces pressure from its creditors.

Kelley writes that financial advisers from both Commonwealth and LPL sold the fund in question, the Laeroc 2005-2006 Income Fund LP, which wants to raise another $12 million to $15 million to pay off — at a steep discount — $49 million of debt. Laeroc Partners Inc., a real estate investor that focuses on Los Angeles and other parts of Southern California, in June issued a “cash call” notice to investors who bought the Laeroc 2005-2006 Income Fund.

According to the article, the fund’s lenders have said that they will foreclose by the end of the year on a shopping center in Sacramento, Calif., if the fresh cash isn’t paid, according to the notice. The Laeroc fund has paid more than $180 million to buy eight properties and owes $105 million in mortgage debt.

The Reg D Difficulties

Dozens of small to midsize independent broker-dealers became entangled in the fallout from Reg D private placements after the Securities and Exchange Commission (SEC)charged two sponsors, Medical Capital Holdings Inc. and Provident Royalties LLC, with fraud in 2009.

Kelly writes that for the most part, leading independent firms such as Commonwealth and LPL sidestepped the toxic products, of which brokers sold $2.7 billion. About half of investors’ principal was wiped out in those two deals, and the steep legal costs associated with client arbitration claims and settlements have pushed dozens of independent broker-dealers to close or be sold.

Industry executives noted that real estate deals, including nontraded real estate investment trusts, which raised money and bought properties from 2006 to 2009, are struggling.

Joseph Kuo, a spokesman for LPL, said that the firm’s reps and clients “have successfully avoided the most difficult product-related issues associated with the financial crisis.”

“The challenges currently faced by the Laeroc fund are driven by market forces resulting from the 2008 credit crisis and the stress to the commercial-real-estate markets from the ensuing recession,” he said, adding that the firm will keep a close watch as Laeroc works to address the issue.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have invested in private placements with Commonwealth Financial Network, LPL Financial, LLC, or Laeroc Income Fund, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

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

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