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shutterstock_155271245-300x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Frank Zito (Zito), formerly associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) in Ridgeland, Mississippi and currently registered with Coker & Palmer was terminated concerning allegations that Zito engaged in conduct such as failure to adhere to firm standards regarding selling away and failure to fully disclose participation in an outside business activity.  A month earlier in May 2018 a customer filed a complaint against Zito alleging that the broker made unsuitable recommendations and sold unapproved products from 2013 through January 2018.  The complaint is currently pending and alleges $571,000 in damages.

At this time, the claims against Zito are unclear as to the exact nature and extent of the unapproved product sale activity.  Zito has outside business disclosures including timber purchasing from timber management firm.

It is possible that this activity is related to the alleged Ponzi Scheme orchestrated by Arthur Adams (Adams) and Madison Timber Properties LLC (Madison Timber) by The Securities and Exchange Commission (SEC).   The complaint against Adams and Madison Timber was unsealed on May 1, 2018 Mississippi federal court and revealed the SEC’s fraud charges against the Mississippi company and its principal who has been accused of stealing from at least 150 investors in a $85 million Ponzi scheme.  Adams and Madison Timber agreed to a permanent injunction, an asset freeze, and expedited discovery.

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shutterstock_76996033-300x200Former Cetera Advisors LLC (Cetera Advisors) advisor Nina Jessee (Jessee) has been subject to at least 21 customer complaints and one employment termination for cause.  According to a BrokerCheck report many of the customer complaints concern variable annuities or alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In November 2017, Cetera Advisors terminated Jessee for cause alleging that she violated the firm’s policies concerning disclosing outside business activities with the firm prior to engaging in such activities.

Our firm often handles cases involving direct participation products, Non-Traded REITs, oil and gas offerings, equipement leasing products, and other alternative investments.  These products are almost always unsuitable for investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments which provides a perverse incentives by brokers to create an artificial market for products that no honest advisor would sell.

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shutterstock_73854277-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Kestra Investment Services, LLC (Kestra Investment) broker Steven Crawford (Crawford). According to BrokerCheck, Crawford has been subject to four customer disputes, one of which is still pending. The majority of these disputes concern the unsuitable recommendation of alternative investments, including Variable Universal Life polices (VULs), variable annuities, and Real Estate Investment Trusts (REITs).

Most recently, in April 2018, Crawford was subject to a customer complaint in which a customer alleged that in 2001, Crawford misrepresented a VUL contract by failing to disclose the fact that the premium payment was not fixed – and could substantially or materially change over time. In 2016, the premium rose and policy lapsed – resulting in customer losses. The customer has requested $622,903.05 in damages. This dispute is currently still pending,

In August 2017, a customer alleged that from June 2016 to August 2017, Crawford recommended the Allianz Index Advantage Variable Annuity to the customer which was unsuitable to the customer’s investment objectives.

In June 2011, a customer alleged that from August 2007 to March 2008, Crawford recommended an REIT investment that was an unsuitable investment to the customer. The customer had requested $9,500 in damages.

In addition, Crawford has been subject to bankruptcy. Bankruptcy is a potential sign that financial advisors are struggling with their finances. The Financial Industry Regulative Authority (FINRA) makes this information public so that investors can have a better sense of their brokers.

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shutterstock_189100745-300x199The law offices of Gana Weinstein LLP continue to investigate the Woodbridge Group of Companies and the Woodbridge Mortgage Funds (Woodbridge).  The Securities and Exchange Commission (SEC) has alleged that the Woodbridge operated a billion-dollar Ponzi scheme ensnaring about 8,400 investors. Woodbridge solicited hundreds of disreputable insurance agents and investment brokers to sell its false notes that the firm claimed to be backed by mortgages.  In plain sight to regulators, Woodbridge engaged in a nationwide investment fraud by offering the sale of unregistered securities.

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Donna Barnard (Barnard) appears to be an agent for Woodbridge fraudulent note sales.  Barnard was formerly associated with HD Vest Investment Services (HD Vest) out of the firm’s Kilgore, Texas office location.  Customers have filed at least 11 complaints alleging millions in losses resulting from the sale of Woodbridge promissory notes.

Federal securities laws and the FINRA rules require firms to monitor and supervise its employees, like Barnard, in order to detect and prevent brokers from offering investments in this fashion.  In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public.  Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including recommending fraudulent investments.

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shutterstock_154554782-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Morgan Stanley broker James Duffy (Duffy). According to BrokerCheck Records kept by the Financial Industry Regulatory Authority (FINRA), Duffy has been subject to five customer disputes, one of which is still pending. The majority of these disputes concern the unsuitable recommendation of Puerto Rico Municipal Bonds.

Most recently, In July 2018, a customer alleged that from 2006 to 2017, Duffy was unsuitably recommending Puerto Rico municipal bonds to the customer. This dispute is currently still pending.

In December 2016, a customer alleged that from 2008 to 2016, Duffy was recommending unsuitable investments. The client requested $250,000 in damages.

In September 2012, a customer alleged that from November 2008 to May 2012, Duffy misrepresented the stability of principals in investment recommendations that were unsuitable to the customer’s investment objectives. The case was settled at $8,000.

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shutterstock_106111121-300x300The law offices of Gana Weinstein LLP have filed complaints before The Financial Industry Regulatory Authority (FINRA) on behalf of multiple clients against brokerage firm Comprehensive Asset Management and Servicing, Inc. (CAMAS) concerning Tamara Steele’s (Steele) recommendation to invest in Behavior Recognition Systems (BRS) (n/k/a Giant Gray, Inc.).  The Claimants alleged Steele was registered with CAMAS and that CAMAS failed to supervise Ms. Steele’s sales of BRS or conduct due diligence and that BRS turned out to be a vesicle for investment fraud.  BRS raised tens of millions from investors while its owner, Ray Davis (Davis), allegedly misappropriated a sizable portion of investor funds.  The complaints allege that Steele solicited her clients to investment millions in BRS.

On September 14, 2018, the Securities and Exchange Commission (SEC) filed a complaint alleging that Steele sold approximately $13 million of BRS to more than 120 advisory clients without disclosing that Steele and her firm, Steele Financial, Inc. received commissions of up to 18 percent from the sales.

BRS was a software development company based in Houston, Texas that focused on technology that could analyze video content by imitating learning and memory processes of the human brain.  BRS was founded in 2005 by Davis and he served as BRS’ Chairman of the Board until September 2015 and CEO until August 2014.  In or around 2013 BRS’ revenues plummeted and its net operating losses increased substantially.  By 2014 BRS’ total sales were only $765,000 and the firm suffered a net loss of $37.7 million.

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shutterstock_191231699-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor Alex Herrera (Herrera), formerly associated with UBS Financial Services Inc. (UBS) in Coral Gables, Florida was barred by FINRA.  In the regulatory action FINRA claimed that Herrera consented to the sanction and findings that he refused to provide information requested by FINRA in connection with its investigation of his possible participation in unreported outside business activities (OBAs) and private securities transactions.

At this time it is unclear the nature or scope of the alleged OBAs and private securities transactions that Herrera was involved in.  However, in May 2018 a customer filed a complaint alleging that Herrera stole her money to buy a vacation home.  The claim is currently pending.

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shutterstock_160304408-300x199According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor John Maccoll (Maccoll), formerly associated with UBS Financial Services Inc. (UBS) in Birmingham, Michigan was barred by FINRA. In addition, The Securities and Exchange Commission (SEC) charged Maccoll with defrauding his brokerage customers out of nearly $4 million in an investment scam.

According to the SEC’s complaint, Maccoll used high pressure sales tactics to solicit at least 15 of his retail brokerage customers to invest in what he described as a highly-sought-after private fund investment. The SEC claims that most of the victims were elderly and retired and invested through their retirement accounts. The SEC claims that Maccoll told his customers that the purported fund investment would allow them to diversify their portfolios, receive annual investment returns as high as 20%, and give them investment growth potential that was better than the growth they received in their brokerage accounts.  The SEC alleges that these statements were false and that Maccoll did not invest the customers’ money but in fact stole it for his own personal use.  The SEC charged that $3.6 million was spent on his own personal expenses.  To conceal the scheme, the SEC alleged that Maccoll instructed his customers not to tell others about the purported fund investment, provided some of his customers with fake account statements reflecting fictitious returns, and paid over $400,000 in Ponzi-like payments to certain of the customers to keep the scheme alive.

In conjunction with the SEC’s action, the U.S. Attorney’s Office for the Eastern District of Michigan filed criminal charges against Maccoll.

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shutterstock_162013331-300x199There is a need for strong protection of the elderly investing population. About one out of every five Americans 65 years and older has been a victim of financial abuse.  The elderly are estimated to lose up to $2.9 billion per year from scams.   In fact, these figures are likely lower than the actual incidence of fraud since only reported accounts of frauds are considered and seniors are “less likely” to report being scammed.

Elders are abused by a variety of persons including family members, caregivers, and scam artists.  Unfortunately, financial advisers, fiduciaries (such as agents under power of attorney and guardians), and brokers also have known to take advantage of the elderly.  Usually the person is already in a position of trust or is able to acquire a high level of trust due to the diminished capacity of the victim.

Brokerage firms are in the perfect position to recognize the signs elder abuse and elder fraud.  Firms should be able to recognize diminished capacity and dementia, decreased ability to handle finances, questionable purchases or transfers, and the inability of their clients to understand or comprehend their financial assets.   When there are reasonable grounds to believe a firm client is being financially exploited the member firm must report potential exploitation to proper authorities and otherwise hold transactions pending review and determination.

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shutterstock_20354401-300x200The law offices of Gana Weinstein LLP continue to investigate the Massachusetts Securities Division’s enforcement action and administrative complaint against ARO Equity, LLC (ARO Equity), Thomas David Renison (Renison), and Timothy James Allcott (Allcott).  The complaint alleges that ARO Equity is Ponzi-scheme.

Upon information and belief former broker Barry Horowitz (Horowitz) recommended Renison and ARO Equity to his investment and legal clients.  Horowitz was employed by Lincoln Financial Securities Corporation (Lincoln Financial) until August 2018.  At the same time Horowitz worked as an attorney with Nirenstein, Horowitz & Associates, P.C.

In the ARO Equity fraud, the state of Massachusetts claimed that Allcott was the manager of ARO Equity and together with Renison took $5.8 million of investor funds since August 2015.  The complaint alleges that these funds were raised through the sale of unsecured promissory notes promising 8-12% annual returns over three to five-year terms.  The complaint alleges that investors made significant investments from their retirement accounts by transferring qualified retirement assets to a self-directed IRA to invest in ARO Equity.  Despite representations of safety, the complaint alleged that ARO Equity principals have received undisclosed and excessive commission payments and executive compensation for soliciting investments and bears the hallmarks of a Ponzi scheme.  In fact, the complaint claims that ARO Equity has only “invested” approximately half of the money received from investors and lost most of it.

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