Articles Posted in REITs

shutterstock_62862913-259x300Advisor Wenjinn Chang (Chang), currently employed by Independent Financial Group, LLC (Independent Financial) has been subject to at least two customer complaints.  According to a BrokerCheck report the customer complaints concern 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 October 2018 a customer filed a complaint alleging that Chang violated the securities laws by alleging over-concentration of non-traded REITs that were not suitable and that resulted in losses. The claim alleged $50,000 in damages and the claim is currently pending.

In September 2018 a customer filed a complaint alleging that Chang violated the securities laws by Alleging that the broker failed to advise of the risks of the investments made and that the Claimant has suffered losses as a result of the investments made.  The claim alleged $75,000 in damages and the claim settled for $10,000.

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shutterstock_64859686-300x300Advisor Donna Hines (Hines), currently employed by Cetera Advisors LLC (Cetera) has been subject to at least four customer complaints.  According to a BrokerCheck report the customer complaints concern 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 June 2018 a customer filed a complaint alleging that Hines violated the securities laws by alleging unsuitable investments from 2005 through 2018 and negligence, breach of fiduciary duty, misrepresentations, and common law fraud concerning alternative investments.  The claim alleged $142,026 in damages and the claim is currently pending.

In December 2015 a customer filed a complaint alleging that Hines violated the securities laws by alleging negligence, misrepresentations, concerning alternative investments.  The claim alleged $340,000 in damages and settled for $100,000.

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shutterstock_145368937-300x225The securities lawyers of Gana Weinstein LLP continue to report on non-traded real estate investment trust (Non-Traded REIT) and investor loss recovery options.  According to First Capital REIT’s website the fhe company claims that “when you invest with First Capital Real Estate Trust Incorporated you join those investors who benefit from the dual strategy that makes our REIT stand out from our competitors. We focus on acquiring existing stabilized cash-flowing assets to support stable, consistent distributions to our stockholders.”

However, the company has subsequently reported that multiple investments that First Capital REIT made have filed a voluntary petition for relief in Bankruptcy Court.  Thereafter, the company in November 2016, sought to protect cash.  It’s been reported that First Capital REIT was failing to pay employees on time and missed filing financial statements with the SEC for more than a year.  According secondary market estimates on the value of First Capital REIT the company’s shares have traded at just $4.90/share or over a 50% loss from the $10.00/share offering price.

Our firm handles where brokers recommend investments in direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments.  These products are almost always unsuitable for middle class investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

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shutterstock_176283941-300x200The securities lawyers of Gana Weinstein LLP are investigating investor losses in VII Peaks Co-Optivist Income BDC II (Peaks Co-Optivist) a business development company (BDC).  According to the company’s SEC filings, Peaks Co-Optivist invests in discounted corporate debt, senior secured term loan and equity-linked debt securities of public and private companies that trade on the secondary loan market for institutional investors and provide distributions to investors.  Peaks Co-Optivist seeks to actively work with the target company’s management to restructure the underlying securities and improve the liquidity position of the target company’s balance sheet.  This strategy targets company management on average 24 months prior to a redemption event to create an opportunity for growth in the investments.

Because Peaks Co-Optivist in non-traded product there are no market pricing for the value of the securities.  The company issued shares at a price of $10.15 per share but due to fees and commissions of $1.015 only $9.135 was used to make investments.  Currently, the company claims that its shares are worth $8.75 per share.  However, this is highly unlikely given that the company has financed most of its distributions through returning investor capital and currently has a distribution rate of only 2.23% annualized.

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shutterstock_29356093-300x214Former Titan Securities advisor Walter Parker (Parker) has been subject to at least eight customer complaints.  According to a BrokerCheck report many of the customer complaints concern 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 addition, in April 2018 FINRA suspended and sanctioned Parker alleging that he made investment recommendations to a customer that were not suitable given her age, risk tolerance, financial experience and liquidity. FINRA found that the customer had little prior experience investing and no experience investing in alternative investments. FINRA alleged that Parker recommended that the customer invest her funds into illiquid, alternative investments and that the customer suffered significant losses in the alternative investments. Due to her investment losses the client was forced to obtain full-time employment.

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shutterstock_183544004-300x200Money Concepts Capital Corp (Money Concepts) advisor Ray Reese (Reese) has been subject to at least three customer complaints.  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 May 2018 a client alleged that Reese misrepresented the product as they were not informed it was not publicly traded and therefore illiquid.  The client alleged damages of $75,000 and the complaint was denied by the firm.

In May 2018 another client filed a dispute alleging unsuitability, negligence, breach of contract, and breaches of Missouri statutes in connection with the loss of assets they deposited for a whole life insurance policy.  The claim is currently pending and seeks $650,000 in damages.

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shutterstock_93851422-300x240The attorneys of Gana Weinstein LLP have reported on the many failings of the non-traded real estate investment trust (Non-Traded REIT) industry for years.  One of the common myths is that these products (such as Behringer Harvard, Cornerstone, Inland and KBS) only failed because of the financial crisis and the decline in the real estate industry.  The truth is these expensive and inefficient products never make sense to invest in.

Proving this to be the case is American Finance Trust Inc., (AFIN) which was sold in 2013 by Schorsch affiliated entities.  When American Finance recently went public approximately $1 billion of the company’s claimed value was wiped out exposing investors to massive losses that had long been hidden by the complex and opague ways the Non-Traded REIT industry operates.

The company itself published its own “estimated per share” net asset value of $23.56, only slightly less than the $25 per share that investors spent to acquire it just the month before.  When AFIN went public it traded as low as $14.80 with a market capitalization of about $1.6 billion – a 40% loss.

As regulators continue to turn their attention to this product and the industry works to lower commissions that brokers earn on this product the truth is now starting to come out.  Brokers have been essentially bribed with 7% commissions for over a decade to sell worthless and inferior products.  Now that commissions have declined sales have plummeted as the pressure to sell Non-Traded REITs dissipates.

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shutterstock_113872627-300x300Former Sandlapper Securities, LLC (Sandlapper) and Independent Financial Group, LLC (Independent Financial) broker Kyusun “Kenny” Kim (Kim) has been subject to at least 23 customer complaints and one regulatory action.  According to a BrokerCheck report many of the customer complaints concern 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 June 2018 FINRA barred Kim from the securities industry after making findings of unsuitable recommendations to numerous senior customers to concentrate their retirement assets and liquid net worth in speculative and illiquid securities.  FINRA found that Kim recommended customers to invest in speculative and illiquid investments that were inconsistent with the customers’ moderate or conservative investment objectives and risk tolerances. FINRA found that these recommendations caused Kim’s customers to have an undue concentration of the customers’ retirement assets and liquid net worth in speculative and illiquid investments. FINRA also found that Kim falsified client information on important forms by entering inaccurate and inflated net worth, liquid net worth, and investment experience figures for certain customers so that they appeared eligible to purchase speculative investments.

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shutterstock_29356093-300x214Former Capital Financial Services, Inc. (Capital Financial) and Questar Capital Corporation (Questar) broker Steven Knuttila (Knuttila) has been subject to at least 25 customer complaints, one employment terminations for cause, and two regulatory actions.  According to a BrokerCheck report many of the customer complaints concern 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 June 2018 FINRA barred Knuttila from the securities industry after he refused to appear for FINRA on-the-record testimony relating to an investigation into allegations that Knuttila made unsuitable recommendations to customers.  FINRA’s bar comes after a bar by Knuttila’s home State of Minnesota after it alleged that Knuttila sold numerous unsuitable investments to clients.  In addition, in 2012 Knuttila was terminated by Questar for failing to report customer complaints and wrongful use of discretion in client accounts.

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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 allowed Jessee to resign. However, Cetera did disclose that Jessee was found to violate the firm’s policies concerning disclosing outside business activities with the firm prior to engaging in such activities.

Jessee stated that she did not contribute to any of these settlements.

Our firm often handles cases involving direct participation products, Non-Traded REITs, oil and gas offerings, equipment 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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