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shutterstock_153667934-300x200The investment attorneys at Gana LLP are investigating claims against former LPL Financial Broker Jason Anderson (Anderson). A pair of elderly customers are suing Anderson and alleging churning and inflated mutual fund charges.

According to news sources, A pair of elderly customers of LPL Financial are suing the firm and Anderson.

The customers, each of whom are over 65, claim to have suffered a combined $630,000 loss in retirement accounts that were originally valued at $3.5 million.

shutterstock_143179897-300x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Clark Gardner (Gardner), in May 2014, was terminated by his then employer Cetera Advisors LLC (Cetera) subsequent to the initiation of customer arbitration claim alleging unsuitable investments.  Cetera stated that Gardner was terminated due to undisclosed outside business activities and the sale of unapproved products.

Shortly thereafter on May 29, 2015, Gardner was arrested for converting approximately $1.3 million in client funds by selling promissory notes to clients and depositing the funds into his personal bank account.  This activity is alleged to have occurred from November 2011 to April 2014.  Allegedly, Gardner used the money for luxury vacation packages, repaying personal funds owed to other individuals, and other items unrelated to the promised investments.

In addition, The Division of Securities for Utah’s Department of Commerce investigated Gardner after receiving a complaint from an investor.  During that investigation the department discovered a $150,000 property purchase Gardner completed with an unregistered real estate company that earned him $20,000 in compensation.  Gardner is reported to have promised the investor a steady income from the property and a significant return in five years.

However, these incidents are not the complete history of Gardner’s prior dealings.  FINRA brought action against Gardner in 2005 for “distributing copies of a brochure promoting an insurance policy that communicated false or misleading information.”

Charging documents state Gardner also was involved in a lawsuit in Pennsylvania for advising clients to “purchase life insurance policies while misrepresenting the nature and benefits of the policies.”

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shutterstock_34872913-300x209Former Newbridge Securities Corporation (Newbridge) broker Austin Dutton (Dutton) has been subject to two complaints and a recent sanction citing dishonest or unethical practices in the securities business by the Pennsylvania Department of Banking and Securities and fining Dutton $200,000.  According to a BrokerCheck report Dutton recommended the purchase of a security to at least one customer without reasonable grounds to believe that the transaction was suitable for the customer.

In addition, Dutton’s firm, Newbridge, was also sanctioned by the state of Pennsylvania on findings that “From in or about January 2012 until December 2016, Newbridge did not maintain a reasonable system for applying and enforcing written procedures pertaining to their sales of structured products by one agent in Pennsylvania to certain of his clients…”  While The order does not name the broker it appears reasonably related to Dutton.

According to newssources, Dutton is known to have recommended and sold and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs).  In particular Dutton sold real estate investment trusts formerly managed by Nicholas Schorsch’s private firm, American Realty Capital (ARC), now AR Global.  An accounting scandal affected ARC and its REITs.  According to sources, Dutton sold these products to retirees and police officers.

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shutterstock_62862913-259x300The law offices of Gana LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.  One particularly hard hit area of the commodities bust have been oil private placements sold by many brokerage firms.  Once private placement that has come under scrutiny by the SEC are the Coachman Energy and Bakken Drilling private placements.

The SEC settled an action where the agency alleged that Coachman Energy Partners LLC failed to adequately disclose its methodology for calculating the management fees and expenses it charged to the funds from 2011 through 2014.  The SEC found that the investment adviser for four private placement oil and gas funds miscalculated by approximately $1.1 million in management fees and $449,000 in management-related expenses.  In addition, the SEC found that Randall Kenworthy, the firm’s CEO, caused Coachman’s inadequate disclosures in documents and in Coachman’s ADV Forms.  Further, there were undisclosed conflicts of interests as one of the funds entered into a transaction with an affiliated entity without proper disclosure or obtaining investor consent.

Bakken Income Fund has raised $20.6 million from 309 investors.  As part of the settlement, Coachman agreed to disgorge over $2 million.  Coachman and Kenworthy are believed to be involved with the following private placement investments:

  • Bakken Drilling Fund III LP
  • Bakken Drilling Fund IV LP
  • Bakken Drilling Fund IVB LLC
  • Coachman Energy Land II LLC
  • Coachman Energy VI LP
  • Coachman Energy VIB LLC
  • Coachman Energy VII Offshore Feeder Fund LTD
  • Coachman Energy VII Onshore Feeder Fund LP

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shutterstock_157106939-300x300The law offices of Gana LLP continue to report on investor related losses and potential legal remedies due to recommendations to invest in Puerto Rico bonds and bond funds.   The island has been meeting with creditors before a U.S. bankruptcy judge in the largest public finance restructuring case.  The sides have been in mediation settlement talks to concerning the outcome of the island’s $70 billion debt.  However, according to news reports, the process could take years.  In fact, it has taken more than two years of debate with Puerto Rico’s government, creditors, and federal lawmakers just to get to this point.

According to some source Puerto Rico bond investors recovery ranges could be as low as 10 to 20 cents on the dollar when the island emerges.  Why so little?  How much can $70 to $100 billion be worth when there are only 1.4 million workers in Puerto Rico and a 45% poverty rate?  In fact, workers are leaving the island in record numbers that will soon be made worse by Hurricane Maria.  84,000 people moved from Puerto Rico to the United States in 2014 resulting in 1.8% of the island leaving.

Mostly retail investors will be the victims of the Puerto Rico debt debacle.  While news focus on hedge funds that have bought Puerto Rico bonds, only about 25 percent of Puerto Rican debt is held by hedge funds.  Compare that to the estimated 500,000 individual bondholders and hundreds of thousands more investors who purchased Puerto Rico mutual funds.

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shutterstock_94632238-300x214The securities lawyers of Gana LLP are investigating investor losses in Behavioral Recognition Systems (BRS) – now known as Giant Grey.  Investors have contacted our firm concerning Scott Reed a former executive at brokerage firm David A. Noyes & Company (David Noyes) who recommended stock in BRS to dozens of clients raising millions of dollars for the company.  David Noyes also sold other private placements including Power Energy Systems, Farris Floral, Evotem, and Digonex Technologies to investors.

BRS marketed itself to investors as a company that makes artificial intelligence technology that analyzes video information. Ray Davis (Davis) founded Behavioral Recognition Systems in 2005 and ran the company until 2015.  Davis raised $47 million for BRS and in 2010 hired his son, Charles, to be an executive vice president.

According to a lawsuit BRS (Giant Gray) accused Davis of defrauding the company out of $15 million by setting up a series of companies to disguise transactions as legitimate services. Instead, the company claims that Davis invoiced millions of dollars for non-existent services and used the money to support his lavish lifestyle.

After the lawsuit Pepperwood purchased Davis’ stock and created Omni AI, a new entity that has taken control of Giant Gray’s intellectual property and assets which have been valued at less than $5 million. Investors in Giant Gray have not been offered Omni AI shares and instead are offered a 10 percent royalty as well as prospective proceeds from the pending lawsuit.  In all likelihood investors have suffered a complete loss.

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shutterstock_187532303-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Adam Veron (Veron), in February 2017, was terminated by his then employer Questar Capital Corporation (Questar).  Questar stated that Veron was terminated due to undisclosed outside business activities and the sale of unapproved products.

Thereafter, in August 2017, FINRA brought action against Veron barring him from the industry.  FINRA alleged that in July 2015, Veron formed Contract Funding and Corporate Management, LLC (CFCM) and served as its President.  CFCM allegedly provides a line of credit to a company which uses the funds to fulfill its federal procurement contracts and then pays profits to CFCM. FINRA found that Veron sold approximately $1.8 million worth of shares in CFCM.  FINRA found that Veron participated in CFCM by soliciting the investors, hiring legal counsel to draft the Subscription Agreement and Private Offering Memorandum, accepting investments by check, depositing those checks into a bank account that he controlled, providing the investors with the Offering Documents, distributing profits from CFCM, managing CFCM’s relationship with the company, and deciding who could invest in CFCM.

The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

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shutterstock_19498822-200x300The law offices of Gana LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.  According to BrokerCheck records, customers have filed about ten complaints with the Financial Industry Regulatory Authority’s (FINRA) against broker Regan Rohl (Rohl), a registered representative with Wells Fargo Advisors Financial Network, LLC (Wells Fargo) out of the firm’s Fargo, North Dakota office location.

Many of the customer complaints against Rohl allege a number of securities law violations including that the broker made unsuitable investments and overcenoncetrated clients in oil & gas related investments among other claims.  The most recent complaint was filed in August 2017 and alleged Rohl recommended an unsuitable portfolio over concentrated in energy sector investments and to hold these investments after they began to decline in value causing $75,000.  The claim is currently pending.

In July 2017 another customer filed a complaint alleging $150,000 in damages.  The claim is currently pending.  In June 2017 a customer alleged that from April 2011 through December 2016, Rohl made unsuitable investment recommendations to buy and concentrate their portfolio of four accounts into oil and gas sector master limited partnerships and closed end funds causing $1,500,000 in damages.  The claim is currently pending.

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shutterstock_36343294-300x225According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) financial advisor James Lyons (Lyons), has been subject to five customer complaints and one employment terminations for cause.  Lyons was formerly associated with Raymond James & Associates, Inc. (Raymond James) until April 2017 when the firm terminated his employment due to customer allegation of unauthorized trading.

The most recent customer complaint filed against Lyons alleged that from December 2013 through June 2017 the broker engaged in unauthorized and unsuitable trading resulting in $800,000 in damages.  The complaint was filed in June 2017 and is currently pending.  Previously a customer in April 2016 alleged unauthorized trading resulting in $1.2 million in damages.  That claim was eventually settled for $400,000.

Advisors are not allowed to engage in unauthorized trading.  Such trading occurs when a broker sells securities without the prior authority from the investor. All brokers are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b).  These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature because no disclosure could be more important to an investor than to be made aware that a trade will take place.

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shutterstock_120556300-300x300According to BrokerCheck records financial advisor James Allen (Allen), now associated with David A. Noyes & Company (David Noyes), has been subject to seven customer complaints and one employment termination for cause.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Allen has been accused by customers of unsuitable investment advice, breach of fiduciary duty, fraud, and negligence among other claims.  The most recent complaint filed in April 2017.

In addition, Citigroup Global Markets Inc. (Citigroup) allowed Allen to resign in April 2017 after the firm made allegations that Allen was investigated for violations of the firm’s policies on communications with clients, and three inaccurate client profiles.

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