Securities Lawyers Blog

GPB Capital Investors Await Accounting Revisions

September 30, 2018 | by Staff Attorney

The law offices of Gana Weinstein LLP have previously reported on their investigation into GPB Capital Holdings (GPB Capital) and its dispute with a former business partner Patrick Dibre (Dibre) who allegedly reneged on the sale to GPB Capital of certain auto dealerships causing the fund to lose $40 million according to GPB’s complaint. That litigation is still playing out in court.

GPB Capital has raised an astonishing $1.8 billion in investor money since 2013. However as reported, GPB will stop raising new money for now to focus on accounting issues and financial statements of its two large funds. Subsequent reporting has alerted the public that investors should no longer rely on 2015 and 2016 financial statements and independent accounts’ reports for: GPB Automotive Portfolio, ($622.1 million); GPB Holdings II, ($645.8 million); and GPB Holdings Qualified. Apparently, these accounting revisions are only being made because GPB Capital missed an April 30 deadline to file financial statements with the Securities and Exchange Commission (SEC) which crossed industry thresholds for making such information public more than a year ago.

Investors should be concerned at this point as it is highly unusual for funds’ of this size to cease raising funds unless there are serious concerns. Moreover, delays in reporting financials and the need to release new reports concerning financial statements made three years ago are highly troubling. This suggests potentially multiple years of false information or a size and nature that is currently unknown.

Advisor Clifton Roberts Discharged Over Undisclosed Business Activity – Investment Attorneys

September 25, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor Clifton Roberts (Roberts), formerly associated with LPL Financial LLC (LPL Financial) in Houston, Texas was terminated for cause by LPL Financial in April 2018 after the firm made allegations that Roberts violated of firm policy regarding outside business activities (OBAs).

At this time it is unclear the nature or scope of the alleged OBAs that Roberts was involved in. According to Roberts’ public diclsoures the broker was part of number of OBAs including IDLife, Ursus Wealth Management – a d/b/a entity for his LPL Financial business, Ursus and Company – a real estate management and construction company which Roberts claims is not investment related. In addition, an unnamed business for insurance is listed. It is unknown whether LPL’s claims relate to any of these entities.

Worden Capital Financial Advisor Michael Rosalia Subject to Customer Complaints

September 25, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Worden Capital Management LLC (Worden Capital) broker Michael Rosalia (Rosalia) has been subject to six disclosed customer complaints, eight tax liens or judgements, and two financial disclosures including bankruptcy. Many of the customer complaints against Rosalia allege churning or excessive trading.

In June 2013 Rosalia declared bankruptcy. Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.

In May 2018 a customer filed a complaint alleging Rosalia engaged in churning, improper use of margin, unsuitability and high commissions. The complaint alleged $503,828 in damages and has been settled.

Steven Knuttila Subject to Numerous Customer Complaints Over Alternative Investments

September 25, 2018 | by Staff Attorney

Former 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.

Frank Zito Discharged Over Selling Unapproved Financial Product

September 24, 2018 | by Staff Attorney

According 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.

Nina Jessee Has Over 20 Customer Complaints Over Alternative and Real Estate Investments

September 24, 2018 | by Staff Attorney

Former 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.

Steven Crawford Subject to Multiple Complaints Alleging Unsuitable Alternative Investments

September 24, 2018 | by Staff Attorney

The 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.

Donna Barnard Accused of Selling Fraudulent Woodbridge Mortgage Investments to Clients

September 23, 2018 | by Staff Attorney

The 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.

Gana Weinstein LLP Files Multiple Cases on Behalf of Clients of Tamara Steele Who Invested in Behavior Recognition Systems

September 23, 2018 | by Staff Attorney

The 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.

Advisor Alex Herrera Barred Over Sale of Unapproved Products

September 22, 2018 | by Staff Attorney

According 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.