Securities Lawyers Blog

Gana LLP Files Claim On Behalf of Vertical Recovery Fund Investor

May 24, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP have recently filed a case on behalf of an investor in the Vertical Fund private placements. The investor purchased a Vertical Fund private placement through Financial West Group broker Jeffrey Gieseke. The Vertical Funds include Vertical Recovery Management, LLC, Vertical Mortgage Fund I, LLC, Vertical US Recovery Fund, LLC, and Vertical US Recovery Fund II, LLC. These funds were marketed to investors as as buying real estate notes at a discount that would pay income and then allow investors to profit through a future sale. However, in September 2015, these funds entered a bankruptcy alternative through a General Assignment for Benefit of Creditors under California law. Investors can expect to suffer substantial losses on their investment.

In addition, an action is pending against the accounting company for the Vertical Funds naming Haynie & Company of California Accountancy Corporation and Michael Zurovski as defendants for aiding and abetting the conversion of funds among other claims. According to the complaint, beginning at least as early as 2011, assets from Vertical Funds I and II were diverted to Vertical Fund Group and other entities. Assets were falsely titled “Acquisition Deposits” in the amounts of over $1.9 and $4.0 million respectively for the two funds. These accounts were titled in a way to suggest they were related to the acquisition of mortgages in the ordinary course of business but instead these amounts represented transfers to Vertical Fund Group seemingly for use in paying the costs of operation of the entirety of the Vertical Group. The complaint alleges that these payments were impermissible advances and were an improper use of funds under the terms of the offering documents and operating agreements and represent a breach of fiduciary duty on behalf of the fund manager.

Private placement offerings are among the most speculative and costly investment products offered to retail investors. While the size of the private placement market is unknown, according to 2008 estimates, companies issued approximately $609 billion of securities through Regulation D offerings. Private placements allow many small companies to efficiently raise capital. However, regulators continue to find significant problems in the due diligence and sales efforts of some brokerage firms when selling private placements to investors. These problems include fraud, misrepresentations and omissions in sales materials and offering documents, conflicts of interest, and suitability abuses.

Customers Files Churning Complaints Against Broker James Flower

May 24, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker James Flower (Flower). According to BrokerCheck records Flower has been the subject of at least four customer complaints and one bankruptcy that was disclosed in January 2016. The customer complaints against Flower allege a number of securities law violations including that the broker made unsuitable investments, excessive use of margin, and churning (excessive trading) among other claims.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

An examination of Flower’s employment history reveals that Flower moves from troubled firm to troubled firm. The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry. See More Than 5,000 Stockbrokers From Expelled Firms Still Selling Securities, The Wall Street Journal, (Oct. 4, 2013). In Flower’s 18 year career he has worked at least 15 different firms. What’s more astonishing is that seven of those firm’s have been expelled from the industry by FINRA and in many instances for securities laws violations for mistreating their customers.

Customer Complaints Involving Alternative Investments Against Broker Robert Cannon

May 23, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Robert Cannon (Cannon). According to BrokerCheck records Cannon has been subject to at least four customer complaints. The customer complaints against Cannon alleges securities law violations that including unsuitable investments, negligence, fraud, and breach of fiduciary duty among other claims.

Many of the complaints involve direct participation products (DPPs) and private placements including oil and gas partnerships, non-traded real estate investment trusts (REITs), and other alternative investments. In a FINRA regulatory action Van Patter was found to have onverconcentrated an investor in alternative investments.

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

FINRA Bars Christopher Burtraw Over Borrowing Client Funds

May 23, 2016 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Christopher Burtraw (Burtraw) working out of Lakewood, Colorado alleging that the broker borrowed client funds. 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”. According to the FINRA regulatory action (FINRA No. 20150472061-01) Burtraw consented sanctions in the form of a permanent bar because he failed to provide documents and information requested by FINRA during the course their investigation into allegations that he borrowed funds from multiple customers.

At this time it unclear the nature and scope of Burtraw’s outside business activities and private securities transactions. However, according to Burtraw’s public records his outside business activities includes Pacific Life Prestige Wealth Management Group. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

Burtraw entered the securities industry in 2003. From September 2004 until November 2009, Burtraw was associated with LPL Financial Corporation. From November 2009 until November 2014, Burtraw was associated with Purshe Kaplan Sterling Investments. Finally, from November 2014 until October 2015, Burtraw was associated with J.P. Turner & Company, L.L.C. (JP Turner).

Customers File Complaints Against Broker Charles Correal Over Unsuitable Oil and Gas Investments

May 21, 2016 | by Staff Attorney

The investment attorneys of Gana Weinstein LLP are investigating investor claims of unsuitable investments in oil and gas related products. Our firm is currently representing a number of investors who lost substantial savings due to poor advice to concentrate holdings in speculative commodities investments like master limited partnerships (MLPs). According to Brokercheck records, Charles Correal (Correal) formerly with Morgan Stanley operating from their offices in Upper St. Clair, Pennsylvania has recently received at least several customer complaints with similar allegations that the broker overconcentrated them in oil and gas related investments.

One of the most popular energy related investments that have become increasingly popular in the brokerage industry in recent years are MLPs. MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. There are about 130 MLPs trading on major exchanges that focus on energy related industries and natural resources.

Wall Street loves MLPs because they provide high yields to investors and require companies to pay Wall Street in order to continue to grow. In 2013 banks earned fees of $890.3 million from MLP issuance. Bloomberg quoted an analyst stating that “MLPs are Wall Street’s dream,” because “[t]hey’re fee machines.” Naturally, in order to entice investors to continue to invest in MLPs Wall Street pumps up MLPs every chance they get. According to Bloomberg, in May 2014 “[a]nalysts predict that 93 of the 114 MLPs in existence will rise in value in the next year…” Astonishingly, “all but five MLPs are recommended by the majority of the analysts who cover them.” At that time professionals without conflicts called MLPs “the next great investment debacle” and warned that “many MLP shareholders…may not understand what they’ve gotten into.”

Customers File Complaints Against VSR Financial Broker Robert Wamhoff

May 20, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Robert Wamhoff (Wamhoff). According to BrokerCheck records Van Patter has been subject to at least seven customer complaints. The customer complaints against Wamhoff allege securities law violations that including unsuitable investments and breach of fiduciary duty among other claims. Many of the complaints involve direct participation products (DPPs), variable annuities, non-traded real estate investment trusts (REITs), and other alternative investments.

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Customers File Complaints Against VSR Financial Broker Dennis Van Patter

May 19, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Dennis Van Patter (Van Patter). According to BrokerCheck records Van Patter has been subject to at least eight customer complaints and one regulatory action. The customer complaints against Van Patter allege securities law violations that including unsuitable investments, misrepresentations, and breach of fiduciary duty among other claims. Many of the complaints involve direct participation products (DPPs) and private placements including oil and gas partnerships, non-traded real estate investment trusts (REITs), and other alternative investments. In a FINRA regulatory action Van Patter was found to have onverconcentrated an investor in alternative investments.

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Customers File Complaints Against Woodbury Financial Broker Daniel Dunn

May 19, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Daniel Dunn (Dunn). According to BrokerCheck records Dunn has been subject to at least five customer complaints. The customer complaints against Dunn allege securities law violations that including unsuitable investments, and misrepresentations among other claims. Many of the complaints involve direct participation products (DPPs) and private placements including ICON Leasing, variable annuities, and tenant-in-common trusts (TICs).

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like variable annuities, ICON, and other DPPs are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Gana LLP Investigates Customer Complaints Against Merrill Lynch Broker Jacquin Fink

May 18, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Jacquin Fink (Fink). According to BrokerCheck records Fink has been subject to at least six customer complaints. The customer complaints against Fink allege securities law violations that including unsuitable investments, misrepresentations, excessive trading, and unauthorized trading among other claims.

In April 2016, a customer complained that unsuitable investments were made and excessive trading occurred from October 2013 to January 2016 causing $581,144 in damages. The claim is pending. Also in April 2016, another customer alleged that unsuitable investment recommendations and misrepresentation occurred in August 2015. The claim is pending. In November 2015 a customer alleged unsuitable investment recommendations from October 2012 to August 2014 causing $106,092 in damages. The claim settled.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

Gana LLP Investigates Investor Losses in Valeant Pharmaceuticals

May 18, 2016 | by Staff Attorney

Until about August 2015, Valeant Pharmaceuticals (Valeant)(Stock Symbol: VRX) was one of the fastest growing pharmaceutical companies on the market. Then its stock price all but collapsed. After shares peaked at more than $260 a share in August of 2015, it is now trading at about $26 a share and is down more than 80 percent since last August.

What happened? According to news sources, as a background Valeant pioneered the financialization of pharmaceuticals. That is the company does not research and sell drugs. Instead, Valeant continually buys rivals in musty and unloved segments of the market to squeeze inefficiencies out of the companies. In other words, it engages in drug arbitrage and hikes drug prices. Remember Martin Shkreli, the executive who hiked up the price of the anti-parasitic pill Daraprim used by AIDS patients by more than 5,000 percent? That’s what Valeant does.

But Valeant racked debt and then lied to investors about its drug sales. After months of scandals which include the firing of its CEO and reshuffling some of the seats on its board of directors the company admitted to some poor accounting practices. Basically, the company recorded drug sales twice. One time when it sold them to mail-order pharmacy company Philidor, and once when Philidor sold them which inflated revenues in 2014 and 2015. The company will re-release almost all of its financial statements which will paint an even bleaker picture of the company. On top of all this the company is the subject of several investigations by Congress and the Securities and Exchange Commission.