Centaurus Financial

Atlas Energy Oil and Gas Investments: A Risky Proposition Part I

December 16, 2014 | by Staff Attorney

As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

Gemini Real Estate Advisors Risk Investor Funds in Private Legal Dispute

November 15, 2014 | by Staff Attorney

As reported in InvestmentNews, three members of a real estate partnership that sells private placements in the real estate space are in the middle of a legal dispute that could potentially endanger millions of dollars in loans and investor capital as a result. The dispute is among the owners of Gemini Real Estate Advisors and began earlier this year when William Obeid, one of the partners, asked the other two partners, Christopher La Mack and Dante Massaro, to restructure the company to reflect certain areas of expertise. Those talks soon broke down and have now ended up in court.

Gemini Real Estate Advisors oversees a real estate portfolio of more than $1 billion and was founded in 2003. The complaint alleges that Mr. Obeid abused his position for personal gain through concealed unauthorized transfers of company funds and hiring of family members at inflated salaries. Thereafter, Mr. Obeid filed his own complaint in New York against Mr. La Mack and Mr. Massaro. alleging that the two other Gemini partners had proposed a business divorce and have acted in an effort to freeze him out in order to strengthen their negotiation position in discussions concerning a buyout of Mr. Obeid’s interest.

According to Mr. Obeid’s lawsuit, his partners’ strategy would harm Gemini and investors, by paralyzing Gemini’s operations, causing existing development projects to become distressed, and risk default on more than $97 million in loans and $15 million of investors’ equity.

Financial Advisor Sanctioned Over Allegations of Unsuitable Overconcentrations of Private Placements

August 26, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred financial advisor Stephen Lard (Lard) concerning allegations that Lard recommended and sold various private-placement securities, that were speculative, high risk, and illiquid to customers three customers. FINRA alleged that Lard’s recommendations resulted in an unsuitable concentrated position for each investor of approximately 50% or greater. Such a concentration exposed each investor to a risk of loss that exceeded each investor’s risk tolerance and investment objectives. FINRA found that some of the investors did in fact suffer substantial losses and financial difficulty due to the illiquidity of the investments.

Lard entered the securities industry in 1994 and was associated with QA3 Financial Corp. (QA3) from 2000 until February 11, 2011. Thereafter, Lard was registered with Centaurus Financial, Inc.

FINRA found that between June 2007, and February 2008, one of Lard’s client’s executed suitability forms for her individual account. The forms reported an annual income of $80,000, a net worth excluding primary residence of $1,780,120, and a worth of all assets, including residence, minus all debts, of $1,852,120, and a liquid net worth of $650,000. The suitability form reflected “Moderate” as her risk exposure and “Income” as her investment objective.

Gana LLP Files Complaint on Behalf of a Family Against First Allied Securities and Centaurus Financial

August 14, 2014 | by Staff Attorney

The law offices of Gana Weinstein LLP recently filed a securities arbitration case on behalf of a family of four investors against First Allied Securities, Inc. (First Allied) and Centaurus Financial, Inc. (Centaurus) concerning allegations that their financial advisor Seyed Ahmad Hashemian (Hashemian) made unsuitable and inappropriate investment recommendations to claimants’ by recommending a near 100% concentration in illiquid, speculative, and high commission investments including variable annuities, equity-indexed annuities (EIAs), private placements, oil and gas ventures, non-traded real estate investment trusts (REITs), and Advanced Equities private placements.

Our law offices have represented over a dozen investors who alleged that they were sold the Advanced Equities private placements through the use of false and misleading advertising materials. In addition, to customer complaints both FINRA and the SEC have sanctioned Advanced Equities concerning the misleading nature of their sales practices. Customers have alleged that the products were misrepresented as “late stage equities” that were a mere 12-36 months from going public. The complaint also alleged that the investments were sold as providing “Higher near-term investment returns than the public equity markets” while providing “Greater short-term liquidity and lower risk profiles.” The complaint alleged that these representations were false and that First Allied failed to conduct even basic due diligence to verify the accuracy of these statements.

In the case of the recent complaint filed, claimants’ investments were alleged to have been made using money that was supposed to be used to replace the earnings the untimely passing of a family member. As a result, the complaint alleged that over a nearly nine year period where the broader market indexes have hit all-time highs, claimants have lost significant sums their investments. The claimants alleged that they have been deprived of the ability to generate reasonable returns by being trapped in illiquid and unsuitable investments.

Centaurus Financial Sanctioned Over Allegations of Supervisory Failures

April 10, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned Centaurus Financial, Inc., (Centaurus) concerning allegations that Centaurus failed to supervise the business activities of five representative in the dissemination of communications concerning the risks of certain private placements. FINRA fined the firm $25,000

Centaurus became a FINRA member firm in 1993 and is headquartered in Anaheim California. The firm has 367 branch offices and approximately 585 registered individuals. The firm operates as a privately held independent broker-dealer and engages in various securities businesses including corporate and municipal debt, mutual funds, direct investments, and private placements.

FINRA alleged that at various times during from February 2009, through January 2010, five Centaurus registered representatives functioned as wholesalers for an unaffiliated investment management firm. FINRA alleged that Centaurus written supervisory procedures did not address the supervision of wholesaling activities and Centaurus did not supervise the wholesaling activities of the five representatives in violation of NASD Rule 3010. FINRA found that the five representatives did not use their Centaurus e-mails for wholesaling activities and instead used the investment management firm’s email address to send communications.

Allen Olander of Centaurus Financial Sanctioned Over Variable Annuity Sales

March 31, 2014 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Allen B. Olander (Olander) of Centaurus Financial, Inc. (Centaurus) concerning allegations that Olander failed to disclose an IRS lien on his Form U4, borrowed money from a customer, and made unsuitable recommendations in the sale and exchange of variable annuities. This is the second Centaurus broker that we have recently reported has been sanctioned.

Olander first became registered as an registered broker in 1993. Olander holds a Series 6 license that allows him to sell only open end mutual funds and variable annuities. From October 2007, to July 2011, Olander was associated with Centaurus. Olander’s BrokerCheck discloses that customers have filed at least 12 complaints against Olander concerning his conduct in handling their accounts. Many of the complaints involve the suitability or failure to disclose certain risks and features of variable annuities.

FINRA found that in May 2011, Olander received a lien by the Internal Revenue Service (IRS) in the amount of $42,465. According to FINRA, Olander failed to amend his Form U4 to disclose the lien. Disclosure of tax liens is important for investors because it lets the public know that the broker has had financial difficulties managing their own affairs and may be tempted to recommend products and services that are overly expensive in order to satisfy debts.

Centaurus Financial, Inc Broker Ralph Saviano Barred From Securities Industry

September 15, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has barred Ralph Saviano (Saviano) from the securities industry after the broker failed to respond to FINRA’s requests for information and an interview concerning unreported tax liens, a civil judgment, and a customer complaint involving the misuse of funds.

During a routine investigation of Centaurus, FINRA discovered information regarding certain undisclosed liens, judgments, and possible customer loans. Thereafter, in June 2012, Centaurus filed a regulatory tip disclosing that a customer had provided Saviano with a cashier’s check for approximately $66,000 that was made payable to Saviano. Saviano’s transactions with the customer concerned a possible misuse or conversion of funds.

Saviano has been associated with several brokerage firms in the past decade. Until 2004 Saviano was a registered representative of Royal Alliance Associates, Inc. From April 2004 until December 2006, Saviano was associated with USAllianz Securities, Inc. Thereafter, from December 2006 until July 2007, Saviano was a registered representative of Questar Capital Corporation. Finally, Saviano was registered with Centaurus Financial, Inc. (Centaurus) until his termination in June 2012. According to Saviano’s FINRA disclosure records he is also the president of Saviano Financial Group.