FINRA Claims Lerner Tried to Coverup Apple REIT Results

June 20, 2011, two class action suits were filed against David Lerner
& Associates over its sales of Apple REITs, a family of real
estate-based securities. This follows a recently filed complaint by the
Financial Industry Regulatory Authority (FINRA) alleging that David
Lerner Associates, Inc. has been misleading investors about the value of
the Apple REIT Ten shares. Here is a link to the  FINRA Press Release about the first regulatory action against Lerner.

Lerner’s company sold $6.8 billion of the securities into some 122,600
customer accounts. His company is a prominent advertiser on New York
City radio, famous for its tagline, “Take a Tip from Poppy”, and in recent years has hosted seminars drawing hundreds of investors in the Boca Raton, FL area.

In December 2011, FINRA sued
Lerner again, this time amending the prior complaint against Lerner’s
company and this time naming him individually, for statements he made in
an attempt to quell
anxious customers who had reason to be concerned about their investments
since two class actions and a regulatory action were filed questioning
the value of the investment. This second action claiming that Lerner
misled investors about risk and
valuation when marketing $2 billion in non-traded REITs also takes issue
with Lerner’s attempt to continue to mislead investors. Here are some
of the highlights of the FINRA complaint against Lerner individually:


  • Since Jan 2011, Lerner has sold $442 million of Apple REIT Ten, “without performing adequate due diligence in violation of its suitability obligations”
  • Earlier Apple REITs inappropriately valued REIT shares at a constant artificial price or $11, not withstanding years of performance declines, increased leverage and excessive return of capital to investors
  • Lerner continues to solicit thousands of customers to purchase Apple REIT  Ten without performing due diligence
  • The
    performance results for Apple REIT Six, Seven, Eight and Nine were
    misleading because they did not reflect reduction in distribution rates
    and did not disclose that income was insufficient to support the
    promised 7-8% returns and that distributions were partially funded by
  • Between 4/28/2011 and 11/17/2011 Lerner made false, exaggerated and misleading claims
    regarding investment returns, market values, performance and prospects
    of the Apple REITs to over 1,000 customers during at least four
    investment seminars
  • Lerner made untrue and misleading statements regarding the prospects of Apple REIT Ten, calling it a cash cow
  • Lerner slide presentations to sell Apple REIT Ten violate FINRA’s advertising rules
  • On
    June 6 and July 27, 2011, to counter negative press following FINRA’s
    initial complaint against Lerner Associates, Lerner signed and sent out
    letters to over 50,000 Lerner customers that contained exaggerated, false, or misleading statements regarding the valuations, performance, prospects, risks, liquidity, and practices of the Apple REIT programs
  • Since
    July 13, 2011, Lerner continued to make unsupported claims regarding
    the merger of the Apple REITs into a company that will be publicly
  • Although
    REITs Six through Nine are all illiquid and worth less than their $11
    per share offering price, Lerner has led customers to believe the
    purported public offering will reap a windfall for investors


Do you believe the regulators, who have no ax to grind other  than to
protect the investing public or do you believe the promoter, who
continues to promote?

Apparently Lerner’s PR campaign is succeeding because investors appear
to have been swayed by his promises, notwithstanding the not so subtle
warning that is coming from FINRA. We have yet to detect that investors
are concerned by the FINRA allegations.

text of the complaint  filed by FINRA Department of Enforcement v David
Lerner Associates, Inc. and David Lerner (CRD No. 307120) on
December 13, 2011 can be accessed here.

Read it and make your own decision regarding what amount of concern to have if you own any of the Apple REITs.

you feel you have suffered losses on Lerner REITs as a result of
misrepresentations, fraud or because they are unsuitable for you, call
us at 561 391 1900. We may be able to help.

We have been helping investors recover investment losses for over twenty years.