Behringer Harvard Strategic Opportunity Fund Sinking


On August 22, 2012, according to the
Investment News, Behringer Harvard announced that yet another one of their real
estate investment trusts (REIT) Behringer Harvard Strategic Opportunity
Fund I, has debt that now exceeds the value of its assets.

This REIT is underwater, like many homeowner’s situations with
residences worth less than the mortgage balance, this REIT owes more
than the underlying property is worth. According to the article, the
company informed brokers last week and intends to make an announcement
to shareholders before Friday, August 24, 2012. As of the time of this
writing there was no information on the company’s website which can be accessed here.

This is not the company’s only problem investment product. Behringer
Harvard REIT shares were typically sold for $10 at the initial offerings:

  • Behringer
    Harvard Opportunity REIT I had dropped to $4.12 at the end of 2011,
    with one of its properties going into bankruptcy in June 2012,
    suggesting a further decline in value
  • Behringer Harvard Short Term Opportunity Fund II had dropped to $.40 at the end of 2011

We
are investigating losses suffered by clients on a number of nontraded
REITs (Wells, Hines, CNL,KBS, Inland, Retail Properties of America, Dividend Capital) , as well as  the Behringer Harvard products.

Our clients have told
us that they were often misled as to the risks associated with these
products and believed that distributions of income were certain and risk
of loss of value was minimal, similar to a bond.

Since many REITs have ceased distributions and cancelled redemption
programs as well as having suffered huge declines in value, investors
may now be faced with difficulty meeting daily living and healthcare
expenses.

It is important that investors pursue claims as soon as possible since delay may result in the loss of valuable rights.


Robert H. Rex, Esq. been helping investors recover investment losses for over twenty years and we represent clients nationwide. Free consultation.


Rex Securities Law
561 391 1900

FINRA Issues August 2012 Disciplinary Actions

The
Financial Industry Regulatory Authority (FINRA) issues a report on
disciplinary and other actions involving registered brokers, investment
advisers and brokerage firms every month.

Here are significant Florida related actions for August 2012. Follow this link to the FINRA website for the entire report for the month of August 2012 as well as to access  earlier time periods.

Merrimac Corporate Securities, Inc. Altamonte Springs, Florida was fined $18,500. The National Adjudicatory Council (NAC) imposed the sanction based on findings that
the firm sold private placements, real estate investment trusts (REITs), limited partnerships and direct participation programs not authorized by its FINRA membership agreement. The findings stated that the firm failed to establish, maintain and enforce WSPs to supervise
the sale of these products and variable annuities. The findings also stated that the firm failed to maintain adequate books and records with respect to emails by willfully failing
to preserve all business-related incoming emails and internal emails, willfully failing to preserve emails in an easily accessible place, willfully failing to preserve emails in a nonerasable, non-rewritable format, and failing to notify FINRA that its emails would be maintained on electronic storage media. FINRA found that the firm failed to make and keep current blotters for its direct application mutual fund and variable annuity businesses.
Because these actions were deemed willful violations, Merrimac is statutorily disqualified.

Andrew Paul Arno –West Melbourne,Florida, a broker with H.D. Vest,  was barred from association with any FINRA member in any capacity. The sanction was based on findings that Arno misused customers’ funds by redirecting individual retirement account (IRA) contributions from customers’ accounts to a bank account he controlled, instead of investing them in IRAs as he had represented to the customers and their relatives. The findings stated that after failing to receive account statements for an extended period of time, one of the customers contacted the IRA entity directly and learned that they did not have a record of any IRA contributions for one year. When the customer raised this with Arno, he claimed that the firm was holding the funds directly. When the customer contacted the firm, she learned that this was not true and confronted Arno, who reimbursed the customer and her relative for approximately $30,000, in aggregate.

Similarly, another customer filed a complaint with the firm, claiming that Arno had stolen $64,000 from him and his relative by taking funds that they told him to invest in their IRAs.

Shortly after this complaint, Arno reimbursed the customer and his relative. The findings also stated that Arno failed to respond to FINRA requests for information and testimony.

Christopher Andrew Carra,  of Deerfield Beach,
Florida and formerly with Newbridge Securities Corporation submitted a Letter of Acceptance, Waiver and Consent in which he was fined $20,000 and suspended from association with any FINRA member in any capacity for one
year.

Carra consented to the described sanctions and to the entry of
findings that he was attempting to procure investment banking and consulting business from a publicly traded company and posted comments on an Internet message board about the company under numerous author names or handles. Several statements in the postings were unwarranted and misleading; some involved conversations between his different handles in which he embellished the prospects for the company and provided the allusion of consensus regarding the company’s prospects.

Carra  used two outside email addresses to communicate with
company representatives about business-related matters, in violation of his firm’s WSPs. One of the outside email addresses may have given the impression that it was a firmprovidedemail address when it was not one.
The suspension is in effect from July 16, 2012, through July 15, 2013.

Marcelo Ivan Jacir  of Weston, Florida formerly with Morgan Keegan and Merrill Lynch submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association
with any FINRA member in any capacity.

Jacir consented to the described sanction and to the entry of findings that he directed two individuals, one of whom was a customer of his member firm, to deposit checks totaling $37,500 for an investment in a company into his personal checking account. The findings stated that Jacir converted the funds to his own use and benefit by making cash
withdrawals and using the funds to pay personal expenses.

William Thomas Johnson Jr. of North Palm Beach,
Florida, a broker formerly with Kovack Securities, submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity.

Johnson consented to the described sanction and to the entry of findings that he received approximately $47,000 from a customer after Johnson made the representation, which was false when made, that he would use the funds to purchase corporate bonds for the customer. Johnson accepted the funds, deposited them into a bank account under his control and made improper use of the funds, which included payment of personal expenses, and never purchased the corporate bonds.

The findings also stated that Johnson received approximately $53,000 from another customer after he made the representation, which was false when made, that he would use the funds to purchase a certificate of deposit (CD) for the customer. Johnson accepted the funds, deposited them into a bank account under his control and made improper use of the funds, which included payment of personal expenses, and never purchased the CD. Johnson’s misrepresentation to his
customer and improper use and conversion of his customer’s funds constituted a failure in the conduct of his business to observe high standards of commercial honor and just and
equitable principles of trade.

Alejandro C. Rotundo of Miami, Florida, formerly with Morgan Keegan  submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and
suspended from association with any FINRA member in any capacity for 30 business days.
Rotundo consented to the described sanctions and to the entry of findings that he executed option trades in a customer’s account without the customer’s written authorization and without his member firm’s acceptance of the account as
discretionary. The findings stated that Rotundo’s discretionary trading activity resulted in customer losses of $489,230, which his firm reimbursed to the customer.
The suspension was in effect from June 18, 2012, through July 30, 2012.

Valerie Helen Silverstein
  of Coconut Creek,
Florida, formerly a broker at Raymond James submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity.

 Silverstein consented to the described sanction and to the entry of findings that she had a pre-existing relationship with an individual when he became a customer of her member firm. In an effort to advance a fraudulent scheme to misappropriate funds from the firm, Silverstein created a false deposit receipt indicating that the customer had deposited a check for $7.8 million into his firm account when
he had not. The findings stated that in further promotion of the scheme, Silverstein sent several letters on her firm’s letterhead, and one email from her firm’s email account, to the customer making various false and misleading statements about the deposit and withdrawal of funds. The findings also stated that the firm closed the account when the customer attempted to
make withdrawals from the account using a debit card, despite never funding the account, and the firm discovered he had a criminal past. The findings also included that, on several
occasions, the customer used the documents Silverstein created. The first was when his attorney sent Silverstein’s firm a letter demanding that his client’s funds be returned.
In support of the demand request, the attorney included documents Silverstein created as attachments to the letter. The second and third occasions were when the customer
provided the documents to other firm branch offices in an attempt to reopen his account and withdraw funds.

Harold James Swart Jr. of  Kissimmee, Florida, formerly a broker with New England Securities  submitted a Letter of Acceptance, Waiver and Consent in which he was barred from
association with any FINRA member in any capacity.

Swart consented to the described sanction and to the entry of findings that he willfully filed inaccurate Form U4s and failed to make other material disclosures on his Form U4s regarding an SEC suspension as well as a related administrative complaint filed by the State of Florida’s Board of Accountancy. The findings stated Swart failed to disclose
his outside business activities to his member firm and his role as compensated registered agent for numerous additional entities. The findings also stated that Swart provided a
misleading response to FINRA in connection with a request for information concerning whether any of his outside business activities had ever been alleged or accused to have
breached any contract, engaged in any type of fraud or misrepresentation, engaged in any unfair or unethical business practice or violated any rule, regulation, statute or ordinance
of law. Swart’s response was misleading because one of his outside business activities was the subject of several filed lawsuits involving such allegations. Swart knew, or should have known, about each of these lawsuits, because, among other things, he was properly served in each of the cases.

Recovering investment losses for victims nationwide for over twenty years. If you have questions about losses in your brokerage account, please contact us.
Free consultation.
Nationwide representation


Rex Securities Law

561 391 1900

Former Sandru/LPL/Cambridge Brokers Face Suspension

In April 2012, the Ohio Division of Securities filed Notices of Intent to
suspend or revoke the licenses of two  investment advisers/stockbrokers who practiced in the Toledo/Perrysburg area.

Eric M. Douglas and Mark Pantenburg  have been accused of engaging in manipulative or deceptive practices in connection with investments in Maumee
Authority Stamping, Inc. (MAS). Keith Obey, president of Maumee was attempting to revive a Ford parts- stamping factory and raised a million or more dollars from investors, including clients of Douglas and Pantenburg. The standard investment was $16,000. 

Both Douglas and Pantenburg formerly worked for LPL Financial, where they did business as Sandru Financial Group,  in 2008 when the MAS investments were made. They both moved to Cambridge Investment Research in the summer of 2009. Douglas is charged with making improper sales to six people and Pantenburg is charged with one improper sale.

In connection with these sales, the Ohio Division of securities allege that Douglas & Pantenburg each: 

  • failed to conduct due diligence on MAS before encouraging clients to
    invest in the company.

  •  failed to disclose  their
    lack of due diligence,

  • falsely assured clients their investments in
    MAS would be safe, and

  • failed to fully inform clients how their
    investments would be held and handled by LPL. 

According to
the orders issued in April, they were scheduled to go
into effect 30 days from the date they were mailed unless the brokers
subject to the orders requested a hearing. A recent check of the website
indicates a final order has not yet been entered.
The orders & status of the proceeding may be viewed here.

Douglas and Pantenburg worked at LPL and next at Cambridge Research Investments with Rick Sandru, a broker who was barred by FINRA in March 2012 for collecting hundreds of thousands of dollars in unauthorized financial planning fees which he converted to his personal use. You can read more about our investigation of Mr. Sandru as well access the FINRA order by going here

If you have information which you think may be helpful to our investigations, we would appreciate hearing from you. We have been helping investors recover investment losses for more than twenty years.

Nationwide representation.

Free consultation.

Rex Securities Law

561 391 1900


Lerner’s Misleading Sales Tactics Cause FINRA to Issue Alert

FINRA reissued its Investor Alert on non-traded REITs as a result of the action filed by FINRA against David Lerner & Associates for failing to investigate the suitability of the investment and for marketing the REITs on its website using misleading returns.

According to the release, FINRA reissued the Alert:

“because of concern that
some investors may be the recipients of misleading information
regarding certain public non-traded REITS. Some investors may also
receive recommendations to purchase these products without adequate
investigation by the firm or individual broker to determine whether
these or similar investments are suitable.”

In their release , FINRA points out some of the same pitfalls of non-traded REITs we have been warning investors about for the past year, including:

  • shares do not trade on a national exchange
  •  the secondary market offers very limited liquidity and shares generally trade at a substantial discount
  • front end fees can be as high as 15% of each dollar invested
  • share prices can fluctuate, up or down

The share price of many non-traded REITs has dropped since the date of issue. In some cases the current value is less than half of the original purchase price. Given the state of the economy, and in particular, real estate, it is not likely that shares will recover to the original purchase price for many of these REITs. 

Couple with this the fact that many REITs have dramatically reduced or eliminated distributions and their lack of liquidity, those who purchased to supplement fixed income have a real problem. 

If you purchased a non-traded REIT based upon misrepresentations, you may be able to recover some or all of your losses. Contact us for further information.

Free consultation. Nationwide representation.

Rex Securities Law

561 391 1900

EIght Major Nontraded REITs– Values Down Sharply

According to a study published in the Investment News analyzing the share value of the eight largest nontraded REITs, these alternative investments have not fared well. According to the study these eight raised over $30 billion, which is now worth less than $20 billion.

Unfortunately retirees, relying on a dependable income stream are some of the hardest hit. Offering share prices were generally $10 for these investments. Here is the “estimated value” as reported by each company:

Retail Properties of America                $3.20
Inland American REIT                         $7.22
Behringer Harvard REIT                      $4.64
Wells REIT II                                     $7.47
KBS REIT I                                        $5.16
CNL Lifestyle Properties                      $7.31
Dividend Capital REIT                         $6.69
Hines REIT                                        $7.78

As implied in their name, nontraded REITs do not trade on any conventional exchange, therefore if liquidity is needed, say for health or living expenses, the only option is a private secondary market. As we have previously reported, these secondary markets discount the company “estimated value” by 25% or more upon sale.

Many investors were convinced to purchase nontraded REITs with promises of dependable income streams, steady value and the ability to sell. Many REITs have ceased distributions and cancelled redemption programs leaving investors with no cash flow and no ability to liquidate.

If you have questions about your REIT investment or other stock market losses, please do not hesitate to contact us. We have been helping investors for over twenty years.
Free consultation.
Nationwide representation.

Rex Securities Law
561 391 1900

CNL REIT Market Value Down over 25%

The market value of non exchange traded real estate investment trusts (REITs) continue to decline. Earlier this week, CNL Lifestyle Properties Inc. became the latest large nontraded REIT to report
a sharp decline in value with its share price dropping to $7.31.
CNL  initially raised $2.7
billion with shares originally priced at $10 a share.

Dividend Capital Total Realty Trust Inc., which raised
$1.8 billion in equity at $10 per share,  recently revised its value to $6.69 per
share, down from  $8.45 a share in March of this year.

 Many brokers sold nontraded REITs to clients and
characterized them as bond alternatives during
the surge in the commercial real estate market, which peaked in  2007. Retirees counting on a dependable stream of income as well as the ability to liquidate their investment in the event of financial emergency have been hit the hardest. Many of these REITs have ceased making distributions and have cancelled their buyback programs. If liquidity is needed, a secondary market, which generally discounts the company “estimated value” by 25% or more is the only option. Assuming such a discount would apply on the liquidation of CNL, the shares would only yield about $5.50. a loss of nearly 50% of the initial purchase price.

For the time being, it appears CNL will continue making distributions, although the annual return is far less than what was touted when they were raising capital. Investors should also be aware that distributions from CNL do not come from income, but rather have been and may continue to be funded with borrowed money. Obviously, incurring debt will likely cause a decline in market value of the investment, meaning you are essentially just getting a distribution of principal.

If you were misled as to the nature of your investment in CNL or any other nontraded REIT, please contact us to discuss your options for recovery of your losses. We have been assisting investors nationwide for over twenty years.

Free consultation.

Rex Securities Law

561 391 1900

Securities Regulator Charges Former Georgia Football Coach with Ponzi Fraud

Former Georgia head football coach Jim Donnan and a business partner were charged by the Securities & Exchange Commission with fraudulently raising $80 million from about 100
investors between 2007 and 2010 in a Ponzi scheme targeting college coaches, former players and others.

A ponzi scheme is perpetuated by using money raised from  investors to pay “returns” to other investors giving the appearance of a successful and ongoing business. In most ponzi schemes there is little or no real business being conducted by the promoter, who as you may have guessed, funnels off a portion, if not most,  of the money for himself.

In Donnan’s scheme, according the the SEC, investors were told that their investment dollars were being used to purchase leftover merchandise from major retailers which was to be sold to discount vendors. Investors were promised inordinately high potential returns of  over 300%. Donnan capitalized on his notoriety as Georgia’s head coach, and later as an ESPN announcer to gather investors.  Donnan is in bankruptcy and investors are fighting over what is left.

If an investment proposition being touted to you sounds too good to be true, it probably is and you should fight the temptation to commit your hard earned dollars to it without fully investigating it.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870