Posts tagged ‘Apple REIT class action’
FINRA fines David Lerner over Apple REIT sales.
The Financial Industry Regulatory Authority Inc. recently announced that it has ordered David Lerner & Associates to pay $12 million in restitution to clients who bought shares of a nontraded real estate investment trust known as Apple REIT 10. Finra also fined David Lerner Associates more than $2.3 million for charging unfair prices on municipal bonds and collateralized mortgage obligations.
In addition, the Syosset, N.Y.-based firm’s founder and chief executive, David Lerner, was fined $250,000 and suspended from the securities industry for one year, followed by a two-year suspension from acting as a firm’s principal.
David Lerner Associates and Mr. Lerner neither admitted nor denied the charges around the sale of the products but consented to the entry of Finra’s findings, the regulator said in a statement issued Monday morning.
David Lerner Associates has been a longtime seller of nontraded REITs, which do not trade on exchanges but rather are held by investors for a number of years and collect dividends over the investments’ lifetime. Over the past 20 years, the firm sold roughly $7 billion of Apple REITs.
The fine and restitution put to bed two long-running Finra investigations into the firm, which has 190 registered reps and six branches in the New York tri-state area and Florida. The brokerage is noted for its radio ads which ask listeners to “Take a tip from Poppy.”
The first action against the firm stemmed from a 2011 Finra complaint. Finra alleged that the firm engaged in improper sales practices of the $2 billion Apple REIT 10. Between January and December 2011, David Lerner Associates allegedly recommended and sold more than $442 million of Apple REIT 10 without performing adequate due diligence in violation of its suitability obligations. The firm has been the lone seller of the series of Apple REITs, which invest primarily in two national chains of extended-stay hotels.
In 2010, Finra alleged that Lerner charged excessive markups and/or otherwise failed to meet its obligation to provide a fair and reasonable price at the time of the transaction on thousands of municipal bond transactions.
The White Law Group has been investigating these same actions for more than a year and continues to advise investors on their litigation options.
If you purchased Apple REITs from David Lerner and are interested in exploring your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
David Lerner in more trouble over Apple REITs
It is being reported that FINRA recently filed an enforcement complaint against David Lerner individually for allegedly misleading investors about risk and valuation when marketing a $2 billion non-traded real estate investment, Apple REIT (the same investment for which FINRA began a similar proceeding against David Lerner’s brokerage firm, David Lerner & Associates Inc., this summer).
FINRA disclosed the allegations on Lerner’s personal BrokerCheck report, a public regulatory filing, on Jan 13.
As we have previously discussed, FINRA, in May, alleged that David Lerner & Associates did not perform “adequate due diligence” to determine whether Apple REIT investments were appropriate for its investors. FINRA also alleged that David Lerner & Associates management “inappropriately valued the REITs’ shares at a constant artificial price” despite years of real estate market fluctuations.
According to the reports, FINRA’s recent complaint against David Lerner individually stems from statements he made to investors in the wake of the regulator’s action against his firm..
David Lerner sent letters to more than 50,000 customers in July to “counter negative press” about the action and to attempt to quell people’s concerns about their Apple REIT investments. The letter also discussed a possible opportunity for Apple REIT shareholders to participate in a sale or listing on a national exchange to dispose of their shares at a reasonable price.
FINRA has also alleged that David Lerner made misleading, exaggerated statements to investors at a seminar his brokerage firm hosted, including that closed REITs are a potential “gold mine.”
The recent allegations raised by FINRA continue to shine a light on the issues raised by FINRA’s complaint in May. At this point, this much is known:
(1) In May 2011, FINRA launched its investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Those individuals that have requested redemptions since the announcement of the FINRA investigation have been told that only a partial redemption would be possible;
(5) The only known offer to purchase Apple REIT shares is at $3/share and the alleged book value is approximately $7/share (depending on which Apple REIT the investor owns).
Based on the foregoing, The White Law Group continues to investigate claims against David Lerner for fraud, negligence, negligent supervision, and breach of fiduciary duty. These claims are based on (1) David Lerner’s failure to perform the necessary due diligence on the Apple REITs prior to offering them for sale to investors, (2) its failure to adequately disclose the relationship between the firm and Apple REIT; (3) its failure to disclose the decline in value of the previous Apple REITs sold to investors when offering Apple REIT 9 and Apple REIT 10 to investors; and (4) the unsuitability of a non-traded REIT for certain investors (retirees, investors interested in liquidity and/or investors adverse to risk).
It is our belief that as additional information comes out regarding the Apple REIT investments (like FINRA’s investigation of David Lerner individually) that more and more people will realize that they have claims against David Lerner. This will not only likely depress the value of the Apple REIT shares further but may also impact the ultimate collectability of David Lerner & Associates. Accordingly, we are encouraging investors that would like to pursue their claims against David Lerner to contact us as soon as possible to discuss their legal rights.
To speak with a securities attorney, please call The White Law Group’s Chicago office at 312/238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
Update on David Lerner / Apple REIT Investigation
The White Law Group has spent the last few months reviewing documents and information regarding the Apple REIT investments sold by David Lerner and determining how best to assist investors in recovering losses incurred as a result of their investing in Apple REIT.
At this point, this much is apparent:
(1) In May 2011, FINRA launched an investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Apple REIT investors have received offers of $3/share and the alleged book value of certain Apple REITs is approximately $7/share.
Based on the foregoing, The White Law Group is reviewing claims against David Lerner on behalf of investors in Apple REIT for fraud, negligence, negligent supervision, and breach of fiduciary duty. These claims are based on (1) David Lerner’s alleged failure to perform the necessary due diligence on the Apple REITs prior to offering them for sale to investors, (2) its alleged failure to adequately disclose the relationship between the firm and Apple REIT; (3) its alleged failure to disclose the decline in value of the previous Apple REITs sold to investors when offering Apple REIT 9 and Apple REIT 10 to investors; and (4) the alleged unsuitability of a non-traded REIT for certain investors (including retirees, investors interested in liquidity, and investors adverse to risk).
To determine whether you may be able to recover investment losses incurred as a result of your purchase of an Apple REIT, please contact The White Law Group at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
More David Lerner / Apple REIT Bad News?
According to the Investment News, clients of David Lerner Associates Inc. holding shares in nontraded REITs created by Apple REIT Cos. Inc. received account statements at the end of last month in which the longtime value of the shares was shown as “not priced.”
For years, shares of the real estate investment trusts were listed at $11 on client account statements. The firm continued to list the same price after the Financial Industry Regulatory Authority Inc. in 2009 told broker-dealers to adjust prices on the investments more frequently.
Finra also prohibited broker-dealers from using information more than 18 months old to estimate the value of a nontraded REIT.
At the end of May, Finra filed a complaint against David Lerner, alleging that the firm was misleading investors and marketing unsuitable investment products to them.
Since 1992, David Lerner has recommended and sold nearly $6.8 billion in Apple REIT shares, according to Finra.
Client account statements also show the cost of investment in the Apple REITs, which is either $10.50 or $11 per share.
A broker-dealer switching a security’s value to “not priced” isn’t unheard of, but it is far from ordinary, attorneys said. Although some attorneys noted that such a change could be a bad harbinger for any security, another lawyer said that such a price change is a potential step in the right direction.
Finra’s complaint against David Lerner has renewed concerns among broker-dealers about the sales of illiquid investments such as nontraded REITs and private placements.
To determine whether you may be able to recover investment losses incurred as a result of your purchase of Apple REIT, please contact The White Law Group at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
Apple REIT Dividend Adjustment
According to the Long Island Business News, Apple REIT Eight, a non-traded real estate investment trust sold exclusively by Syosset-based David Lerner Associates, recently announced that it has reduced its annual dividend from 7 percent to 5 percent, blaming a “slower than anticipated” recovery for some of its extended-stay hotels.
Apple REIT Eight, which owns 51 Marriott- and Hilton-brand hotels, said in a statement that “the company believes that it is prudent to lower the annualized distribution rate until such time as a recovery can be achieved.” The REIT had come under fire recently for defaulting on mortgages for five of its hotels. The company said it has renegotiated and reinstated two of those loans with payments resumed in full and the three other loans “remain under discussion.”
Apple Eight said it is currently working to replace outstanding lines of credit to take advantage of low fixed-rate debt, new term loans and a new reduced line of credit.
Apple Eight expects its debt to remain at or below $240 million through the rest of 2011, an average debt to total initial capitalization ratio of about 21 percent. The company predicts net income for the year of about $9 million to $16 million, or about 10 cents to 17 cents per share.
The changes to the Apple REIT dividends will take effect on July 15, according to the statement.
The Financial Industry Regulatory Authority complaint against DLA alleged that since at least 2004, the company’s non-traded REITs have unreasonably valued their shares at a constant price of $11 despite market fluctuations, performance declines and increased leverage. FINRA questioned the policy of maintaining outsized distributions of 7 to 8 percent by leveraging the REITs through borrowings and returning capital to investors.
Meanwhile, in a Securities and Exchange Commission filing last month, Apple Eight management reported the value of its shares at $7.57 per at the end of March, which contradicted the statement price of $11. Apple Eight had to restate its value so it could recommend that owners of the REIT not sell their shares in response to a $3 per share offer by a group of investment funds managed by Mackenzie Patterson Fuller, which buys illiquid real estate investments at deep discounts, according to published reports.
If you have questions about your Apple REIT investment, please feel free to contact the securities attorneys of The White Law Group.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.