Posts tagged ‘DBSI fraud’
DBSI Executives Indicted.
Are you still trying to recover from financial losses as a result of investments made in DBSI products? If so, The White Law Group may be able to help you recover your losses.
According to a press release from the US Attorney’s Office of Idaho the CEO of DBSI, Inc., Douglas Swenson, and three top executives, including his two sons, were recently indicted on 83 counts “for conspiracy to commit securities fraud, wire fraud, mail fraud, and interstate transportation of stolen property.”
The press release states that “the defendants publicly represented that DBSI was a profitable company and had a net worth in excess of $105 million,” when in actuality “DBSI’s real estate and non-real estate business activities were universally unprofitable.”
DBSI is an Idaho-based real estate company that was founded in 1979. The company has been under investigation since 2008. DBSI investments were comprised mostly of risky tenant-in-common (TICs) and private placements offerings in commercial real estate.
“Master Lease” was one particular problematic DBSI product. According to the press release, “Master Lease” “was loosing approximately $3 million dollars a month.” In addition, “the defendants are also charged with defrauding investors of approximately $89 million from a 2008 notes offering.”
The attorneys at The White Law Group continue to investigate potential FINRA arbitration against the brokerage firms that sold DBSI products. A list of brokerage firms that sold DBSI products is available here.
To determine whether you may be able to recover investment losses incurred as a result of your purchase of DBSI products, please contact the REIT fraud attorneys of 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.
Recovery of DBSI TIC Losses
Have you suffered investment losses in a DBSI TIC investment? If so, The White Law Group may be able to help you recover your losses through FINRA arbitration.
The White Law Group is investigating potential securities fraud claims against the broker-dealers that improperly or unsuitably recommended tenant in common (TIC) investments to its clients.
A TIC investment is when a property is sold to multiple investors who then own fractional interests in the property as co-owners. The co-owners enjoy his/her share of the “pro rata” share of the net income (or expenses), appreciation, and share of the proceeds at the sale of the property. Tenants in common investors are not involved in the day to day management of the property but do retain certain other rights regarding the management of the property.
Due to the relatively high interest or dividend offered by TICs, retired investors are often attracted to these products. Unfortunately, TICs are generally unsuitable for retired or income seeking investors. First, the investments themselves are unsuitably risky because they are entirely dependent on the performance of the underlying real estate properties and the overall health of the real estate market. Additionally, TIC investments are generally illiquid, severely limiting the investors’ ability to access their funds should the need arise.
TICs typically pay a high commission – often as much as 10% (which often explains the stockbroker’s motivation in recommending the TIC investment to the investor).
DBSI TICs have suffered catastrophic losses over the last few years. On November 10, 2008, DBSI filed for chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware. The bankruptcy trustee’s report details a company riddled with problems. According to the report, not only did the company commit countless acts of fraud, but it commingled investors’ funds and misrepresented company profits. DBSI has also subsequently been the subject of an investigation into fraud and gross mismanagement by the Securities and Exchange Commission.
The White Law Group’s investigation into the improper sales of TICs to investors includes, but is not limited to, recommendations to invest in the TICs offered by the following sponsors: DBSI, Cabot Investment Properties, Argus Realty, Covington Realty Partners, Evergreen Realty Group, FOR 1031, and Triple Net Properties (NNN).
To determine whether you may be able to recover investment losses incurred as a result of your purchase of a risky TIC investment, 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.
FINRA Arbitration Award Against LPL Financial Involving TIC Investments
The Investment News is reporting that LPL Financial is on the hook for a $1.4 million arbitration award to an elderly couple who bought real estate tenant in common deals.
According to the report, the couple bought two tenant-in-common exchanges, one in 2007 and another in 2008, from former LPL broker David Glenn.
The investors asked for damages of $8 million.
The Finra panel issued the award Friday and, as is typical, gave no explanation for its decision. According to the award, the elderly couple made several allegations, including federal securities fraud and elder abuse.
Tenant in common investments (or TICs) are a form of real estate ownership in which two or more parties have a fractional interest in the property. TICs gained in popularity after a favorable 2002 Internal Revenue Service ruling that allowed investors to defer capital gains on real estate transactions involving the exchange of properties.
Unfortunately, after the real estate bubble burst, many TIC investors saw their properties cut dividends and/or fall in to foreclosure.
One of the biggest TIC sponsors, DBSI Inc., declared bankruptcy in 2008, and broker-dealers that sold those deals have faced dozens of arbitration complaints filed with Financial Industry Regulatory Authority Inc.
The White Law Group has handled many FINRA arbitrations involving TIC investments and have found that in many cases the broker-dealers that recommended these investments failed to perform the necessary due diligence on the investments prior to recommending them for sale to their clients.
TICs can involve high risks and liquidity problems and in many cases brokerage firms misrepresent these risks and instead focus on the income streamed that is promised (and sometimes guaranteed) by these investments. It is this income stream that often made these TIC investments appealing to retired investors who sought income during retirement, but who also didn’t realize the risks involved with these investments.
If you have questions about a TIC investment you purchased through a financial professional or broker-dealer, please call The White Law Group’s Chicago office at 312/238-9650 for a free consultation.
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.
Expert Says Some Brokerage Firms Performed Poor Private Placement Due Diligence
A recent article by Bruce Kelly of the investmentnews.com reported the opinion of Gordon Yale, a forensic accountant, who has served as an expert for dozens of investors who have brought claims against brokerage firms related to the sale of failed private placement investments issued by companies like DBSI, Inc., Medical Capital Financial Corp., and Shale (Provident) Royalties. In Mr. Yale’s expert opinion, “Broker-dealers that sold billions of dollars in allegedly fraudulent private placements failed massively in their due-diligence responsibilities to investors.”
Yale likened the due diligence failures of firms that sold these private placements to the failures of large banks to perform due diligence on bad mortgage backed securities that led to the mortgage crisis. He said, “It was basically the same recklessness…but it was done by middle- or lower-tier firms and [with] a different set of products.”
Certainly, firms that sold these investments contend that they did do adequate due diligence. However, recent arbitration awards as well as fines and sanctions issued by securities regulators like the Financial Industry Regulatory Association (FINRA) indicate that they are at least skeptical of the due diligence work performed. Kelly notes that FINRA recently fined the former president of Capital Financial Services $10,000 related to the sale of Medical Capital and Provident Royalties. He also noted that only one of the cases that Yale has worked on necessitated his testimony in arbitration (many settled in advance of arbitration) and in that case a $1.2 million award was ordered to be given to an investor by Securities America Inc. and a broker.
In the investmentnews.com piece Yale indicated his opinion that firms too often relied on 3rd party due diligence reports, he said, “They viewed those reports as the end of the process, rather than the beginning. There’s a notice to [Finra] members, 05-48, that basically says you can outsource any function, but you can’t outsource your responsibility for compliance with federal securities laws or regulations.” Yale feels like firms, especially one’s like Securities America who sold $700 million in Medical Capital notes, should have hired an independent CPA to conduct financial due diligence on the investments.
The White Law Group is all too familiar with the difficulties investors have had over the last several years with failed private placements. The firm has represented and currently represents many investors who have suffered damages as a result of the recommendation of their financial professional to purchase private placement investments from companies like DBSI, Medical Capital, and Shale (Provident) Royalties. We have found that in many cases the FINRA registered firms failed in their fiduciary duty to perform adequate due diligence and to disclose the risks involved with these investments. Brokerage firms that fail in this fiduciary duty may be liable in FINRA dispute resolution claims to recover investment losses.
If you are concerned about an investment you made in a private placement like those from DBSI, Medical Capital, and Shale (Provident) Royalties and would like to speak to an attorney about your potential to recover investment losses through a FINRA claim please call out 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.
DeWaay Financial Network Trying to Fight off Bankruptcy and DBSI Litigation
DeWaay Financial Network LLC says they are teetering on the edge of bankruptcy due to a deluge of securities litigation against them. According to the Des Moines Register, the litigation and looming bankruptcy “stem from selling high-risk private placement investments — particularly real estate deals for DBSI Inc., a Delaware company that packaged real estate deals, and oil and gas development deals.”
It has been reported that DeWaay sold $46.3 million in DBSI investments, mostly tenants in common exchanges, to 590 customers. Tenants in common exchanges are “are higher-risk investment vehicles in which real estate ownership is split among two or more parties that have a fractional interest in the property.” The big problems for these investors began when “DBSI entities filed for bankruptcy protection in November 2008 as commercial and residential real estate values plummeted.”
Recently, DeWaay filed an injunction to halt eight investor claims against the firm from going to FINRA arbitration hearings. DeWaay Financial Network claims they do not have the resources to pay the 8 investors currently pursuing individual arbitration claims, they stated in a memorandum that they, “[lack] sufficient funds to satisfy the claims in eight arbitration claims against it — let alone the potential claims of 304 other customers that have not yet brought suit.” DeWaay has reported total assets of $3.4 million.
In filing for a temporary restraining order in Delaware Federal Court, DeWaay is seeking to stay the 8 FINRA arbitrations filed against the firm (as well as any future claims that may have been filed against the firm as a result of their sale of DBSI to investors). Based on the pleading filed by the firm, it is apparent that DeWaay is also hoping to convince the Delaware judge that there is a limited amount of money available to settle its contingent liabilities resulting from its sales of DBSI and that the FINRA arbitrations could potentially result in an inequitable allocation of the available settlement proceeds. The Delaware judge has yet to hear argument on DeWaay’s request to stay the FINRA arbitrations.
It should also be noted that the Des Moines register spoke to an attorney of two of the eight current FINRA plaintiffs who “pointed out that DeWaay Financial Network’s holding company, DFN Partners, reported having $4.8 million in assets and $580,000 in annual net revenue in 2010.”
The White Law Group is also right in the middle of this ongoing situation. Our firm is currently representing DBSI investors who have been struggling with their investment losses in claims against DeWaay Financial Network and other broker-dealers who represented and sold DBSI investments. The White Law Group is committed to ensuring that their rights as investors are honored in the best way possible.
If you invested in a DBSI tenants in common investment through DeWaay Financial Network or another FINRA registered broker dealer and would like to speak to a securities attorney about your ability to pursue recovery of your investment losses through FINRA arbitration please call our 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.