A reckless stockbroker with CapWest Securities Inc. negligently urged a retired couple to plunge more than $1 million of their nest egg into so-called income-producing “alternative investments” that turned out to be bogus Ponzi schemes and highly speculative real estate investments, according to a claim filed today by the Vernon Litigation Group law firm.
The Florida couple now faces foreclosure on their home. A retired small businessman and homemaker, they have seen their monthly retirement income from these investments drop from $8,000 to $600 per month.
The couple’s financial devastation is the result of following the plan devised by their CapWest Securities Inc. “retirement planning specialist” who claimed to have special expertise in working with retirees on safe investments and income-producing “alternative investments,” the claim states.
The non-traded REITs, or private REITs, and real estate partnership deals the couple invested in having to a large extent shut down redemptions and suspended distributions, thus essentially depriving a couple of access to almost half of their retirement savings. The nontraded REITsinclude Desert Capital, Inland REIT, KBS REIT, and the IMH Secured Loan Fund. In addition, the couple was sold two private real estate LLC programs: Clovis Senior Living LLC, which was shut down by Oregon regulators, and Blue Rock 1355 First Ave. LLC.
The couple’s CapWest Securities stockbroker pledged that both he and his employer conducted due diligence on the investments, according to the claim. But three of the investments have now been shut down as Ponzi schemes by the SEC and one of the real estate investments has been shut down by Oregon state regulators.
The three Ponzi schemes in which the couple was urged to invest were Medical Capital Notes, Provident Royalties’ Shale Oil Royalties program, and Striker Petroleum.
“Ponzi schemes like Medical Capital fed brokers ultra-high commissions so they could sell these alternative investments to the public and collect a steady stream of money from new investor victims,” said investor rights attorney Chris Vernon. “Reckless and greedy firms like CapWest Securities should be held accountable for creating a pipeline for these products and then pushing them on financially vulnerable retirees.”
Basic due diligence by CapWest Securities and its stockbroker would have called into question Medical Capital’s business practices: Medical Capital’s CEO had been sued for fraud in the 1990s and he had his insurance license revoked by California regulators; Medical Capital’s financial statements had never been audited; and Medical Capital loaned $90 million of investors’ money for hospital purchases to a company called IHHI whose CEO had been sued for fraud and embezzlement at a previous job, according to the claim.
On the private REITs, the CapWest stockbroker never advised the couple that the REIT could suspend redemptions and monthly distributions — thereby locking up the retirees’ money — according to the claim.
The arbitration claim filed today before FINRA, the Financial Industry Regulatory Authority, accuses CapWest of breach of fiduciary duty, common law fraud and misrepresentation, and violations of the Florida Securities and Investor Protection Act and seeks recovery of the couple’s actual $1 million in damages, costs, attorneys fees, and punitive damages.
Vernon Litigation Group is a Naples, Florida law firm that represents investors nationwide who are victims of stock fraud and stock losses due to broker fraud and brokerage firm fraud and misconduct. Vernon Litigation Group securities attorneys are experienced in arbitration and litigation and the firm assists clients in attempting to recover losses caused by all manner of financial fraud and negligence. It focuses its practice on complex financial litigation and arbitration as well as other complex business litigation and arbitration.
For more information contact,
Chris Vernon, attorney at law - Vernon Litigation Group Naples, Florida