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 by Vernon Litigation Group.
The Florida couple now faces foreclosure on their home, and they have seen their monthly retirement income from these investments drop from $8,000 to $600 per month.
The couple’s CapWest Securities stockbroker, who called himself a “retirement planning specialist,” pledged that both he and his employer conducted due diligence on the investments, but three of the investments have now been shut down as Ponzi schemes by the SEC.
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.
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 because they are currently unable to liquidate. The non-traded REITs include 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.
To read more about the claim filed by Vernon Litigation Group, click here.
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
Website: www.vernonhealy.com Tel: (239) 319-4434 Toll Free: 239-649-5390