Naples, Fla. — A group of brokers registered with VSR Financial fraudulently misrepresented illiquid and speculative non-traded REITs and alternative investments that they sold to three clients, including to a cancer patient who was told the investments were safer than stocks and bonds, according to claims recently filed by the law firms of Vernon Litigation Group and Dovin Malkin and Ficken.
The primary broker from Naples sold two of the retirees speculative “alternative investments” including oil and gas partnerships and private water and land development partnerships, the claims say. The three investors represented by the Vernon Litigation Group and Dovin, Malkin, and Ficken law firms are from Naples, Cape Coral, and Minnesota. Collectively they are seeking at least $2.35 million in damages for their losses from VSR Financial.
The Naples broker from VSR sold the investor victims non-traded REITs including KBS, Inland American, Cole, and Behringer Harvard. Both KBS and Inland have suspended redemptions, meaning investors can’t withdraw the money they put in, and Cole has only a limited redemption program, the claims state. The broker also failed to disclose the risks and sold the victim'ss partnerships involving high-risk start-up ventures, according to the claims.
VSR Financial fired the Naples broker in September 2010 for selling investments that weren’t approved by VSR Financial and the Financial Industry Regulatory Authority permanently barred the broker from the securities industry in December, according to securities regulators. VSR Financial failed to supervise the Naples broker, who breached his fiduciary duty, recommended unsuitable investments, and misrepresented the risks of the investments he sold, according to the claims.
The broker met one of the investor victims, a retired insurance executive who now lives in Cape Coral, at church, the claim says. The man also had a history of battling cancer when he met the broker.
“The broker knew this man was concerned about having enough money to provide for his wife’s needs in the event he should die. This broker continued to mislead him and placed his savings in illiquid non-traded REITs,” securities attorney Chris Vernon said. “The conduct in these cases is reprehensible and VSR Financial needs to pay for failing to supervise its broker. What’s also despicable is that the broker befriended some of his victims at church.”
The broker had recommended that the 70-year-old invest 95 percent of his IRA in illiquid and speculative investments, including non-traded REITs that generate high commissions to the selling brokers, the claim states.
In another case, the Naples broker persuaded a 58-year-old retired manufacturing executive who he met through a mutual friend at church to invest in speculative land and water deals. The Naples retiree had told the broker that he had already lost a significant amount of his savings in a Ponzi scheme in 2002 and that he wanted investments that were safe, liquid and that would provide income, according to the claim filed today. At certain times, the broker misrepresented that the man would be able to get his money back in three to six months, the claim says.
Altogether, the Naples man invested $1.3 million in various speculative, illiquid so-called “alternative investments” recommended by the VSR Naples broker, the claim states.
“Tragically, our law firm is seeing numerous retirees who’ve been burned by non-traded REITs and other so-called alternative investments that are pitched as safer alternatives to investing in the stock market,” Vernon says. “In reality, many of these products are highly risky and illiquid. Retirees are being misled about the risks and not told that their money could be locked up for years or flat out lost entirely.”
For more information, contact:
Chris Vernon - Vernon Litigation Group, attorneys at law
(239) 319-4434 Website: www.vernonhealy.com, www.reitattorneys.com