Founded in 2001 by Wayne “Rob” Hannah III, TSG Real Estate LLC of Chicago has built a reputation for itself by taking on creative business ventures. Hannah, TSG’s president and CEO, is a former bond trader who later ventured into commercial real estate. Among other things, Hannah is credited with helping to develop an IRS Revenue Procedure on tenants-in-common (TIC) compliance with 1031 Exchanges and, in 2008, for spearheading plans to launch the nation’s first eco-friendly real estate investment trust (REIT), Green Realty Trust, Inc.

Along the way, Hannah garnered credit for something else: Allegations by investors and regulators of operating an investment vehicle to partly finance personal obligations. As reported March 9, 2009, by Crains Chicago Business, investors allege that Hannah used their money to help pay for a $5.2-million, 10,000-square-foot vacation home near Park City, Utah.

According to the article, that accusation follows several other allegations charging Hannah of mismanaging properties, misleading investors and violating Illinois securities laws. On Jan. 30, 2009, the Illinois Securities Department issued a temporary order (File No. 08-00157) prohibiting Hannah and TSG Real Estate from selling securities in the state of Illinois. Among the allegations outlined in the complaint, Hannah failed to inform new investors about charges stemming from two prior lawsuits.

In those lawsuits, Illinois regulators cite a number of allegations pending against Hannah and various entities for which he served as an officer or director, including violations of the Illinois Securities Law of 1953, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, common law fraud, racketeering, mail and wire fraud, and conspiracy.

TSG Real Estate first established its niche in the real estate industry as a sponsor of tenants-in-common investments (TICs). Unlike real estate investment trusts, sponsors of TICs sell interests in individual properties. TIC investors then buy a percentage interest in the commercial or investment property, allowing them to invest in properties they might not otherwise be able to afford.

TICs were especially popular during the boom time of the real estate market in the 1990s. Today, however, amid a housing downturn and recession, many firms that sponsored TICs are hurting, and TSG in particular reportedly is beset with problems.

According to the Crain’s Chicago Business article, investors in about 15 TSG properties want TSG replaced as manager. As for the lawsuit involving Hannah’s Utah vacation home, the article cites allegations in the complaint that contend Hannah and TSG used money from a $13.4-million investment fund for unauthorized purposes. Those “purposes” reportedly included Hannah using more than $800,000 to pay back a loan to his father and nearly $5 million to finance the Utah vacation home, which was acquired by a TIC for his “friends and family.” Neither transaction was allowed under the fund’s operating agreement, the suit says.

More than 87% of the fund’s investors have voted to replace Hannah as the fund’s manager, and about 60 are named as plaintiffs in the suit.

If you have lost money because of investments related to TSG Real Estate or Wayne Rob Hannah III, we want to hear your story. Tell us about your situation by leaving a message in the Comment Box below or via the Contact Us form.

A warning from the Securities and Exchange Commission (SEC) in the form of a Wells Notice could have a direct impact on how Charles Schwab addresses current and future lawsuits and arbitration claims by investors who suffered losses in the  Schwab YieldPlus Funds.

The San Francisco-based brokerage acknowledged earlier this week that it had received the SEC’s Well Notice, which outlined possible civil enforcement actions against Schwab Investments, Charles Schwab Investment Management, Charles Schwab & Co., Inc. and the president of the YieldPlus funds for alleged violations of securities laws in connection to the two fixed-income mutual funds.

Companies that receive Well Notices are given a chance to respond to the SEC’s allegations before the commission decides whether to approve an enforcement action. The notice is not a formal allegation or finding of wrongdoing.

On Aug. 21, a California federal court certified an investor lawsuit involving the YieldPlus Fund Select Shares and YieldPlus Investor Shares as a class action. As reported Oct. 15 in an article by Investment News, the Oct. 14 Wells Notice plus other various supporting documents could very well serve as a road map for the class action lawsuit, which some analysts and attorneys contend dwarfs individual arbitrations by hundreds of millions, if not billions, of dollars.

Regardless of the outcome of the SEC’s investigation, Schwab YieldPlus investors are under a tight deadline to decide whether to stay in the class-action lawsuit or “opt out” if they wish to file an individual arbitration claim with the Financial Industry Regulatory Authority (FINRA). (Individuals are generally in a class action unless they formally ask to be excluded.)

The deadline to submit opt-out requests is Monday Dec. 28, 2009. In addition, investors must:

•Provide a written statement requesting exclusion from the Schwab YieldPlus class-action lawsuit;
•Sign and date the request and include your mailing address; and
•Ensure the written request is received by the Notice Administrator no later than Dec. 28, 2009. The address to mail the opt-out request is: Schwab Corp. Secs. Litigation Exclusion, c/o Gilardi & Co. LLC, P.O. Box 808061, Petaluma, CA 94975-8061.

Between Sept. 1 and Oct. 1, the date on which the most current available decision with FINRA is posted, Schwab has lost seven out of 10 YieldPlus FINRA arbitration cases, according to the Investment News article.

We are very interested in your situation with Schwab YieldPlus. Leave us a message in the comment box or the Contact Us form. We want to counsel you on your legal options.

Taking much-needed steps to strengthen investor protections, the House Financial Services Committee has begun the first of several congressional hearings on reforming the securities industry. Initial discussions concern the Investor Protection Act of 2009, with the focus on hedge fund registrations, the creation of an agency to oversee the insurance industry and a law to protect consumer investors. As part of the proposed legislation, the Securities and Exchange Commission (SEC) would be allowed to make fiduciary duty the standard for any broker/dealer or investment adviser who dispenses investment advice about securities.

“Over the years, full-service brokers have been allowed to portray themselves to the public as ‘financial advisers’… all without having to act in their clients’ best interests, which is the true hallmark of an advisory relationship,” said Barbara Roper, director of investor protection for the Consumer Federation of America, in a July 25 article appearing in the Salt Lake Tribune.

Currently, brokers/dealers are held to a suitability standard. They are required to make recommendations deemed generally “suitable” for an investor. Investment advisers, on the other hand, are subject to an overarching fiduciary duty under the Investment Advisers Act of 1940. As fiduciaries, they have a duty to act in the best interests of their clients and to make full and fair disclosure to clients regarding conflicts of interest. Broker/dealers do not.

The distinctions, albeit subtle, mean broker/dealers are, among things, free to receive higher commission and fees for recommending certain investments or financial products to clients, despite the fact another product may be a better option. At the same time, many broker/dealers market themselves as “advisers,” creating further confusion for investors.

According to a 2008 study commissioned by the SEC and conducted by the RAND Corporation, the majority of investors do not understand the distinctions between investment advisers and broker/dealers – even when those distinctions are explained to them.

On Oct. 8, during a second House Financial Services Committee hearing, the following question was posed to lawmakers: Which is the higher standard, fiduciary or suitability?

The six witnesses, each of whom represented a broad spectrum of the financial services industry, replied: The fiduciary standard.

If the past year of the Bernie Madoff debacle, the crisis on Wall Street and repeated charges levied by the SEC on several broker/dealers and financial advisers for allegedly operating “mini-Madoff” Ponzi schemes and other investment scams has taught us anything, it’s that advisers, financial planners and broker/dealers who dispense investment advice must be held accountable for their words and actions. A first step toward making this happen is imposing a fiduciary duty standard for all financial professionals.

The bottom line: Allowing investment advisers and broker/dealers to operate under different statutory and regulatory frameworks not only creates confusion in an already complex industry but ultimately renders a disservice to investors. Adoption and enforcement of a strict, universal fiduciary standard of care to broker/dealers, as well as investment advisers is a step in the right direction to restoring investor confidence in the financial services industry.

Tell us about your investment losses. Leave a message in the area below or on the the Contact Us form. We want to counsel you on your legal options.

Last year, the Montana State Auditor’s Office took a rather unusual approach to educate investors about the dangers of investment fraud. It teamed up with the AARP to produce Fraud Under the Big Sky, an hour-long documentary highlighting two major cases of securities fraud in Montana, including one that involved stockbroker Thomas J. O’Neill and Piper Jaffray & Co.

The O’Neill/Piper Jaffray case reveals how O’Neill “churned” the accounts of his clients, making an excessive number – more than 6,000 – of unauthorized trades in order to generate huge commissions for himself. Many of O’Neill’s clients were elderly. Evidence later showed that one of the victims was a 92-year-old man, who had seven speculative trades made in his account while in a coma. A final trade was conducted hours after he had died. O’Neill pleaded guilty in U.S. District Court in January 2005 to wire and securities fraud for activities from 1997 to 2001. In April 2005, he was sentenced to two years in prison for defrauding clients.

This year, in February 2009, O’Neill filed a lawsuit in a Butte district court against his former employer, accusing Piper Jaffray of destroying hand-written records while he worked for the firm that could have been used to help in his defense. The complaint also alleges that the records provide evidence that O’Neill had followed Piper Jaffray’s business plan and that the firm also reviewed and approved all of O’Neill’s transactions.

O’Neill’s complaint further accuses Piper Jaffray of knowing its business plan was fraudulent yet allowing him to continue implementing it.

Based in Minneapolis, Piper Jaffray’s origins date back to 1895. Over the years, the company evolved into one of the most powerful brokerage and investment firms in the United States. At the same time, however, Piper Jaffray also acquired a slew of investor complaints, regulatory sanctions and allegations of securities fraud, unauthorized trading and misuse of research for financial gain. On the latter allegation, Piper Jaffray reached a settlement in 2003 with the Securities and Exchange Commission (SEC), NASD, NYSE, NASAA, and the New York Attorney General and agreed to pay a $32.5 million fine.

Tell us about your situation with Piper Jaffray by leaving a message in the Comment Box below or via the Contact Us form. We want to counsel you on your legal options.

The list of brokerage firms facing arbitration claims from investors who suffered losses from investments in

The basis of the lawsuits against concerns breach of fiduciary duty, with claimants alleging that brokerages like Based in Tustin, California, Medical Capital purchases accounts receivables of medical providers and then packages them as private investments. Over a six-year period, the firm raised $2.2 billion from 20,000 investors.

In addition, the SEC says Medical Capital made a number of multimillion-dollar investments that had nothing to do with its core business of medical receivables. Among those investments:

• $20 million for “The Perfect Game,” a film about a group of Mexican youths who became the first non-U.S. team to win the Little League World Series in 1957;

• $7 million in a company that marketed a mobile phone application, which consisted of a live video feed of a hamster in a cage; and

• An unspecified amount for a 118-foot yacht called The Home Stretch.

If you have questions about your Medical Capital investments, please contact us. If Securities America, QA3 Financial Corp. or another brokerage has sold you Medical Capital notes, tell us your story by leaving a message in the Comment Box below or on the Contact Us form. We want to advise you on your legal options.

A recently filed lawsuit claims advisers with Securities America chose to ignore obvious red flags in an effort to sell hundreds of millions of dollars’ worth of securities notes in Medical Capital Holdings, a California medical receivables company that now faces securities fraud charges from the Securities and Exchange Commission (SEC).

According to the lawsuit filed last week on behalf of Ilene Grossbard, an investor in Florida who invested $112,000 in a Medical Capital deal, Securities America sold offerings of Medical Capital as late as October 2008. Several months earlier, however, W. Thomas Cross, an executive with Securities America, wrote to a Medical Capital official expressing fear of “a panicked run on the bank” about Medical Capital. Those fears did not stop Securities America from selling the Medical Capital notes.

“Securities America apparently was not all that alarmed because less than a month later, in August 2008, [the firm] signed on to distribute, promote, offer and sell still more Med Cap securities, this time on behalf of the sixth and final offering by Med Cap, Medical Provider Funding Corp. VI,” the lawsuit says.

As reported Oct. 5 by Investment News, in addition to selling the sixth deal through October, Securities America continued selling Medical Capital’s previous offering, Medical Provider Financial Corp. V. The firm also allegedly neglected to warn investors of the potential dangers in the Medical Capital notes.

IIn July, the SEC charged Medical Capital Holdings with fraud in connection to the sale of $77 million worth of private securities. Since then, a court-appointed receiver, Thomas Seaman, has conducted an inventory of MedCap’s assets and reveals that of $80 million in verified accounts receivable, $74 million is more than 180 days old. An additional $543 million – 87% of all the accounts receivable on MedCap’s books – are “non-existent.”

Grossbard’s lawsuit is seeking class action status.

The lawsuit also names Securities America’s parent company, Ameriprise Financial, as a defendant.

Tell us about your situation with Securities America by leaving a message in the Comment Box below or via  the Contact Us form. We want to consult with you about possible legal options.

Securities America, a subsidiary of Ameriprise Financial, has been sued by Ilene Grossbard of Sarasota, Florida, over allegations that the Omaha-based brokerage failed to warn her and other investors about what she says was a multibillion-dollar Ponzi scheme involving sales of notes in Medical Capital Holdings. According to the complaint, Grossbard bought two promissory notes from Securities America last year for $112,000. The notes were issued by Medical Provider Funding Corp. V, a subsidiary of Tustin, Calif.-based Medical Capital Holdings – the same company that the Securities and Exchange Commission (SEC) charged with securities fraud in July.

Since December 2003, Medical Capital Holdings has raised more than $2 billion from selling the notes to some 20,000 investors. The notes included those issued by Medical Provider Funding Corp. V, which as of March 2009 had more than $400 million in outstanding notes to 4,270 investors.

Grossbard’s lawsuit against Securities America alleges that it failed to detect, probe or make investors aware of the numerous red flags that pointed to the alleged Ponzi scheme at Medical Capital Holdings.

Grossbard is seeking class-action status in her lawsuit.

On Sept. 14, 2006, a National Association of Securities Dealers arbitration panel (now the Financial Industry Regulatory Authority) fined Securities America $2.5 million for failing to adequately supervise one of its brokers, David L. McFadden, who had been charged with securities fraud for allegedly luring long-term employees of Exxon Corporation into retiring prematurely with unreasonable and exaggerated promises of high returns from reinvested funds from their company retirement plans.

In addition to the fines, the arbitration panel ordered Securities America to pay $13.8 million in restitution to 32 former Exxon employees.

Tell us about your situation with Securities America by leaving a message in the Comment Box below or via the Contact Us form. We want to consult with you about possible legal options.

Smaller brokerage firms and broker/dealers often fly under the radar when it comes to internal compliance and enforcement, despite the fact that many of these firms have serious arbitration and customer complaints lodged against them. Case in point: Woodbury Financial Services.

According to information listed in the BrokerCheck section of the Financial Industry Regulatory Authority (FINRA), in June 2009 the Vermont Securities Division charged and fined Woodbury Financial Services for violations involving supervisory failures. The incident in question concerned two Woodbury Financial agents who were alleged to have made unsuitable recommendations to clients regarding variable annuity contracts.

Earlier in 2009, Woodbury Financial was again sanctioned and fined by securities regulators. This time, the Arizona Corporation Commission fined Woodbury $250,000, as well as ordered the company to reimburse investors for the losses they suffered in a scam conducted by two former Woodbury Financial agents, Mayra Jeanette Angulo and Mark Islas of Tucson. The Commission ordered the duo to pay $914,317 in restitution and $150,000 in administrative penalties for defrauding at least 30 investors, some of whom were residents of Mexico.

According to the Commission, Angulo and Islas opened brokerage accounts and post office boxes for some customers and, in several instances, used their own post office boxes for clients or used the same post office box for several different customers. While distributing fictitious brokerage accounts statements, Angulo and Islas funneled money from their customers’ accounts to themselves and family members.

In the Arizona case, Woodbury Financial Services was forced to reimburse investors some $2 million.

Other serious marks on Woodbury’s CRD record include violations of the Missouri Securities Act of 2003 for allowing several brokers affiliated with the company to conduct business in the state of Missouri without having first attained proper licensing.

In terms of arbitration disputes, in 2000, FINRA (Case No. 00-05078) awarded an investor more than $150,000 in damages for her claim against Woodbury Financial on causes of action that included violation of the Georgia Securities Act; violations of the federal securities laws; breach of contract; common law fraud; breach of fiduciary duty; and negligence and gross negligence.

In another claim (Case No. 01-06167), this one settled in 2001, FINRA found Woodbury liable for more than $110,000 in a claim involving misrepresentation, breach of fiduciary duty, failure to supervise and unsuitability.

Woodbury Financial Services is a subsidiary of The Hartford Financial Services Group of Hartford, Conn. As an independent broker/dealer, Woodbury Financial offers life insurance, variable annuities, alternative investments, and brokerage services. The company has more than 1,850 independent representatives located throughout the United States.

Tell us about your relationship with Woodbury Financial Services. Please fill out the Contact Us form, or leave a comment below. We want to hear your story and consult with you about your options.

In September, the Financial Industry Regulatory Authority (FINRA) announced that Robyn Lynn O’Hara, formerly of WFG Investments, had been barred from FINRA for securities violations. According to FINRA’s findings, O’Hara engaged in multiple trades in customers’ accounts at her member firms without customers’ authorization or consent. The findings further stated that O’Hara continued unauthorized trading in one account even after the customer instructed her to cease all trading.

Information posted in FINRA’s BrokerCheck provides additional insight into O’Hara’s professional background, with allegations of unauthorized trades and unsuitable investments dating as far back as 1992 when she working as a broker at J.W. Gant & Associates. In that particular case (FINRA Case No. 92-01617), FINRA eventually ruled O’Hara and J.W. Gant jointly liable for their actions, awarding some $6,500 in damages to the claimant.

That same year, 1992, O’Hara again faced allegations by FINRA of using high-pressure sales tactics and failing to execute a client’s instructions to sell certain securities in his account. O’Hara was fined $20,000 and suspended from association with FINRA for 20 days.

In another case (FINRA Case No. 09-02650) filed in July 2009. O’Hara is again accused of misrepresentation by a former client. The investor also is suing WFG Investments for failing to supervise O’Hara. The case is still pending with FINRA.

In total, O’Hara’s CRD shows at least five regulatory events related to securities violations. In addition, she’s been named in at least three customer complaints tied to securities fraud.

If you have questions about investments made with Robyn Lynn O’Hara or WFG Investments, please fill out the Contact Us form or leave a comment below. We want to hear your story and consult with you about your options.

Breach of fiduciary duty. Misallocated portfolios. Misrepresentation. In a nod to the growing dissatisfaction felt by investors over the actions – or inactions – of their financial advisers and stock brokers, new arbitration cases filed with the Financial Industry Regulatory Authority (FINRA) soared 65%, to 4,991, through August 2009, after climbing to 3,018 for the same period last year. The latest figures put new filings with FINRA on track to hit 7,000 by year end, up from 4,982 in 2008.

“I don’t anticipate it slowing down this year or next,” said Linda Fienberg, president of dispute resolution for FINRA, in a July 14, 2009, story appearing in the Washington Post. Fienberg added that more investors are prevailing in their cases this year than they had in the past.

The No. 1 complaint in investors’ claims through August 2009 is breach of fiduciary duty, followed closely by misrepresentation.