BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

LPL Investment Holdings to pay $1.37M in alleged elder abuse case


SAN DIEGO (Reuters)—A unit of LPL Investment Holdings Inc., the top U.S. independent brokerage, must pay nearly $1.37 million to two investors who alleged the company engaged in civil fraud and elder abuse related to real estate investments, according to a ruling on Friday.

The investors, Heinrich and Araceli Hardt, filed the claim in early 2011 alleging LPL misled them about real estate investments marketed as private placements, according to their lawyer, Brian Miller, in San Diego.

Their dispute focused on investments in fractional interests in commercial real estate the couple made through Direct Invest L.L.C., a Boston-based real estate investment and asset management company, according to the ruling by a Financial Industry Regulatory Authority arbitration panel.

A Direct Invest representative did not return a telephone call requesting comment.

Investing in fractional real estate interests appeals to many investors looking for a way defer capital gains taxes on real estate properties they recently sold, said Mr. Miller. U.S. tax regulations allow real estate owners to defer those taxes when they reinvest the money in certain types of real estate within a specific period.

The Hardts, of San Diego, were drawn to the investments because they had recently sold some apartment buildings, Mr. Miller said. They also thought income they received on the investments would replace the rental income from their apartments, he said.

But the monthly checks from the real estate investments were not tied to rental income, Mr. Miller said. Instead, they were a combination of money the investment company borrowed and a partial return of the Hardts' own funds. None of the companies involved adequately disclosed that information to the Hardts, Mr. Miller added.

"When they sold this, they used tricks to structure the deal that are not apparent to anyone who doesn't do a complex analysis," Mr. Miller told Reuters.

In addition, the Hardts paid exorbitant fees ranging between 22% and 25% of the roughly $3.4 million they invested, Mr. Miller said.

The Hardts, who originally sought $8 million, also named two other independent brokerages in the case. The FINRA panel dismissed the claims against those firms in December after the couple settled with them. One of the companies has since shut down, according to regulatory filings. While the FINRA panel found LPL liable in the case, it awarded the investors $1.37 million, according to the ruling. The panel did not provide any reasons for its award, as is typical of arbitration rulings.

Elder abuse claims are allowed under California law in cases involving alleged securities fraud, according to Mr. Miller.

"(T)he arbitration panel did not indicate there was any evidence of elder abuse in this matter," said LPL spokesman Michael Herley. "Moreover, given the amount of the award in comparison to the alleged damages, we believe that the arbitrators rejected many if not most of claimants' claims."

The broker involved in case left LPL before the Hardts filed their claim, he added.