Securities America and CapWest sued over allegedly misleading private placements

Individuals who thought their assets were being placed in oil and gas investments claim that the two firms actually used their money to pay out other investors

Aug 26, 2009 @ 3:29 pm

By Sue Asci

Investors filed a class action yesterday against Securities America Inc. — a subsidiary of Ameriprise Financial Inc — and CapWest Securities Inc., alleging that the two firms falsely represented private placement investments and used incoming assets to pay dividends to investors in older investments.

The suit, filed by Joseph Billitteri and Scott Jessen on behalf of themselves and other investors, alleged that Provident Royalties LLC, a Dallas company that holds oil and gas interests, began offering a series of private placement investments in 2006 through 21 businesses known as the Provident Entities.

Provident and its subsidiaries filed for Chapter 11 bankruptcy protection in the U.S. District Court for the Northern District of Texas in June, which is why these entities were not named in the suit, according to the filing.

La Vista, Neb.-based Securities America Inc. and Lakewood, Colo.-based CapWest Securities Inc. offered and sold limited-partnership interests and preferred stock in those entities, according to the suit.

But the two firms' private placement memoranda misrepresented how investor funds would be used, according to the court filing. Investors were falsely told that 86% of their funds would be placed in oil and gas investments, the complaint alleged.

“Although some portion of the proceeds may have been used for the acquisition of oil and gas interests, funds obtained from later investors were commingled with those of earlier investors and investor funds raised in later offerings were used to pay ‘dividends' and ‘returns of capital' to investors in earlier-created Provident Entities,” the complaint alleged.

As a result, the Provident Entities were unable to pay further dividends or return outstanding principal investments to the investors, the filing said.

Provident Entities stopped accepting new investors Jan. 22 and ceased making dividend payments Jan. 29, according to the complaint.

Securities America declined to comment on the claims in the suit, said the firm's spokeswoman Janine Wertheim.

Spokesmen for Ameriprise Financial and CapWest Securities were not immediately available to provide a response.

Daniel Girard, a principal in Girard Gibbs LLP of San Francisco, the law firm representing Mr. Billitteri and Mr. Jessen, would not specify a dollar amount that the suit is seeking.

The suit was filed in the U.S. District Court for the Northern District of Texas in Dallas. Ameriprise Financial is based in Minneapolis.


What do you think?

View comments

Recommended next


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print