Independent broker-dealer Berthel Fisher & Co. Financial Services Inc. scored a victory this month in an arbitration over an investor seeking $934,000 in restitution for investing in a real estate deal involving an office building in Minnesota.
Two other broker-dealers named in the Financial Industry Regulatory Authority Inc. arbitration claim, Securities America Inc. and Welton Street Investments LLC, reached a settlement in the matter, which was based on a wide-ranging claim of $2.4 million by five individuals and related trusts, according to the award.
The investors alleged that the tenant-in-common interests in the Eden Prarie building were worthless “because they were sold as part of an undisclosed fraudulent ponzi scheme operated by the Geneva Organization.”
The three-member Finra arbitration panel issued the award July 6.
In a statement, Berthel Fisher chief executive Thomas Berthel said: “We are pleased that the arbitrators found that our due-diligence procedures and sales practices were appropriate. We believe that our conduct with respect to these investors was entirely appropriate.”
An attorney for the investor claimants, Julie Firestone, a partner at Briggs and Morgan, confirmed the settlements. One investor in the group, Janet Bowman, didn't settle with any of the three broker-dealers.
Welton Street closed in 2010. Its former chief executive, Mark Quam, said that attorneys advised on settling the matter due to the cost of litigation,
A Securities America spokeswoman, Rita Hood, declined to comment.
According to press reports, the Geneva Organization specialized in pooling individual real estate investors into a group to buy commercial real estate. Those partnerships were often TICs, which were widely popular investments sold by some independent broker-dealers that deferred capital gains taxes on clients' real estate transactions.
The TIC market has collapsed in the wake of the sharp decline in commercial real estate values, starting in 2007.
Indeed, Berthel Fisher has been fighting complaints on a number of legal fronts involving TICs.
Most of those stem from TICs issued by Diversified Business Services and Investments Inc., a bankrupt real estate manager characterized by its receiver as a Ponzi scheme. Berthel Fisher has settled almost half its DBSI claims with investors, but additional claimants are seeking almost $26 million from the company, according to a filing with the Securities and Exchange Commission in February.
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