GunnAllen, Questar, Bluestein named in suit

GunnAllen Financial Inc., Questar Capital Corp. and a former broker affiliated with both firms, Frank Bluestein, allegedly were involved in a massive Ponzi scheme that ran for 12 years and defrauded 1,000 investors of $350 million, according to a class action lawsuit filed earlier this week. Mr. Bluestein and his practice, the Maximum Financial Group Inc., “facilitated the scheme over the years with the assistance” of Questar and GunnAllen, according to the complaint, which was filed on Tuesday in U.S. district court in Detroit. The complaint centers on the sale and distribution of unregistered securities created by Edward May, whom the Securities and Exchange Commission charged in November with allegedly offering sham deals to investors in the form of shares of bogus Las Vegas casino and resort telecommunications contracts. About 1,200 investors, many elderly, bought into the scheme, according to the SEC. Mr. May, who has declared bankruptcy, is not named in the class action suit. Mr. Bluestein was affiliated with Questar from 2000 to 2005, when he joined GunnAllen. He was affiliated there until October. Two investors, a retired Chrysler plant manager Donald Haase and his son, Douglas, were named as lead plaintiffs in the claim, which has to be approved by a judge to go forward. “Mr. Bluestein did not know this was a Ponzi scheme,” said his attorney, David Foster. “If he did, he never, ever would have recommended this to anyone.” Mr. Foster said that Mr. Bluestein and his family also lost money because they invested with Mr. May, although he declined to say how much. David Jarvis, general counsel for GunnAllen, which is based in Tampa, Fla., and Hubertus Kuelps, spokesman for Questar of Minneapolis, did not return to calls to comment by deadline.