The world of high-stakes private investing is getting another black eye with accusations that the former president of a real estate investment trade group ran a fraudulent scheme that raised $1.1 million from investors.
The Securities and Exchange Commission on April 8 alleged that Renee Brown, former president of the Real Estate Investment Securities Association, scammed six clients by moving money into a bogus bond fund that promised fixed annual returns of 8% to 9%.
Last Thursday, REISA said that she had resigned as president of the group and was replaced by Rick Chess, managing partner of Chess Law Firm PLC.
The charges come as sellers of private deals, known as sponsors, face more pressure from broker-dealers and their representatives to vet such high-commission deals, which are marketed to wealthy accredited investors. The firms and reps in turn face stricter scrutiny from state regulators and the
Financial Industry Regulatory Authority Inc.
Ms. Brown, who was based in Minnesota, had a number of broker-dealer and investment adviser affiliations, according to the SEC.
Until last month, she was a registered rep affiliated with Capital Quest Securities Inc. Ms. Brown was also a founder and registered investment adviser with Wildwood Wealth Management LLC, and worked as an adviser for Sawtooth Asset Management Inc., for less than three weeks before leaving last month.
She recently started her own investment advisory business, Aaria Capital Inc., according to the SEC complaint.
The SEC alleges that in July, Ms. Brown opened an unregistered fund, Investors Income Fund X LLC. At the same time, she “surreptitiously began competing with her employer,” the complaint alleges.
“She either discreetly convinced Wildwood clients to withdraw their money from Wildwood and invest with the fund or forged a client’s signature to facilitate the fund’s transfer,” the complaint says.
Ms. Brown then “distributed bogus Madoff-like ‘returns’ to investors, furthering the fiction” that the fund was a legitimate and successful investment.
In reality, the fund was actually her alter ego, the SEC claims. The SEC said that Ms. Brown misappropriated most of the $1.1 million she raised from investors to, among other things, purchase a condominium for herself.
“We’re not very happy ourselves,” said Brandon Balkman, executive director with REISA, a non-profit organization with more than 700 members that provides education and information to professionals who offer and distribute real estate, according to its website.
Ms. Brown was also one of the founders of due-diligence firm Fact-
Right LLC, an outfit that vets private placements and real estate deals.
She left that company about 18 months ago, and never worked on third party due-diligence reports of any deals. Instead, Ms. Brown focused on distribution, particularly through the Internet, said Tony Chereso, a principal and chief operating officer for FactRight.
“I am terribly disappointed and surprised at these allegations,” he said.
“We are cooperating with the regulators to see how this matter can be resolved with a concern to the clients whose funds were involved in the allegations,” said Douglass Elsass, Ms. Brown’s attorney.
