David R. Chase, P.A.
Call Us Now: 800-760-0912
David R. Chase, P.A.
Call Us Now: 800-760-0912


Seller Beware – SEC Hits Broker-Dealer with Fraud Charges in Role as Placement Agent

The Securities and Exchange Commission recently brought fraud charges against a securities broker-dealer, Portfolio Advisors Alliance (PAA), in connection with its role as placement agent in a high yield securities offering. The SEC also sued the broker dealer’s owner, Howard Allen, and its President, Kerri Wasserman.

The broker-dealer served as placement agent for the sale of the high-yield securities of American Growth Funding II LLC (AGF II), a Manhattan-based lending company, owned by Ralph Johnson. According to the SEC, Johnson lured investors with the promise of 12 percent annual returns falsely claiming its financial statements were being audited every year, and concealing details about the company’s deteriorating loan values that may have materially negatively impacted its ability to make repayment to investors.

As grounds for its charges against PAA’s executives, the SEC alleged that Allen became aware during the offering that AGF’s offering documents were inaccurate, but nonetheless continued to use them to solicit investors and raise capital. Allegedly, Allen told Wasserman of this, but Wasserman took no action.

Andrew M. Calamari, the SEC Director of the New York Regional Office commented: “We allege that AGF II misled investors and overstated the true value of these investments, which are worth far less than presented because many of the company’s loans are non-performing.” As to the principals of PAA, Calamari stated: “We further allege that Allen and Wasserman looked the other way and allowed PAA to facilitate the fraud as the placement agent.”

Given its nationwide subpoena powers and the ability to compel sworn testimony, the SEC was evidently able to develop sufficient, direct evidence establishing the personal knowledge of the underlying fraud by the placement agent. It is the classic SEC investigative inquiry: what did you know and when did you know it.

For all securities firms acting as a placement agent for issuers, this is a cautionary warning: seller beware.

David Chase, a SEC lawyer and securities attorney, is principal of the law firm of David R. Chase, PA, a SEC defense law firm located in Fort Lauderdale, Florida. Mr. Chase represents those under SEC investigation and handles white collar securities fraud cases throughout the country. The firm also represents victims of stock broker fraud and negligence. For a confidential, no-cost consultation with Mr. Chase, call toll-free at: 800-760-0912, or send him an e-mail: david@davidchaselaw.com. The firm’s website is: www.securitiesfrauddefense.net.

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