Two Ohio attorneys representing more than a dozen people who have filed an arbitration claim against a Florida-based investment broker in hopes of recovering money from the now-defunct First Americans Insurance Services were in Nebraska this week preparing their case.
John S. Chapman and his associate, Alin L. Rosca, represent 18 residents of Grand Island and Omaha in an arbitration case against Transamerica Financial Advisors of St. Petersburg, Fla. The claim was filed with the Financial Industry Regulatory Authority.
Chapman and Rosca contend Transamerica sold fraudulent and illegal First Americans Insurance Service securities to the public. The three principals of First Americans - Stella Levea, James Masat and Kenneth Mottin - are set for trial in federal court in June on charges they defrauded more than 250 investors.
They are each charged in 25-count indictments that allege they raised funds for First Americans, in part, by borrowing money from private lenders. They provided lenders with promissory notes and told the lenders the loans would be secured by collateral. The defendants also told lenders the annuity would be sufficient as to avoid loss of the loaned amount, even if First Americans failed, according to the indictment.
The defendants, who had their broker's licenses revoked shortly after First Americans filed for bankruptcy in January 2009, failed to purchase the insurance annuities and failed to advise lenders that such annuities wouldn't be purchased, according to the indictment.
"Our folks lost money because Transamerica was asleep at the switch," Chapman said. "Transamerica has the responsibility of overseeing First Americans and they failed."
Chapman said there were "plenty of red flags" that First Americans was involved in a Ponzi scheme and Transamerica could have shut it down.
"They could have done something to stop this," he said. "They are supposed to investigate and dig and dig and dig until they get answers. They fell short and I think the arbitration board will be outraged."
He said Transamerica had an agent in Grand Island but that person didn't adequately supervise First Americans' dealings.
"The supervision was uncommonly bad," he said.
Chapman and Rosca were in Omaha and Grand Island this week to talk to their clients, contact other victims, meet with the bankruptcy trustee, examine documents and pick up paperwork.
Victims can still join the arbitration case. Chapman and Rosca can be reached at 877-410-8172.
Rosca said some of the people who lost money in the scheme have only thought of the brokers and First Americans but not Transamerica, perhaps because they don't know a larger entity was involved.
"We have to actively ask questions so they can make the connection," he said.
Chapman said the scheme goes beyond Levea, Masat and Mottin but because Ponzi schemes are an unusual area of the law not many attorneys have experience looking into such cases.
"We've tried a lot of these cases around the country," he said. "We know where to look. The human toll is huge. You become aware of it when you talk to people and find they've lost their nest egg. They've spent a lifetime building up to retirement and along comes a con man and it's gone up in flames. The victims have to keep reliving that moment and have to ask their kids for help. It's just awful."
The arbitration case is set to be heard before the three-person board in Omaha in November. Chapman believes the hearing could take a week. They are asking for full compensation plus interest for their clients as well as damages and attorneys fees.
"We hope to put real money back in their pockets," he said. "We are putting together a strong case. We're excited."
Transamerica is a "substantial entity" with more money than the local brokers and First Americans so there's a better chance for recovery, he said.
Chapman wants people to know that if an investment sounds too good to be true, it is and should probably be avoided. When making investments, he suggests asking questions, getting second opinions and doing background checks. Promises, guarantees and high rates of return are words that should make investors "run the other way," he said.
Both Chapman and Rosca said investments should have security backings and should be registered with the federal government. People can check on such things through the U.S. Securities and Exchange Commission, which is online at www.sec.gov.
By Grand Island Independent
Source: The Kearney Hub