Securities Arbitration is Your Best Chance to
Recover Your LaeRoc Fund Losses
Klayman & Toskes' sole focus is the representation of investors in large and complex securities arbitration and litigation matters. The quality legal representation provided by Klayman & Toskes to its clients has resulted in the recovery of over $100 million in securities arbitration claims and over $250 million in other securities litigation matters. We have represented numerous investors who sustained losses in investment products like Real Estate Investment Trusts (“REITs”), private placements, hedge funds, arbitrage funds, bond funds, CDOs, and CMOs.
Our law firm is handling securities arbitration claims in the arbitration forum established by the Financial Industry Regulatory Authority ("FINRA") to recover losses sustained in LaeRoc Funds, which are private placements. LaeRoc Funds were represented to many investors to be safe, conservative, stable, diversified, non-correlated products, with predicable income and a growth component achieved through asset appreciation. The underlining collateral of the Fund was pitched as high quality real estate properties which would have little chance of losing money. However, LaeRoc Funds are illiquid products which carry a significant number risks. Among other allegations, the claims our firm is handling against firms which sold LaeRoc Funds involve causes of action for unsuitability, misrepresentation and omission, breach of fiduciary duty, negligence, failure to supervise and failure to conduct adequate due diligence.
Under FINRA Rules, brokerage firms have an obligation to make only suitable recommendations, and to fully disclose all risks associated with a recommended product. Moreover, brokerage firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings made under the Securities and Exchange Commission's Regulation D under the Securities Act of 1933, also known as private placements.
Regulation D provides exemptions from the registration requirements of Section 5 under the Act. Regulation D transactions, however, are not exempt from the antifraud provisions of the federal securities laws. A broker-dealer has a duty, enforceable under federal securities laws and FINRA rules, to conduct a reasonable investigation of securities that it recommends, including those sold in a Regulation D offering.
Courts have found that the amount and nature of the investigation required depends, among other factors, upon the nature of the recommendation, the role of the broker in the transaction, its knowledge of and relationship to the issuer, and the size and stability of the issuer. A brokerage firm that lacks essential information about an issuer or its securities when it makes a recommendation, including recommendations of securities in Regulation D offerings, must disclose this fact as well as the risks that arise from its lack of information.
The LaeRoc Funds
LaeRoc Partners, Inc. (“LaeRoc Partners”), which manages LaeRoc Funds, is located in Hermosa Beach, California and is involved with real estate private placements that were sold by FINRA broker-dealers. LaeRoc Partners was founded in Los Angeles in 1986 and, starting in 1993, offered income and equity funds. LaeRoc Partners claims to manage over $650 million in assets in 14 funds that focuses on income producing properties in the Western United States with a concentration in Southern California. The Company focuses on "income producing properties in the western US with a concentration in southern California." Examples of properties owned include the Santa Clarita Plaza Retail Shopping Center, Murdock Plaza and the Vineyard Shopping Center in Ontario, California.
The LaeRoc Funds include LaeRoc 2002 Income Fund, LaeRoc 2004-2005 Income Fund, LaeRoc 2005-2006 Income Fund, LaeRoc Edge Fund, and LaeRoc Income Fund 2007. The Funds were sold by several brokerage firms including LPL Financial Services, Allegheny Investments, Ltd., Unison Capital Group, Capital Strategies Limited, Chauner Securities, CommonWealth Equity Services, Gramercy Securities, Kendrick, CFG/H.Beck, Stimpfig, & Ryu, La Salle Securities, Manarin Securities Corp., TriEqua Capital Corp., Hagen Securities, Northstar Securities, American Investors Co., Burch & Co., Metropolitan Investment Securities, Rushmore Securities, Linsco Private Ledger (LPL), Empire Financial Group, Inc., May Management, VSR Financial Services, Inc., and Mid Atlantic Capital Corporation.
In 2011, a notice of dissolution was issued to investors in the LaeRoc 2002 Income Fund. Numerous properties in the LaeRoc Funds are reported to be in severe financial distress resulting in a decline in the value of the Funds. Many of the real estate purchases may not have been based on solid financials but expected financials, but rather based on complex business strategies that never came to fruition. With the crash in the real estate market in 2008 and 2009, it is believed that many of the LaeRoc Funds have suffered substantial declines in value, resulting in large, unrealized losses in the Funds.
The LaeRoc 2005-2006 Income Fund LP is currently attempting to raise another $11 million to $14.5 million to pay off at least $49 million of debt. In June of 2011, the Fund issued a cash call notice to investors who bought the LaeRoc 2005-2006 Income Fund. According to published reports, the Fund's lenders have disclosed that they will foreclose on one of its holdings, the Country Club Plaza in Sacramento, California, if the Fund is unable to raise sufficient capital. It defaulted on its loan in November of 2010. The Fund purchased the Club in 2006 for $57.8 million. The Fund, which still owes $43.6 million, tried to sell the property earlier this year but bids made by potential buyers came in too low.
For more information on how to start a claim, or to find out if you have a claim, please contact our law firm for a free consultation. Be aware, there are strict time limitations, which in some cases are as short as one or two years. Don't lose your opportunity to get your money back!