Retirees Lose $6 Million From Real Estate Investment Scheme

• Posted on: Oct 4 2017

This Blog has previously written about the financial exploitation of America’s seniors. (Here, here, here and here.) As noted in these prior posts, unscrupulous investment professionals (such as, stockbrokers, financial advisors and insurance brokers) often exploit the fact that many elder and disabled investors are not market savvy and financially sophisticated or are trusting of those in a position of knowledge and authority. They prey on the fact that senior and vulnerable investors are often hesitant to admit they do not understand what is being presented to them.

On September 29, 2017, the Securities and Exchange Commission (“SEC”) announced that it had charged a former broker, his company, and his business partner for preying on retirees and other investors in an alleged real estate investment scheme in which the defendants used high-pressure sales tactics to steal $6 million from their victims.

In its complaint, the SEC alleged that Leonard Vincent Lombardo (“Lombardo”) operated the scheme over a four-year period at his Long Island-based company, The Leonard Vincent Group (“TLVG”), with assistance from its CFO Brian Hudlin (“Hudlin”). As noted in the SEC compliant, Lombardo has a long history of preying on investors: he previously worked at several brokerage firms, including Stratton Oakmont, the former pump-and-dump brokerage firm that was at the center of the “Wolf of Wall Street,” and has been barred from the brokerage industry by the Financial Industry Regulatory Authority for multiple violations, including fraud and unauthorized trading in customer accounts.

According to the SEC, more than 100 investors were defrauded with false claims that their money would be invested in distressed real estate. Some were told that their investments had increased by more than 50 percent in a matter of months when in fact there were no actual earnings on their investments.  Lombardo allegedly invested only a small fraction of investor money in real estate and used the bulk of it for separate business ventures into the e-cigarette industry and personal expenses, such as car payments on his BMW and Mercedes, marina fees on his boat, and visits to tanning salons.

“As alleged in our complaint, retirees entrusted their money to TVLG believing they were investing in high-return real estate investments, not electronic cigarettes or trips to the tanning salon,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.  “This is another case involving a fraudster trying to look the part of a wealthy financial advisor while doing nothing more than trying to separate people from their hard-earned money.”

“Investors should be suspicious anytime they are guaranteed high investment returns,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “High investment returns typically involve high risk, and cannot be guaranteed.”

TLVG, Lombardo, and Hudlin agreed to settlements that are subject to court approval.  TLVG and Lombardo agreed to pay disgorgement of $5,878,729.41.  Earlier this year, Lombardo pled guilty in a parallel criminal case brought by the U.S. Attorney’s Office for the Eastern District of New York.  Without admitting or denying the SEC’s allegations, Hudlin agreed to pay a $40,000 penalty.

Takeaway

Financial exploitation of senior and vulnerable adults remains an all too common fact of life. Enforcement efforts, such as the action discussed in this article, should help. At the end of the day, however, vigilance by investors and those trusted persons charged with overseeing their assets and property is the best way to help detect and stop financial exploitation before it results in financial ruin. As Director Schock noted: “Investors should be suspicious anytime they are guaranteed high investment returns.” After all, there are no guarantees when it comes to investing.

Tagged with: Elder Exploitation and Abuse, Financial Elder Abuse, Securities and Exchange Commission, Securities Fraud