Berthel Fisher Faces Class Action For Misrepresentations and Omissions

An investor in the TNP 2008 Participating Notes Program, LLC, which went into default last year, recently filed a class action claim against Berthel Fisher & Co. Financial Services, Inc. (“Berthel Fisher”), in Iowa federal court. The investor alleges Berthel Fisher failed to perform due diligence, and failed to make proper disclosures to investors. In addition, the TNP 2008 Participating Notes Program “commingled funds it raised through its programs and used investor money to make distribution payments to investors in other programs it sponsored, in Ponzi-scheme fashion,” alleges the complaint.

Berthel Fisher was the underwriter, promoter, and Managing Broker-Dealer of the TNP 2008 Participating Notes Program, and enjoyed a “close relationship” with Thompson National Properties, LLC (“TNP”), the sponsor of the TNP 2008 Participating Notes Program, according to the complaint. As promoter, Berthel Fisher was responsible for recruiting investors, from whom TNP 2008 Participating Notes Program raised approximately $26,224,903, alleges the investor’s complaint. Further, Berthel Fisher was “instrumental in the preparation and dissemination” of the private placement memorandum for the TNP 2008 Participating Notes Program (“TNP 2008 PPM”), which allegedly contained several material misrepresentations, including:

• The TNP 2008 PPM indicated that the Offering proceeds would be used for real estate investments but failed to disclose that such proceeds would be commingled with proceeds from other TNP-sponsored real estate investment programs and used for distribution payments to investors in other such programs, in Ponzi-scheme fashion;

• The TNP 2008 PPM indicated that TNP guaranteed the Scheme investors’ investments, as well as the interest payments on such investments, but failed to disclose that such guarantee was worthless because TNP did not have the financial ability to make good on it;

• The TNP 2008 PPM made clear the viability of Scheme depended upon TNP’s own viability but failed to disclose that TNP’s financials were deteriorating fast, TNP had defaulted on its financial obligations, and TNP’s losses and negative cash flow threatened its viability;

• The TNP 2008 PPM made clear the Scheme’s success depended upon its management by TNP but failed to disclose the misappropriation of investor funds and other serious misconduct in several other TNP-sponsored real estate investment programs;

• The TNP 2008 PPM omitted to disclose that TNP and its affiliates were dependent on continuously raising new capital to meet their existing financial obligations.

Berthel Fisher also allegedly failed to investigate red flags regarding the TNP 2008 Participating Notes Program, such as:

• the rapidly deteriorating financial condition of Thompson National Properties, LLC (“TNP”), who sponsored the TNP 2008 Participating Notes Program;

• TNP’s default on $1.3 million in financial obligations;

• The high rates and return offered by TNP, of up to 13%, and the fact that such returns and principal investment were guaranteed;

• High sales and due diligence commissions, of up to 10%, which significantly reduced the funds that were available to generate between 10-13 % in annual returns on the total investment, including such commissions;

• The concomitancy of the multiple offerings for TNP programs, designed to raise funds for the same types of investments;

• Evidence of commingling of funds.

Several other firms sold the TNP 2008 Participating Notes Program to its clients, but Berthel Fisher was named in the lawsuit because it acted as the deal’s underwriter, reported Investment News. The lawsuit also named Thomas Berthel, founder and chief executive of Berthel Fisher, as a defendant.

FINRA recently filed a complaint against real estate investor Tony Thompson and his broker-dealer, TNP Securities, LLC. FINRA alleges that Thompson and TNP Securities deceived and defrauded investors who purchased $50 million in high yield promissory notes sponsored by Thompson National Properties, LLC, which are the TNP 12% Notes Program LLC, the TNP 2008 Participating Notes Program LLC and the TNP Profit Participation Program LLC (collectively, “TNP Notes”).

TNP Notes were sold by Thompson National Properties and other independent broker dealers between 2008-2012. To induce investors to fund Thompson’s real estate ventures, the TNP Notes offerings featured an express guaranty of principal and interest by Thompson National Properties. One of the series of private notes is in default, while two others have stopped making payments to clients, according to FINRA’s complaint.

Investors have complained that the TNP Notes were pitched as suitable for conservative income-seeking investors in search of safe returns and low risk when, in fact, the TNP Notes were speculative, high risk, and illiquid. FINRA now alleges that none of the offering documents or supplements for the three TNP Note programs disclosed the increasing likelihood that Thompson National Properties would be unable to meet the guaranties of principal or interest. FINRA also alleges that the information available to investors in these documents were insufficient for investors to evaluate the risks that the TNP Notes would default and that the guaranty would be abandoned.

Investors who invested in the any of the TNP Notes can file FINRA arbitration claims against the firms who recommended the TNP Notes, despite the pending FINRA complaint and class action regarding the TNP 2008 Participating Notes Program. Although a FINRA complaint may ultimately provide some restitution to investors, it is not a substitute for an individual claim to recover damages from a firm.

Further, class action lawsuits seek to recover damages for a group or “class” of investors who sustained losses from the same cause. Individual investors who have suffered damages as a result of investing in the TNP Notes are unlikely to see great benefit from the class action against the promoter/underwriter and its executive. Rather, individual investors should seek damages directly from the brokerage firms who sold them TNP Notes upon theories that the brokerage firm misrepresented or failed to state risks associated with the TNP Notes, failed to thoroughly investigate the TNP Notes before selling them to investors, and failed to properly evaluate whether the TNP Notes were suitable for an individual’s specific circumstances.

If you invested in the TNP 12% Notes Program LLC, TNP 2008 Participating Notes Program LLC, TNP Profit Participation Program LLC or any other investment associated with Tony Thompson or Thompson National Properties, and suffered investment losses, please contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our contact form.