Claimants Win But Not Likely To See A Penny
A Financial Industry Regulatory Authority (FINRA) arbitration panel in Denver, Colorado has found CapWest Securities LLC liable and ordered them to pay Claimants more than $854,263 in compensatory damages, interest, punitive damages and attorneys’ fees. That is the good news for the investors. The bad news is they will likely not ever see any of the money which has just been awarded them. Before explaining why, these are the facts from the arbitration hearing.
The Statement of Claim in this case was filed in June 2010, alleging various causes of action, including breach of fiduciary duty, fraud, violation of the Colorado Securities Act, violation of the Texas Securities Act and negligence, among other things. All of the causes of action related to the Claimants’ investments in MedCap Financial Corporation VI, South Salem Retail Property – Albertson’s 4450 Commercial Street SE LLC (Canyon Creek), DBSI Corporate Center III LLC and Wichita Falls Apartments LLC – French Quarter Apartments (Canyon Creek). The claim was initially for $623,560.53 in compensatory damages. This amount was reduced to $342,264.04 at the conclusion of the evidentiary hearing.
The one day evidentiary hearing resulted in the FINRA arbitration panel finding CapWest Securities and its broker Larry Ivan Behrends jointly and severally liable and ordered them to pay Claimants $285,485.96 in compensatory damages, inclusive of pre-judgment interest. The panel also found CapWest Securities and its broker Larry Ivan Behrends jointly and severally liable and ordered them to pay Claimants post judgment interest on the $285,485.96 at the Colorado statutory rate of 8% per annum from August 8, 2011 until it is paid. The panel found Larry Ivan Behrends solely liable to Claimants and ordered him to pay an additional $56,778.08 in compensatory damages, inclusive of pre-judgment interest, plus post judgment interest on that amount at the Colorado statutory interest rate of 8% per annum from August 11, 2011 until it is paid. The panel found CapWest solely liable and ordered them to pay Claimants $500,000 in punitive damages for the egregious violations of the state and federal securities laws. Finally, the panel found CapWest and Behrends jointly and severally laible and ordered them to pay Claimants $12,000 in attorneys’ fees as a sanction for refusing to comply with an Order of the Panel relating to the production and exchange of documents. All of the $5,250 in forum fees for the arbitration were assessed jointly and severally against CapWest and Behrends. (FINRA# 10-02838; Virginia Cooley-Linder, Cooley-Linder Retail Property LLC, Cooley-Linder’s French Quarter LLC, Darrell F. Linder and Virginia C. Linder and Darrell F. Linder LLC v. CapWest Securities LLC, Workman Securities Corporation and Larry Ivan Behrends).
Now, back to why these Claimants will likely never see a penny of the money awarded to them by the panel. On August 31, 2011, CapWest Securities filed its Form BDW with FINRA and the U.S. Securities and Exchange Commission (SEC). The Form BDW is the Uniform Request for Broker-Dealer Withdrawal that is file when a firm is requesting termination and shutting down. CapWest was another independent broker dealer that got caught up in private placement offerings by Medical Capital Holdings Incorporated and Provident Royalties LLC, along with bundled real estate deals by DBSI Incorporated.
Since July 2011, the firm has been hammered with arbitration awards totaling $1,518,960 in addition to this case. Earlier in the year the hand writing was on the wall when the firm had stated that there were certain events on the horizon “that raised substantial doubt about the company’s ability to continue as a going concern.”