Florida Investment & Securities Lawyer
Call to Schedule a Consultation
561-475-1332

SEC Sanctions Broker Who Defrauded Investors in Real Estate Company

Many people rely on family and friends for investment advice. While there is nothing wrong with this, it is important to always do your own homework before trusting someone else—even someone you think you know—with your money. Securities fraud schemes often rely on misplaced trust by inexperienced investors.

For example, the U.S. Securities and Exchange Commission recently charged several individuals with defrauding investors in a Maryland-based real estate company. According to SEC officials, the company’s manager “orchestrated the fraud by enticing family, friends and fellow church members to become his clients.” Many of these investors were not given an accurate portrait of the real estate company’s financial condition, nor were they aware of undisclosed commissions paid to various individuals associated with the venture.

SEC v. Colonial Tidewater Realty Income Partners, LLC

James R. Glover worked in the Maryland office of a Boston-based brokerage. According to SEC documents, most of their brokerage clients were “financially unsophisticated individuals who relied heavily” on their advice. Glover was well-known within his community, serving as a leader of his local church and working as a community college professor.

Glover was also a managing member of Colonial Tidewater, a limited liability company which owned residential and commercial properties throughout the mid-Atlantic. According to the SEC, Glover oversaw investor relations while another managing member, Sherman T. Hill, ran daily operations.

The SEC said “nearly all” of Colonial Tidewater’s investors came from Glover’s existing brokerage client base. Colonial Tidewater never registered any of its securities offerings with the SEC. Such unregistered sales are legal provided the offering qualifies for an exemption. For instance, the SEC does not require registration of sales to what are known as “accredited investors.” These are defined as investors with a net worth of over $1 million or who have a regular income of at least $200,000 per year. The SEC claims Glover told his clients they would qualify as accredited investors even though, as their investment adviser, he was “well aware” that was not true.

And while Colonial Tidewater operated a legitimate real estate business, the SEC said the company’s “overreliance on debt to supports its expansion and acquisition of properties,” coupled with the 2008 financial crisis, led Glover to mislead investors about what was going on. Glover and Hill both inflated their estimates of Colonial Tidewater’s values, the SEC said, and failed to disclose several properties were in foreclosure. Furthermore, Glover continued to promise some investors returns upwards of 15%.

The SEC said investors also did not know the extent of Glover’s own financial interest in Colonial Tidewater. Indeed, Glover allegedly told some investors he had no interest in the company. But in fact, the SEC said Glover received nearly $95,000 in undisclosed “commissions” from Colonial Tidewater. Glover also embezzled several hundred thousand dollars from the company without Hill’s knowledge.

Glover and Hill chose not to contest the SEC’s charges, instead agreeing to place Colonial Tidewater under a receiver and repay the money they were accused of stealing from investors. Separately, the broker which employed Glover agreed to pay a $450,000 fine for failing to properly supervise him. Two other individuals also agreed to SEC settlements in connection with this case.

Always Get It In Writing

Many of Colonial Tidewater’s investors never bothered to receive or review a written explanation of the company’s offering, relying instead on Glover’s oral representations. This is never a good idea. Even when dealing with an established broker, you should never participate in any investment without reviewing a detailed, written explanation of the offering.

If your broker has taken advantage of you, it is important you receive independent legal advice from an experienced Florida securities fraud attorney. Contact Gregory Tendrich, PA, in Boca Raton today to speak with someone as soon as possible.

MileMark Media - Practice Growth Solutions

© 2015 - 2017 Gregory Tendrich, P.A. All rights reserved.
This law firm website is managed by MileMark Media.

Contact Form Tab