We encounter a fair amount of bad brokers in our fraud cases involving failed tenant in common (“TIC”) investments. Most just gave bad advice or allowed the lure of big commissions to overcome common sense. It really doesn’t matter, however, as stockbrokers are responsible if they fail to conduct proper due diligence or make unsuitable investment recommendations.
And then there is Paul Larsen. According to records obtained from the Financial Industry Regulatory Authority (FINRA), Larsen has been a stockbroker since 1982. Until 2010, he never had a disclosable event on his record. (Customer complaints, bankruptcies, criminal charges, lawsuits and regulatory events all must be disclosed.) Almost three decades without a complaint and beginning in 2010, fifteen (15) disclosure events. Talk about a meltdown!
We are not sure what happened but its bad.
Paul Larsen was terminated by his employer VSR Financial Services of Overland Park, Kansas in September of 2010 after a customer complained that Larsen had “illegally” converted funds from a TIC investment. We don’t see record of a criminal complaint but his alleged conduct was enough to get him fired.
And that is when the complaints began pouring in. Thirteen to be exact. According to FINRA and published reports, Larsen was pedaling oil and gas and TIC investments. Many of his customers were apparently retired and or elderly. He used church connections – we call that religious affinity fraud – to coax his customers to turn over their monies.
TIC investments, along with oil and gas deals, are typically speculative. They are not for the faint of heart and definitely not suitable for most retirees who seek conservative investments and preservation of capital. These folks need their money to be safe in order to carry them through retirement.
Stockbrokers and brokerage firms have a legal duty to perform due diligence on the investments they sell. They also have a duty to fully understand their customers’ needs (Know Your Customer rules) and to only recommend investments suitable for those needs. (suitability rules).
Paul Larsen’s clients say that he did neither. Some claim fraud. Larsen has denied the claims but several of the cases have settled with money being paid to his former customers.
The good news is that Paul Larsen is no longer allowed to sell securities. He was banned from the industry in 2011 after refusing to cooperate with regulators who were investigating his activities. He consented to the permanent ban without admitting guilt in lieu of facing a hearing.
The bad news is that the claims suggest that Larsen was often selling TICs, REITs and oil and gas deals without the permission of his employer, VSR Financial Services. Luckily for victims, VSR Financial may have an independent duty to those customers because of their duty to supervise their employees and know what they are selling.
Where Paul Larsen hangs his hat today is unknown. FINRA says he was last selling insurance and real estate in Naples, Florida.
If you lost money through Paul Larsen, VSR Financial Services or any stockbroker, you may be entitled to a return of your hard earned money. Most claims against brokerage firms can be handled on a contingent fee basis meaning no legal fees unless the lawyers are successful in recovering money.
(Photo courtesy of photoholic at freedigitalphotos.net)