ZAMANSKY FILES CLASS ACTION LAWSUIT AGAINST DAVID LERNER ASSOCIATES, APPLE REITS SIX-TO-TEN AND GLADE M. KNIGHT.
*** On October 22, 2012, FINRA announced that it had reached a settlement with David Lerner Associates regarding its sales of Apple REIT Ten. Under the terms of the settlement, David Lerner Associates will pay approximately $12 million of restitution to many Apple REIT Ten purchasers. In announcing the settlement, FINRA stated that the firm had improperly “solicited thousands of customers, targeting unsophisticated investors and the elderly, selling the illiquid REIT without performing adequate due diligence to determine whether it was suitable for investors.”
If you purchased Apple REIT Ten through David Lerner Associates, you will be contacted by a settlement administrator regarding the steps you will need to take to ensure that you receive your share of the restitution funds. Please note that your receipt of FINRA restitution funds will in no way impact your continuing rights as a member of the class action we have pending against David Lerner Associates and Apple REITs Six, Seven, Eight, Nine and Ten. ***
Zamansky LLC announces that on June 20, 2011 it filed a class action lawsuit against David Lerner Associates, Inc. (”David Lerner”) and its senior officers, Apple REITs Six through Ten (”Apple REITs”) and their principal Glade M. Knight, in the United States District Court, District of New Jersey, Case No. 2:33-av-00001.
The lawsuit was brought on behalf of all investors in the $3.2 billion of non-traded Apple Real Estate Investment Trusts (”Apple REITs”) sold by David Lerner. If you were an investor with a substantial loss, you should contact our office to protect your legal rights and discuss inclusion in the lawsuit. Contact Jake Zamansky at (212) 742-1414, or email at email@example.com.
The class action complaint alleges that David Lerner acted negligently in its sales, marketing and underwriting of more than $6.8 billion of shares in the Apple REITs to DLA’s brokerage customers. DLA allegedly sold Apple REITs to many customers who were elderly, retired and/or unsophisticated by misstating the fundamental business model of the Apple REITs, omitting material information about how the Apple REITs were intended to operate, omitting to disclose material risks associated with an investment in the Apple REITs, and misrepresenting the value of Apple REIT shares and the returns investors would receive on their investments. DLA allegedly told investors that Apple REITs which invested in extended stay hotels such as Marriott and Hilton paid safe and secure returns from earnings generated by revenues.
DLA negligently failed to disclose to investors, the complaint alleges, that Apple REITs were sold at artificial prices of $11 per share, and that its 7-8% returns paid to investors were not from income or funds from operations but paid from new investor money or borrowing. DLA also failed to disclose that the Apple REITs were not financially healthy but that they had deteriorated far below the artificial $11 values on investors’ account statements. The Apple REITs also, as alleged, had not paid dividends from earnings for over seven years, and that 7-8% dividends were likely unsustainable in the future. DLA allegedly breached its due diligence obligations, and obligations as financial advisor to customers, to give investors while its investors have unknowingly suffered large unrealized losses.
For its efforts, DLA received more than $600 million in fees and commssions which represented 60-70% of DLA’s business annually over the last seven years. DLA received 10% of all funds invested, which included underwriting fees and marketing expenses. The class action complaint alleges that DLA was unjustly enriched at the investors’ expense.
The complaint alleges that the Apple REITs and its primary principal Glade M. Knight as liable for DLA’s acts under agency theory. DLA was the exclusive selling agent for the Apple REITs, and sold to its captive customer base of over 120,000 accounts. DLA used radio, the internet and investor seminars to sell Apple REITs. The complaint alleges that the financial fortunes of DLA and the Apple REITs were so intertwined that the Apple REITs and Knight are liable for its negligence.
If you were an investor in the Apple REITs through David Lerner, please contact Zamansky at (212) 742-1414, or email at firstname.lastname@example.org, to discuss the lawsuit or your rights as an investor. Zamansky LLC, a leading securities arbitration and class action firm, filed the lawsuit along with several other prominent class action and securities firms.