REITs :: Stock Broker Fraud Blog

REIT Manager W.P. Carey & Co has reached a $30M settlement agreement with the SEC over antifraud charges.

According to the SEC, W.P. Carey, its ex-CFO John J. Park, and its former chief accounting officer Claude Fernandez paid $10 million in undisclosed compensation to a brokerage firm that sold real estate investment trusts (REITs). The three parties then misrepresented these moneys in periodic filings to keep the compensations secret.

These activities allegedly benefited the broker-dealer and W.P. Carey, which received larger fees as a result, including $6.4 million in reimbursements and illegal fees. Park and Fernandez are accused of using fake invoices to hide the payments and get around the regulatory limitations about compensation.

The SEC says W.P. Carey is supposed to disclose such payments and that investors are entitled to know whether a brokerage firm is being compensated when making a sale.

The commission is also accusing W.P. Carey of taking part in a $235 million illegal and uregistered offering of REIT shares and being responsible for a broker-dealer receiving $100,000 from two REIT’s for proxy solicitation services. The SEC Is also accusing W.P. Carey of failure to comply with other disclosure requirements.

W.P. Carey has agreed to pay $20 million in interest and disgorgement and $10 million in penalties, which will be given to REITs that were adversely affected by the scheme.

Park, who is now in charge of W.P. Carey’s strategic planning, will pay a $240,000 penalty and serve a five-year ban from that prevents him from working as a director or officer of a public company. Claude Fernandez, now W.P. Carey’s managing director, is suspended for two years and will pay a $75,000 fine. All three defendants are permanently enjoyed from violating federal securities laws.

Shepherd Smith and Edwards represents victims of investor fraud in arbitration and in court. Our stockbroker fraud lawyers have helped thousands of people across the United States get their money back.

Related Web Resources:

SEC Closes $30M Case against REIT Manager, CCHWallstreet.com, March 24, 2008

Read the Complaint (PDF)

What Are REITs?, Investopedia.com

Posted by Shepherd Smith & Edwards | Permalink | Email This Post

Posted In: REITs , Securities Fraud

Bookmark:

REIT Investors around the world can now take advantage of a global property boom in commercial real estate. Whereas several years ago, only six other nations, including the United States, allowed investors to invest in real estate investment trusts, there are now nearly 24 countries that either have established REITs or are structuring them.

REIT’s allow investors to become exposed to real estate without having to involve themselves in private investment outfits or direct ownership. Typically, real estate investment trusts own offices, apartments, and other kinds of commercial real estate, including warehouses, shopping malls, and hotels. Shareholders receive dividends based on 90% of all taxable income.

Examples of two countries that are developing REIT laws for investors:

· Germany is finalizing certain REIT-related rules that will be made into laws in 2007.
· The United Kingdom’s REIT law will go into effect on January 1, 2007.

Also, from 2003 and 2006, the market cap of non-US real estate securities increased to approximately $400 billion—a 300% growth.

Types of REITS:

Equity REITs are in charge of the value/equity of their real estate assets. They invest in/own properties.

Mortgage REITs buy mortgage-backed securities or existing mortgages or lend money to real estate owners for their mortgages. These type of REITs are involved in investing and owning property mortgages, and revenues mainly come from interests earned on mortgage loans.

Hybrid REITs invest in mortgages and properties while using the investment strategies of both equity REITs and mortgage REITs.

Currently, the majority of institutional-quality properties are securitized in Europe, so American retail investors could have an opportunity to invest in markets abroad. Germany could be the largest site for property investment in Europe since it is that continent’s largest economy. Open-ended retail funds in Germany currently own $101 million in commercial real estate. Due to a decrease in real estate value between 2004 and 2005, bribery scandals related to REIT funds in Germany, and a growing interest by the international community to invest in the country, the REIT law was more quickly established there. Although residential properties are not allowed to be owned by REIT’s at this time, experts say that more than $150 million in German real estate could enter the international market.

In the United Kingdom, analysts believe the new law will lead to a slew of acquisitions and mergers and that large companies such as British Land and Land Securities Group will end up buying the smaller public companies.

Potential Negatives of Jumping into the Global REIT Market:
· REIT investors must deal with the potential risks that come with any type of real estate investment.
· There are also the added possibilities of decreased liquidity, political instability, currency market fluctuations, and economic uncertainties.

Investors wishing to invest in REIT’s can either:
· Buy their shares directly on an open exchange.
· Invest in a mutual fund specializing in public real estate.

Shepherd, Smith, and Edwards is committed to helping American investors recover losses caused by inappropriate actions of stockbrokers and their firms. If you have suffered a loss due to an investment you have made, and you would like to speak with an attorney, contact Shepherd, Smith, and Edwards today. With our offices in New York, San Francisco, Houston, Dallas, Chicago, Phoenix, New Orleans, and Mexico City, we are able to represent clients throughout the United States and abroad.

Stock Broker Fraud Blog

Published by Houston Securities Fraud Lawyers Shepherd Smith & Edwards

W.P. Carey & Co Settles SEC Charges Over Payments of Undisclosed REIT Compensation

For Investors, REIT’s Go Global

Contact Us

Browse

Topics

By Date

Search

Recent Entries

Legal Blogs