Securities Fraud Case: Summary Judgment Granted

On January 27, 2015, the Los Angeles Superior Court granted my client’s, Shattuck Hammond Partners, motion for summary judgment.

In 2003, Asset Real Estate & Investment Co. created structured transactions to acquire senior assisted living facilities. AREI planned to finance these acquisitions by raising equity through the sale of tenant-in-common interests to investors and by raising debt from institutional lenders. In 2004, AREI retained Shattuck Hammond to help solicit and obtain debt financing from institutional lenders.

Between 2008 and 2010, TIC investors in five AREI properties filed five separate lawsuits against AREI and others involved in the transactions, including broker-dealers, law firms, lenders, title insurance companies, and Shattuck Hammond. In all five cases, Plaintiffs’ central allegation was that the private placement memoranda on which they relied in making their investment decision failed to disclose material information about AREI and about the transaction. Plaintiffs alleged that AREI was a Ponzi scheme and that the defendants had conspired with AREI to defraud Plaintiffs.

Earlier in 2015, Shattuck Hammond settled with the plaintiffs in four of the five cases, but plaintiffs in the Roseville case persisted. The Roseville Plaintiffs asserted three causes of action against Shattuck Hammond. First, material assistance in a securities violation under Cal. Corps. Code 25504.1, second, conspiracy to commit fraud, and third, fraudulent nondisclosure.

After more than a year of discovery, Plaintiffs were unable to present any evidence that created a triable issue of fact that Shattuck Hammond knew of the alleged omissions from the PPM, that it had any intent to defraud, or that it had agreed with AREI to defraud. The court agreed that the evidence established that the debt and equity sides of the transaction were separate, that Shattuck Hammond did not owe a duty of disclosure to Plaintiffs, that Shattuck Hammond did not materially assist in the alleged securities violation, and that Shattuck Hammond did not conspire with AREI to defraud the TIC investors.

I led the litigation team in this matter.

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Neal Marder Quoted in the Daily Journal

On January 29, 2015, the Daily Journal published an article titled “Judge Tosses Charges Against Investment Bank.” I was quoted in this article regarding my representation of Shattuck Hammond Partners.

The article discusses a Superior Court judge’s decision to dismiss charges against my client, an investment bank, for their alleged role in a Ponzi scheme that duped dozens of investors into buying $200 million in securities for senior housing facilities.

The plaintiff investors accused the investment bank of assisting Asset Real Estate and Investment Company in sales of tenant-in-common (TIC) interests in 34 properties.

I am quoted in the article stating: “We had no involvement on the equity side in an attempt to raise money on these TIC interests. The court agreed with us.”

Shattuck Hammond had no involvement in the private placement memorandum – a document in the sales process of securities – that formed the basis for the investors’ investments.