Five Charged by SEC with Selling Woodbridge Group of Companies and Reaping Millions in Commissions
Posted on Monday, August 27th, 2018 at 1:35 pm
Erez Law is currently investigating financial advisors across the country who recommended their clients investment in the Woodbridge Group of Companies.
In August 2018, the U.S. Securities and Exchange Commission charged four companies and five individuals – Barry M. Kornfeld (CRD# 1490377), Ferne Kornfeld (CRD# 4615990), Lynette M. Robbins (not registered with FINRA now or previously), Andrew G. Costa (CRD# 1600926), Albert D. Klager (not registered with FINRA now or previously) – with selling Woodbridge Group of Companies LLC to retail investors. These five individuals and their companies were among the top revenue producers, reaping millions in commissions, and sold more than $243 million of Woodbridge securities to more than 1,600 retail investors. The brokers were also not registered as broker-dealers and were not permitted to sell securities, including the Woodbridge Group of Companies. The complaint further alleged that the group of brokers earned more than $5.8 million in transaction-based sales commissions related to recommendations of Woodbridge securities. The SEC is seeking the return of supposedly fraudulently gotten gains with interest, as well as financial penalties against the Kornfelds, Costa, Klager and their companies.
According to the SEC, First Financial Tax Group, Costa Financial Insurance Services Corp., Atlantic Insurance & Financial Services Inc. and Knowles Systems Inc. were among Woodbridge’s biggest generators of income.
According to the SEC, the SEC seeks court-ordered injunction, return of allegedly ill-gotten gains with interest, and financial penalties against the Kornfelds, Costa, Klager and their companies. Robbins and her company, Knowles Systems Inc., agreed to settle the SEC’s charges in a separate action without admitting or denying the allegations and return more than $1 million of allegedly ill-gotten gains plus interest. Robbins also agreed to pay a $100,000 civil penalty and to an industry and penny-stock bar.
In another SEC complaint from August 2018, Robbins and Knowles Systems, Inc. with receiving significant transaction-based sales commissions. Robbins held no securities licenses, was not registered with the Commission, and was not associated with registered broker-dealers, nor did they qualify for an exemption. Robbins was thus not permitted to sell securities.
The Woodbridge Group of Companies is a southern California luxury real estate developer that missed payments on notes sold to investors and filed chapter 11 bankruptcy in December 2017, along with 275 subsidiaries and affiliates, citing “unforeseen costs associated with ongoing litigation and regulatory compliance.” It is alleged that elderly and other investors invested millions of dollars into the Woodbridge Group of Companies investment programs. The investors were allegedly told that these were secure investments in real estate, which is not the case as evidenced by these bankruptcy proceedings.
The SEC is investigating whether 235 LLCs have violated the anti fraud, broker-dealer and securities registration provisions of the federal securities laws in connection with the Woodbridge Group of Companies receipt of more than $1 billion of investor funds from thousands of investors nationwide. The SEC is investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities. Monetary claims against Woodbridge remain pending.
The brokers are alleged to recommend the Woodbridge securities as “safe and secure” and solicited investors at seminars, a “conservative retirement and income planning class” they taught at a local university, through ads placed in local newspapers and while on-air at a local radio program, as well as through radio, television and internet marketing.
Barry and Ferne Kornfeld are co-president of First Financial, a Florida corporation with offices in Boca Raton and Boynton Beach, Florida. First Financial has never been registered with the Commission, FINRA or any state securities regulatory authority.
Barry Kornfeld was last registered with Brookstreet Securities Corporation in Coral Springs, Florida from 2004 to 2007.
In February 2017, the Idaho Department of Finance sanctioned Barry Kornfeld to a $500 civil and administrative penalty/fine and $5,250 in restitution following allegations, “Mr. Kornfeld, owner of First Financial Tax Group, Inc., was not registered to sell securities at the time he acted as an independent contractor to solicit and sell unregistered securities for Woodbridge Mortgage Investments Funds.
Ferne Kornfeld was last registered with Grant Williams L.P. in Boynton Beach, Florida from 2009 to 2010. In April 2018, the Florida Office of Financial Regulation opened an investigation alleging, “Offer and sale of unregistered securities; sale of securities by unregistered dealer, associated person or issuer.”
Costa Financial is a Florida corporation with offices in Fort Lauderdale, Florida, owned and controlled by Costa. Costa is not currently registered with the Commission, FINRA or any state securities regulatory authority, nor was he during the time period relevant to the allegations contained herein. Costa was last registered with Costa Financial Securities, Inc. in Boca Raton, Florida from 2003 to 2008.
Klager is president and beneficial owner of Atlantic Insurance & Financial Services, Inc. Klager is not currently registered with the Commission, FINRA, or any state securities regulatory authority, nor was he during the time period relevant to the allegations. Atlantic is a Florida corporation with offices in Vero Beach, Florida, owned and controlled by Klager.
Robbins is the CEO of Knowles Systems. Robbins is not, and has never been, registered with the Commission, the FINRA, or any state securities regulatory authority. Knowles Systems is a Delaware corporation owned and controlled by Robbins and her husband with its principal place of business in The Villages, Florida. Knowles Systems sold investment products, including Woodbridge’s securities, to retail investors. Knowles Systems has never been registered with the Commission, FINRA or any state securities regulatory authority. On April 20, 2018, Knowles Systems voluntarily filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Middle District of Florida.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms around the country may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.