Former Cadaret, Grant & Co., Inc. Client Wins $1.5 Million FINRA Arbitration for Losses Due to Investment Scam
Posted on Thursday, July 25th, 2019 at 10:02 am
In June 2019, a former client of Cadaret, Grant & Co., Inc. won an award in a FINRA arbitration for compensatory damages for $1,462,000, plus 9% per annum, for losses sustained from investments with broker Steven Pagartanis (CRD# 1958879).
The causes of action included misrepresentation, omission, failure to supervise and breach of fiduciary duty. The causes of action relate to unspecified securities. The FINRA arbitration hearing was conducted in New York, New York.
Pagartanis was registered with Lombard Securities Incorporated in Setauket, New York from September 2017 to March 2018, when he was terminated regarding, “As a result of an internal investigation, the representative failed to respond to customer complaint questions and requests for information. The firm requested specific information on unapproved investments allegedly made outside of the firm by a customer and why the broker failed to notify the firm regarding such outside investments.”
Previously, he was registered with Cadaret, Grant & Co., Inc. in Setauket, New York from 2012 to 2017, when he was terminated regarding, “After the firm received the arbitration, which contained an allegation of selling a private security unauthorized by the firm, a surprise examination of Pagartanis’ branch was planned. However, Pagartanis resigned the day before the examination was to be conducted. The examiners travelled to Pagartanis’ branch despite his resignation, but were not provided with the information and documents requested. The Statement of Claim alleges fraud, conversion and selling away among other allegations.”
In May 2018, the Securities and Exchange Commission (SEC) charged Pagartanis with defrauding long-standing customers in an $8 million investment scam. According to the SEC complaint, Pagartanis told some investors – including retirees who had been Pagartanis’s customers for many years – that he would invest their funds in either a publicly-traded or private land development company, which was secretly controlled by Pagartanis. The SEC said that Mr. Pagartanis directed his investors to write checks payable to an entity he secretly controlled, Omega Planning Associates in Setauket, New York. He promised his clients that the funds would be safe and also offer guaranteed monthly interest payments on the investments. It is alleged that Pagartanis used the money to pay personal expenses and make the guaranteed “interest” payments to his customers.
Pagartanis made interest payments and created fictitious account statements reflecting ownership interests in the land development companies to conceal the scam.
The Suffolk County District Attorney’s Office also filed criminal charges against Pagartanis.
The SEC is seeking a judgment ordering Pagartanis to disgorge his allegedly ill-gotten gains plus prejudgment interest, and to pay financial penalties.
In April 2018, FINRA barred Pagartanis after he consented to the sanction and to the entry of findings that he refused to appear to provide FINRA with on-the-record testimony in connection with its investigation of allegations that he made fraudulent misrepresentation to customers and misappropriated customers’ funds.
Pagartanis has been the subject of 11 additional customer complaints between 2013 and 2019, according to his CRD report:
August 2018. “Claimant alleged that RR S. Pagartanis sold customer an investment that was not approved by the firm(s) and used the proceeds for his personal benefit.” The customer is seeking $285,000 in this pending customer complaint.
June 2018. “Selling unsuitable investment away from firm.” The customer sought $865,000 in damages and the case was settled for $150,000.
April 2018. “Between January and July 2013, Mr. Pagartanis is alleged to have recommended unsuitable investments totaling $255,000 in a small, speculative land development company.” The customer sought $255,000 in damages and the case was settled for $103,500.
April 2018. “Between 2014 and January 2017, Mr. Pagartanis is alleged to have recommended unsuitable investments totaling $3,700,000 in a small, speculative land development company.” The customer sought $3.7 million in damages and the case was settled for $1 million.
March 2018. “Customer alleges that the broker asked them to make checks payable to Genesis a company that was not an approved investment by the firm.” The customer sought $75,000 in damages and the case was settled for $56,250.
March 2018. “Customer alleges that the broker asked them to make checks payable to Genesis a company that was not an approved investment by the firm.” The customer sought $185,800 in damages and the case was settled for $138,750.
March 2018. “Customer alleges that the broker asked them to make checks payable and endorse other checks received to Genesis a company that was not an approved investment by the firm.” The customer is seeking $239,770.99 in damages and the case was settled for $180,000.
March 2018. “Customer alleges that the broker asked them to make investments in a company that was not an approved investment by the firm. Genesis Land Development Corp. It is alleged that Genesis was controlled by Pagartanis.” The case was settled for $35,000.
February 2018. “Customer alleges that broker asked them make checks payable and endorse other checks received to Genesis, a “company” that was an unapproved investment by the firm. Customer further states that they received no statements or confirmations, or any other official documents regarding this investment.” The customer sought $230,000 in damages and the case was settled for $165,000.
August 2017. “Allegations of negligence, suitability, misrepresentation and fraud relating to reit investments.” The customer sought $245,000 in damages and the case was settled for $97,000.
October 2013. “Client alleges unsuitable and misrepresented investments due to an error in the clients 2008, 1035 exchange that omitted the 7% GMIB benefit.” The customer sought $88,000 in damages and the case was settled for $80,000.
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, Cadaret, Grant & Co., Inc. may be liable for investment or other losses suffered by Pagartanis’ 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.