SEC Charges North Dakota Developments, principals Gavin and Hogan

On May 6, 2015 the SEC announced charges and an emergency asset freeze against North Dakota Developments, LLC and its two principals, Robert L. Gavin and Daniel J. Hogan, for allegedly defrauding investors in a scheme to purportedly build and operate short-term housing facilities or “man camps” for workers in the Bakken oil and gas formation of North Dakota and Montana.

The SEC’s complaint alleges that North Dakota Developments and its owners Gavin and Hogan raised over $62 million from hundreds of investors for “units” in NDD’s projects by promising exceptionally high annual returns, up to 42%. The SEC also alleges that North Dakota Developments and its owners Gavin and Hogan offered investors the option of receiving a “guaranteed” annual return of up to 25% of the purchase price of their unit without regard to actual rental income.

As further inducement to invest, NDD and its owners Gavin and Hogan also promised investors that the various projects would be operational in a very short time frame, often within months. In reality, the SEC alleges, at the present time, none of the projects are fully operational.

According to the SEC’s complaint, North Dakota Developments and its owners Gavin and Hogan directly or indirectly made material misrepresentations and omissions regarding the use of investor funds, the payment of commissions, and the return on the investment. The SEC alleges that, despite the lack of profits, North Dakota Developments and its owners Gavin and Hogan made Ponzi-style payments to certain early investors by paying their “guaranteed” returns using funds provided by later investors. The SEC also alleges that instead of developing the projects as promised North Dakota Developments and its owners Gavin and Hogan have misappropriated over $25 million of investor funds to pay undisclosed commissions to sales agents, make payments to Gavin and Hogan, make investments in unrelated Bakken area projects for Gavin’s and Hogan’s personal benefit, and to make the Ponzi-like payments.

The above allegations contained in the SEC’s complaint have not been proven, and the issuance of a complaint represents the SEC’s initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint.

The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.

When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.

Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.

Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.

FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).

If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.