The Securities and Exchange Commission last week announced new legal action in a case involving Atlanta-based businessman Christopher F. Brogdon, who was charged in late 2015 with fraud in connection with his efforts to raise funds from investors to purchase and renovate senior living communities and nursing homes.
Now, an Arizona-based brokerage firm, its CEO and its former underwriter’s counsel have agreed to settle charges related to municipal bond offerings they were underwriting that turned out to be fraudulent, the SEC announced Wednesday.
Lawson Financial Corp., according to the commission’s order, failed in its role as a gatekeeper to conduct reasonable due diligence when underwriting bond offerings to purchase and renovate the senior living communities and nursing homes. The offerings were managed by Brogdon, who faces a court order to repay $85 million to investors.
Lawson Financial did not ensure that Brogdon and his related borrowers complied with a rule that prohibits underwriters from purchasing or selling municipal securities unless the issuer or obligated person has committed to providing continuing disclosure information, such as annual financial materials and operating data, according to the SEC.
Lawson Financial’s founder and CEO, Robert Lawson, and then-underwriter’s counsel John T. Lynch Jr. are charged with failing to conduct reasonable due diligence.
“Underwriters are critical gatekeepers relied upon by investors to ensure that accurate information is being provided in municipal bond offering documents,” said Andrew M. Calamari, director of the SEC’s New York regional office. “Lawson Financial failed to confirm that continuing disclosure obligations were being met by the Brogdon-controlled borrowers, allowing Brogdon’s nursing home investment scheme to continue.”
Without admitting or denying the SEC’s findings, Lawson and his firm agreed to pay combined disgorgement of almost $200,000 as well as penalties of almost $200,000 for the firm and $80,000 for Lawson, who will be barred from the securities industry for three years.
Also, according to the SEC, Lynch did not disclose that he was not authorized to practice law at the time, as was represented to investors in the bond-offering documents. He agreed to a bifurcated settlement without admitting or denying the SEC’s findings, will pay almost $45,000 and agreed to be suspended permanently from appearing and practicing before the SEC as an attorney. An administrative law judge also could ban him from the securities industry for a period of time.
The SEC said it is continuing its investigation.
The settlement is the latest legal or regulatory action related to Brogdon’s business dealings.
- The Financial Industry Regulatory Authority filed a complaint against small cap research boutique Cantone Research, and its president, Anthony J. Cantone, was charged with fraud in late 2015 in connection with the sales and subsequent extensions of more than $8 million of certificates of participation in five promissory notes executed on behalf of one of several entities controlled by Brogdon. Cantone Research said that the complaint contains “blatant misrepresentations.”
- In September, the SEC announced that a subsidiary of Oklahoma-based BOK Financial Corp. had agreed to pay more than $1.6 million to settle charges that it concealed information from investors in Brogdon’s municipal bond offerings.
- In January, the SEC announced fraud charges against South Carolina businessman Dwayne Edwards, alleging that he diverted funds raised from investors to buy or renovate assisted living and memory care communities and used them for other purposes. Edwards’ business partner, Todd Barker, agreed to a bifurcated settlement. Eight of the offerings in the case involved purchases from Brogdon, who is named as an “other relevant actor” in the case.
- A former BOKF, NA, bank executive responsible for a department overseeing what later was determined to be a series of fraudulent bond offerings by Brogdon agreed to pay a $55,000 fine and never work in corporate trust work related to municipal securities again under the terms of a judgment the SEC announced in March.
- Also in March, municipal bond investors filed a civil class-action lawsuit against BOK Financial “for aiding fraud, negligence and breaching its fiduciary duty” in the Edwards-related offerings, a media outlet reported. The company said it would “vigorously defend the lawsuit and are confident we will prevail.”