Broker-dealer says it will 'vigorously defend' against allegations
A representative for the dealer-broker that served as a placement agent for some of the holdings of a businessman accused by the Securities and Exchange Commission of misusing the funds of senior living investors says its attorney “will be vigorously defending us” against related allegations made in a separate complaint. While litigation is pending, however, Cantone Research is unable to comment, she added.
The SEC announced fraud charges and an emergency asset freeze against Atlanta-based Christopher F. Brogdon on Nov. 20. The commission says he amassed nearly $190 million through dozens of municipal bond and private placement offerings in which investors purportedly earned interest from revenues generated by the assisted living community, nursing home or other retirement housing projects supported by their investment.
The same day, the New Jersey Bureau of Securities and the Financial Industry Regulatory Authority filed a complaint against Cantone Research, based in Tinton Falls, N.J., and its president, Anthony J. Cantone. FINRA is charging the company, which describes itself as a “small cap research boutique,” with fraud 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.
The complaint alleges that, to date, four of the five relevant promissory notes have defaulted, resulting in about $6 million in losses to investors. At the same time, Cantone Research and Anthony Cantone received fees, commissions and other payments of more than $1 million, according to FINRA. The complaint also charges Christine L. Cantone, the company's chief compliance officer during the time of the alleged fraudulent misconduct, with failing to supervise Anthony Cantone.
Among other things, FINRA alleges that Cantone Research and Anthony Cantone misrepresented and / or failed to disclose to investors and prospective investors that:
- Brogdon had twice been barred from the securities industry, once for “egregious misconduct” involving unauthorized transactions and later for a separate “scheme” involving financial misconduct;
- Brogdon had been indicted for racketeering, theft and Medicaid fraud;
- Brogdon had been found liable for breaching a stock repurchase guarantee agreement; and
- several entities controlled by Brogdon had filed for bankruptcy.
FINRA's filing of the disciplinary complaint marks the start of a formal proceeding by the independent regulator. FINRA has not issued any findings related to the allegations in its complaint. Under the regulator's rules, Cantone Research, Anthony Cantone and Christine Cantone can file responses and request hearings before a FINRA disciplinary panel. Depending on findings made, they face possible fines; censure, suspension or bar from the securities industry; loss of gains associated with violations; and payment of restitution.
McKnight's Senior Living's request for comment from Global Healthcare REIT, the company of which Brogdon is CEO, president and director, remains unanswered. Meanwhile, Brogdon has until Dec. 3 to argue in U.S. District Court that an injunction should not be filed against him.