An heiress to the Knott's Berry Farm theme park is seeking $8.5 million in an arbitration claim against LPL Financial LLC.
The claimant, Maureen Sloan, 63, of Newport Beach, Calif., claims that former LPL broker Alberto Neira stole $4.5 million from her through a fraudulent auto-financing scheme called Silver Oak Leasing. Ms. Sloan said she lost another $4 million in unsuitable trading of preferred stocks.
Ms. Sloan is the granddaughter of Walter Knott, founder of the Buena Park, Calif.-based Knott's Berry Farm.
Ms. Sloan's attorney, Andrew Stoltmann of the Stoltmann Law Offices PC, said that $4 million of the $4.5 million that she put into Silver Oak came directly from a margin loan LPL made to Ms. Sloan.
“Talk about a red flag,” Mr. Stoltmann said. “There was no margin in the account, then all of the sudden, there's a $4 million loan [with] all of that flowing out of LPL into an entity that the broker already disclosed as an outside business activity.”
He said LPL never contacted his client about the transfer.
Ms. Sloan told InvestmentNews that she did not approve the margin loan and that she told Mr. Neira she was looking for dependable income with minimal risk.
“We just needed something where we could park our money safely and just make a modest return,” she said. “We had plenty [of money]. There was no reason to speculate.”
After she experienced losses in preferred stocks, Mr. Neira put her in Silver Oak, she said.
“He always assured me that [Silver Oak] was the best pathway for me to take [to] avoid market losses,” Ms. Sloan said.
Her daughter, Cynthia von Hoffman, 46, is also part of the case, which was filed March 21 with the Financial Industry Regulatory Authority Inc. Ms. Hoffman alleges that she lost $700,000 in Silver Oak plus another $1 million from inappropriate trading.
LPL terminated Mr. Neira in January 2011 for failing to fully disclose participation in outside business activity and selling away in violation of firm policies, according to Finra records.
Last November, Finra barred Mr. Neira from the industry after he failed to respond to Finra's request for information regarding $2 million in Silver Oak investments made by 14 LPL clients. Finra said Mr. Neira failed to disclose that he was a paid director of Silver Oak, rather than just a passive investor, as he had claimed.
In a statement, LPL spokeswoman Betsy Weinberger noted that Mr. Neira “failed to fully disclose his outside business activities and transactions to LPL, including that he was a director of Silver Oak, or that he recommended the purchase of its stock or promissory notes. These transactions were conducted privately and not through LPL Financial.”
MORE TO COME
Mr. Stoltmann said he has filed three other arbitration claims relating to Mr. Neira's activity, and has six more coming. All told, his clients are claiming about $25 million in damages.
The arbitration comes at a difficult time for LPL, which was the subject of a recent article in The New York Times that questioned the adequacy of LPL's compliance procedures.
Over the past 13 years, Mr. Stoltmann has filed about 60 arbitration claims against LPL, more than any other firm except Morgan Keegan & Co. Inc., which has faced numerous claims over failed bond funds. Most of LPL's alleged problems stem from selling away and theft, he said.
djamieson@investmentnews.com Twitter: @dvjamieson
