One of the nation's top-producing independent brokers is under investigation by Michigan securities regulators.
One of the nation's top-producing independent brokers is under investigation by Michigan securities regulators. The broker's attorney said his client, Frank Bluestein, has lost "substantial amounts" of his own money through bad investments.
This summer, Mr. Blue-stein was ranked by Registered Rep, a trade publication, the fourth-largest independent-contractor registered representative, with $1 billion in client assets. His practice, Maximum Financial Group, is based in Waterford, Mich.
Industry sources said Mr. Blue-stein's annual fees and commissions were close to $7 million. According to an attorney familiar with the matter, 1,500 people in-vested in a series of private partnerships that paid monthly dividends that stopped about six months ago — many of them through him.
The clients' investments ranged from $10,000 to $1 million, said Bill Shepherd, an attorney with Shepherd Smith and Edwards LLP of Houston. The law firm has interviewed about 100 clients who invested in the partnerships, he said.
Attorneys with knowledge of the case said that the investors bought the partnerships over a period of between three and 10 years. Attorneys also characterized the partnerships as investments in real estate, and telephone and Internet leases to hotels.
Over the last decade, Mr. Blue-stein has been affiliated with Gunn- Allen Financial Inc. of Tampa, Fla., Questar Capital Corp. of Golden Valley, Minn., and AXA Advisors LLC of New York. Last month, he resigned from GunnAllen — with which he had been affiliated since 2005 — company officials said.
Mr. Bluestein "denies culpability," said his attorney, Matthew Leitman of Miller Canfield Paddock & Stone PLC in Detroit. "Frank and his family invested substantial amounts and lost substantial amounts."
"He's not a wrongdoer," said Mr. Leitman, who said the investments in the private partnerships were offered by a colleague, Ed May.
Mr. May's attorney, Harold Gurewitz of Detroit, said he could not make any comments about the case.
The Michigan Office of Financial and Insurance Services is "investigating Mr. Bluestein," said a spokeswoman, Kathy Fagan, who added that it is policy not to reveal further details of a case during an investigation.
Also as a matter of policy, the Financial Industry Regulatory Authority of Washington and New York does not confirm or deny if an individual is under investigation, noted Herb Perone, a spokesman.
Regulators haven't charged Mr. Bluestein in any lawsuits or complaints, and Mr. Shepherd noted that the Michigan probe is "brand-new."
The 1,500 investors in the partnerships didn't all invest through Mr. Bluestein, he said.
Two officials with GunnAllen said that Mr. Bluestein didn't disclose any potential outside business activity to the firm, which ran two audits of his office during his tenure.
"GunnAllen did not authorize, endorse, sponsor, approve, sanction, participate or benefit in any way from this activity," the firm's general counsel and executive vice president, David Jarvis, and national sales manager, David Levine, said in a joint statement.
The two said the firm learned of the investments early last month and promptly notified regulators. "After interviews with Maximum Financial employees, GunnAllen now reasonably believes this activity was hidden from it."
Questar Capital, with which Mr. Bluestein was affiliated from 2000 to 2005, hasn't received an inquiry from Michigan regulators, said Juli Wall, a spokeswoman for Golden Valley, Minn.-based Allianz Life Insurance Company of North America, which acquired Questar in 2005. Questar is "not aware of any investigation" involving Mr. Blue-stein, she said.
Jo Ann Tizzano, a spokeswoman for AXA Advisors, confirmed that Mr. Bluestein worked with the firm until the end of 1998, but she declined to comment on the investigation by Michigan regulators.
Bruce Kelly can be reached at bkelly@crain.com.
