NEW ULM - A local investment and insurance services firm that allegedly sold, managed and gave advice on various investments, including SBM certificates, faces a five-count lawsuit seeking more than $50,000 in damages and related costs.
A lawsuit filed in Brown County District Court Wednesday by the Farrish Johnson Law Office of Mankato, named Lester W. Reinarts of Sleepy Eye vs. Laurie A. Braulick and Alan F. Roeser, representatives of Investment & Insurance Services of New Ulm, 1 S. Minnesota St.
According to the complaint, Roeser sold, managed, and gave advice to Reinarts concerning four types of SBM certificates issued for five, seven and ten-year terms, in April 2001.
The complaint listed a five-year certificate issued on April 27, 2001 with a 7.1 percent interest rate and $14,399.06 face value; a seven-year certificate issued on April 27, 2001 with a 7.9 percent interest rate and $15,000 face value; and 10-year certificates with 8.0 and 8.25 percent interest rates and $50,000 and $45,838.94 face values respectively.
The lawsuit alleges that Roeser told Reinarts the SBM Certificates were "guaranteed," safe investments.
Eventually management and advice for Reinarts' SBM certificates was turned over to Braulick who was still working for Investment & Insurance Services of New Ulm, Ltd.
According to the complaint:
Roeser and Braulick knew or should have known at the time of sale that SBM certificates were questionable, risky, unsafe investments.
That they had an obligation to disclose that the principal officer of SBM had been under investigation and was the subject of criminal charges relating to fraudulent activities affecting the liquidity and worth of SBM certificates.
Defendants continually reassured the plaintiff that he would be able to receive the face value and interest owed on SBM certificates.
SBM Certificate Company failed to pay the surrender value and unpaid interest owed on each certificate.
The lawsuit alleged negligence, breach of fiduciary duty, negligent misrepresentation, fraud, and violation of securities regulations.
Mankato attorney Patrick Casey of the Farrish Johnson law office said he has been contacted about SBM certificates from people as far away as Nevada.
"My concerns are that the statute of limitations on these claims may run out and that the certificates are not worth anything...we're pursuing other claims regarding this," Casey added.
As of Friday morning, a response to the lawsuit summons had not been received in Brown County District Court.
An earlier federal lawsuit alleged SBM certificate Company and several other firms owned or controlled by Eric M. Westbury of Silver Spring, Md, did not maintain minimum cash or qualified investment reserves to cover $33 million in face-amount certificates held by more than 2,000 investors, according to court documents.
On March 7, 2011, SBM Financial Group, LLC, announced a settlement in U.S. District Court for the District of Maryland. As part of the settlement, SBM companies consented to various undertakings, including but not limited to engaging an independent compliant and accounting consultant.
After a period of restructuring, the settlement allows SBM Companies to pursue the resumption of normal business operations.
On Jan. 13, 2012, a lawsuit involving the sale of SBM certificates involving the Estate of Florence C. Swanker vs. Laurie A. Braulick and Investment & Insurance Services of New Ulm, Ltd. was settled for $39,000 in Brown County District Court.
Judge John R. Rodenberg ordered that the SBM certificates are an asset of the Swanker Estate that initially sought $62,000 due on certificates, according to court documents.
The lawsuit remains a court matter. A motion hearing for the case is set for 4:15 p.m., Tuesday, Feb. 21 in Brown County District Court.
Fritz Busch can be e-mailed at firstname.lastname@example.org.