NEW ULM - Brown County District Court Senior Judge Greg Anderson took motions under advisement Friday, during a hearing of one of several lawsuits involving the sale of SBM investment certificates.
A lawsuit was filed in Brown County District Court on Feb. 19 by the Farrish Johnson Law Office of Mankato, on behalf of Lester W. Reinarts of Sleepy Eye, involving 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.
The complaint argues 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, the suit stated.
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 by 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.
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.
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 Company consented to various undertakings, including but not limited to engaging an independent compliance and accounting consultant.
After a period of restructuring, the settlement allowed SBM Company to pursue the resumption of normal business operations.
On Jan. 13, 2012, Judge John R. Rodenberg approved a motion to enforce a settlement a settlement agreement involving SBM certificates in the Estate of Florence C. Swanker for $39,000 in Brown County District Court. Rodenberg denied a subsequent motion by plaintiffs for attorneys fees.
On April 13, 2012, Braulick, Roeser and Investment and Insurance Services of New Ulm, Ltd., filed a third-party complaint against SBM Certificate Company in Brown County District Court.
The complaint alleged that SBM repeatedly sent marketing material and information to Braulick, Roeser and their firm that SBM face-amount certificates were a less risky way to investors to invest money and were a "fixed-income investment product" backed by reserves they were required to maintain by law.
The complaint added that SBM did not notify the plaintiffs they had not maintained adequate reserves and misinformed them by claiming they had $2,636,915 in excess reserves in a 2004 report.
In the suit, Braulick and Roeser claim they had no way of knowing they had received false and misleading information, and were entitled to indemnity from SBM, and asked for a judgment in their favor.
Fritz Busch can be e-mailed at firstname.lastname@example.org.