Woodbrige Group of Companies, LLC
Houston, TX – December 7, 2017
Lawyers with the Securities Law Firm of SHEPHERD SMITH EDWARDS & KANTAS LLP, www.sseklaw.com (“SSEK”) are investigating claims involving Woodbridge Group of Companies, LLC (“Woodbridge”), a luxury real estate developer based out of Sherman Oaks, California which was started in or around 2012. The company filed chapter 11 bankruptcy on December 4, 2017, and company CEO, Robert Shapiro, resigned Friday, December 1.
Woodbridge advertises that it sells three types of investments: first position commercial mortgages, secondary market annuities, and interests in a commercial bridge loan fund. As part of the sale of these securities, Woodbridge creating numerous investment companies, including:
- WMF Management, LLC;
- Woodbridge Group of Companies, LLC;
- Woodbridge Mortgage Investment Fund 1, LLC;
- Woodbridge Mortgage Investment Fund 2, LLC;
- Woodbridge Mortgage Investment Fund 3, LLC;
- Woodbridge Mortgage Investment Fund PA, LLC; and
- Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth).
Woodbridge is not, and does not appear to ever have been, a registered brokerage firm or investment advisory company. It similarly appears that none of the securities issued by Woodbridge were registered with any state securities regulators or the Securities and Exchange Commission (“SEC”). Despite this lack of registration, it has sold securities across the country, both directly and through a number of third party sales intermediaries. Public filings show that William Holliday, registered with the advisory firm AIO Financial, LLC sold these securities to his clients and clients of his firm. Frank Capuano, a former registered representative of Royal Alliance Associates, Inc. sold more than $1 million in investments in Woodbridge products to his clients. His securities licenses were ultimately suspended by FINRA for his involvement. Similarly, Elizabeth Haskell, working under Iron Will Advisory Group, sold these securities in Pennsylvania.
Due to this lack of registration, as well as concerns about potentially fraudulent sales practices, many securities regulators have taken some form of action against Woodbridge. As far back as May 2015, the state of Massachusetts issued a permanent bar on Woodbridge’s entities from selling securities within that state. Similarly, the Texas State Securities Board issued a cease and desist order against various Woodbridge entities and individuals, prohibiting them from continuing their business practices within the state. Regulators in Arizona, Colorado, Idaho, and Michigan have all opened formal proceedings against Woodbridge in those states as well. According to Woodbridge’s filings in its bankruptcy case, roughly 25 state securities regulators have at least begun an investigation into the company.
The SEC began its own investigation of Woodbridge around September 2016, including possible securities law violations such as the alleged offer and sale of unregistered securities, the sale of securities by unregistered brokers, and the commission of fraud in connection with the offer, purchase, and sale of securities.1 Although this investigation by the SEC has not yet developed into a full blown enforcement action like some of the state investigations have, the SEC has brought formal legal challenges against Woodbridge over its attempts to obstruct the investigation. According to the SEC, Woodbridge has repeatedly refused to comply with subpoenas and court orders to produce emails from the former company CEO, Mr. Shapiro. The SEC has also criticized the fact that, despite purporting to step down as CEO, Mr. Shaprio has been hired as a “consultant” by the new management, and will be paid $2.1M per year in fees during the bankruptcy for that work.2
Between the SEC’s investigation and the bankruptcy filing documents, it appears that Woodbridge, all told, raised over $1 billion in funds from investors. However, Woodbridge has far less than that in assets. Woodbridge claims in its bankruptcy filings assets totaling between $650-750 million. Nowhere in SSEK’s investigation has it been disclosed where the rest of the investors’ money went. To compound the problem, promissory notes issued by Woodbridge are also currently in default of payments due. While it is currently unclear the extent of the damage that Woodbridge investors may suffer, it has become increasingly apparent that the problems are both wide-spread and devastating for those who entrusted Woodbridge with their assets.
There appear to be numerous problems with Woodbridge and its operations. However, Woodbridge is not the only company that may have legal obligations related to these investments. Brokers and investment advisors, as well as the companies that employ them, have legal obligations related to any investment they recommend to a client. For one, they are required to conduct due diligence on potential investments before offering them for sale, so that the advisor can understand the risks and characteristics of the potential investment. They must conduct this due diligence before they offer that security for sale to anyone. The advisor must also ensure that the recommendation to purchase is suitable and appropriate for the particular client they are recommending it to. This requires them to evaluate the risks and potential benefits of the investment, and compare those to the risk tolerance and investment objectives of each client. If an advisor failed to properly fulfill those duties, they might be just as responsible as Woodbridge for any losses investors suffered or suffer in the future related to these investments.
If you are or were an investor in Woodbridge and have any information about the claims being made about this investigation or Woodbridge Group, please contact the law firm of Shepherd, Smith, Edwards & Kantas LLP. All communications will be kept strictly confidential, and you will not be billed in any way for this communication.
Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. For more than two decades, our firm has represented thousands of investors nationwide to recover losses. We have represented clients in federal and state courts, as well as arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions.
- See Declaration of Lawrence R. Perkins in Support of the Debtors’ Chapter 11 Petitions and Requests for First Day Relief at ¶ 47-48, In re: Woodbridge Group of Companies, LLC, et al., No. 1:17-bk-12560 (Bankr. Del.).
- See SEC’s Supplement in Support of its Motion for Contempt at 3, SEC v. Woodbridge Group of Companies, LLC, No. 17-cv-22665 (S.D. Fla.).