Neb. Supreme Court rules brokerage owners should be liable for firm’s unregistered securities

Neb. high court says investors should get $120,000

a LINCOLN, Neb. — The Nebraska Supreme Court said in a ruling released Friday that the owners of Freedom Financial Group knew enough about the improper way an investment was sold to be held liable for some investors’ losses.

The court said the evidence contradicted Westley, Carolyn and Patrick Pierce’s explanation that they were duped by the Capital Equity Fund when the Pierces agreed to sell stock in that company.

The court said the Pierces should have known that unregistered investments in Capital Equity were being sold with promises of little risk and annual returns of 11 percent because their Omaha-based Freedom Financial Inc. was the broker-dealer for the Capital Equity stock.

As a result, the Pierces will have to pay Donald and Marilyn Hooper of Omaha nearly $119,000 in restitution and attorney fees.

The Pierces’ attorney, Jerry Katskee, did not immediately respond to a message left Friday morning.

The Hoopers’ attorney, Clifford Lee, said his clients are pleased the earlier ruling was upheld.

The Hoopers should not have even qualified to invest in the privately placed securities because they weren’t experienced investors and didn’t have more than $1 million in assets. The school administrator and housewife had about $400,000 in assets when they invested in Capital Equity in 2002, court documents said.

The Hoopers were looking for a safe, conservative option for their retirement investments at the time.

The Hoopers have been able to recover some money by selling their Capital Equity Fund stock, and they won an earlier arbitration ruling against the Pierces’ Freedom Financial Inc. and the two representatives who sold them the investment. It’s not clear how much the Hoopers have been able to collect from those earlier orders.

The Supreme Court said there wasn’t enough evidence to determine how much the Hoopers might have received through other judgments, so it didn’t address whether those earlier rulings should reduce the amount the Pierces owe.

Online:

Nebraska Supreme Court decision: www.supremecourt.ne.gov/opinions/2010/june/jun25/s09-796.pdf

(This version corrects background of the case to show that Capital Equity did not file bankruptcy and clarify earlier award.)