Texas Regulator Charges Three Businesses with Securities Fraud

An emergency cease-and-desist order has been issued by the Texas Securities Commissioner against three businesses in Texas and California for not disclosing their companies’ history of state and federal regulatory sanctions while selling unregistered securities backed by real estate loans.

The order was filed against Woodbridge Mortgage Investment Fund 3 LLC and executive Robert Shapiro, of Sherman Oaks, Calif.; Old Security Financial Group Inc. and executives Donald MacKenzie and Robert “Lute” Davis, of Spring, Texas; and BP Financial & Tax Design Group and executive Brett Pittsenbargar, of Austin, Texas.

According to the order, Old Security Financial and BP Financial offered for sale investments in Woodbridge’s First Position Commercial Mortgage Note Program. The Woodbridge Note program purportedly pools investors’ funds into commercial loans secured by real property and pays investors a fixed monthly return.

Old Security Financial and BP Financial advertised the Woodbridge Note program in print and on radio, but allegedly failed to disclose regulatory sanctions against Woodbridge. Earlier this year, Massachusetts regulators sanctioned three Woodbridge funds for violating securities laws and ordered the company to pay a $250,000 civil penalty and offer rescission to investors. One of the programs sanctioned in Massachusetts was the Fund 3 program cited in the Texas Securities Commissioner’s order.

In addition, the order notes that MacKenzie of Old Security Financial has a 14-year history of state and federal regulatory sanctions, including sanctions for operating as an unregistered broker-dealer in selling unregistered securities. In Texas, MacKenzie was sanctioned in 2012 for engaging in the sale of life settlements without being licensed.

The order also charges that the individuals and companies named are not disclosing financial risks associated with the funding of commercial loans secured by real property and have failed to disclose material financial details that would demonstrate Woodbridge’s ability to pay investors. The Texas order also claims that none of the individuals listed is licensed to sell securities in the state.

The Cogdell Law Firm is a boutique law firm focusing on large, complex business and criminal financial-related litigation, including white collar criminal defense, securities fraud, health care fraud investigation, criminal appeals and state criminal defense. When results matter most, contact Dan Cogdell at (713) 426-2244 or dan@cogdell-law.com.