For the past several years the majority of Mr. Hermann’s practice has focused on protecting the rights of clients who have been defrauded through a variety illegal and/or overreaching investment offerings. Many of Mr. Hermann’s clients are elderly retirees who are unaware of the market complexities and find themselves easily persuaded by misleading presentations of savvy industry insiders. Although al legitimate investments contain some element of risk, individuals offering advice about the soundness of a financial investment are required to identify all of the material factors associated with the recommended investment. In particular, individuals offering financial advice must be knowledgeable with regard to the details of the investment, understand the methodology by which the returns are generated, determine that the investment is suitable given the client’s overall goals and/or objectives, disclose any interest that they may have in the transaction including any fees and/or commission that they earn as a result of the sale. If the advisor fails to perform any of the foregoing, they have violated their duty of care and are liable for any resulting damages.

 

Business Opportunity Fraud - a/k/a Ponzi Schemes

A “Ponzi scheme” is named after Charles Ponzi, who is believed to be the inventor of this type of scam.  Early investors, are lured by promises of high rates of return within a short period of time. The scams are often touted as limited investment offerings in real estate, natural resources, new technologies, or any other type of investment a creative perpetrator can come up with.  The hallmark of a Ponzi scheme is that early investors typically receive their promised payouts.   Unfortunately the earnings paid to the early investors are from the later “downstream” investors. Ponzi schemes may continue to grow for several months, or possibly several years, before people eventually catch on, and the scheme collapses.

 

Orville Jay Schwark, Jr. v. William Harwell, Jr. William Harwell, Jr., the son of noted Detroit Tiger’s broadcaster Ernie Harwell, solicited Mr. Schwark for a business opportunity in what were described as internet kiosk terminals. After investing his entire life savings into the business opportunity, Mr. Schwark soon learned that the internet kiosks that he purchased didn’t exist and that the entire operation was a ponzi scheme. Authorities including the Federal Bureau of Investigation and Federal Trade Commission seized bank accounts of several of the operators who eventually pled guilty to various wire and mail fraud charges. On behalf of his client, Mr. Hermann was able to obtain a judgment against the local agent (i.e. Mr. Harwell) for the entire amount that his client invested into the illegal Ponzi scheme.

 

Stock and Securities Fraud

Generally speaking, securities fraud consists of deceptive practices in the sale of registered stock or stock offerings in violation of State and/or Federal Securities Laws. The term also encompasses a wide range of other actions, including failure to disclose material terms regarding the risk of a security or failure to ensure that the perspective security matches the individual investor’s individual need (i.e. “suitability”), the practice of unnecessary trading activity for the primary purpose of generating fees and/or commissions (i.e. “churning”). Most securities fraud cases are submitted to mandatory arbitration proceedings through the Financial Industry Regulatory Authority (FINRA).

 

Mortgage and Real Estate Fraud

Mr. Hermann has handled a number of recent cases exposing the fraudulent practices of real estate agents, appraisers, developers, and lending institutions  who collaborate to sell undervalued or non-existent real property to  unsuspecting victims. The schemes take a number of different forms, but are typically perpetrated by inside participants whose primary objective is to generate lucrative commissions and/or fees on the transaction which are often redistributed among the participants in the form of “kick backs.”

 

Financial Exploitation of the Elderly and/or Vulnerable Adults

Mr. Hermann has handled a number of high profile cases involving the financial exploitation of elderly individuals who due to their physical or mental limitations are susceptible to the financial exploitation by individuals with whom there is a relationship of trust and/or confidence. Under MCL 750.174a, financial fraud affecting the elderly constitutes criminal embezzlement. The act provides in pertinent part:

 

A person in a relation of trust with a vulnerable adult shall not through fraud, deceit, misrepresentation, coercion, or unjust enrichment obtain or use or attempt to obtain or use a vulnerable adult’s money or property to directly or indirectly benefit that person knowing or having reason to know the vulnerable adult is a vulnerable adult.

 

A person of trust includes any person who assumed responsibility for the management of the vulnerable adult’s money or property. MCL 750.174(c). Although the statute does not contain a civil remedy provision, it defines the activity (financial fraud of the elderly) as embezzlement, which is actionable under Michigan’s conversion statute which is set forth  in  MCL 600.2919a and provides in part:

a person damaged as a result of as a result of (1) Another person’s stealing or embezzling property or converting property to the other person’s own use,” and/or (2) another person’s “buying, receiving, or aiding in the concealment of any stolen, embezzled, or converted property,” may recover three times the amount of actual damages sustained, plus costs and reasonable attorney fees.

 

In 2016, Mr. Hermann successfully represented the estate of a deceased Oakland County woman seeking the return of her home residence in Franklin, Michigan that was transferred  to her male caregiver while she was undergoing hospice treatment weeks before she her passing. Mr. Herman was able to demonstrate that at the time of the conveyance, the decedent meet the definition of a “vulnerable adult”  due to the advance stages of her cancer and narcotic medication being administered by hospice. Through discovery, Mr. Hermann also discovered that the conveyance was made by her male caregiver and/or companion under a Power of Attorney which by operation of law creates a presumption of “undue influence.”