The Quad City Times, (Stephen Elliott)
A Rock Island financial adviser allegedly defrauded at least 10 investors, including seven in the Quad-Cities, out of millions of dollars through the sale of unregistered oil and gas securities described as “surefire investments” and “guaranteed.”
As a result, the alleged victims are seeking more than $4.9 million in damages from Rock Island financial adviser Stephen Walker and his former company, Linsco/Private Ledger Corp. A complaint filed with the Financial Industry Regulatory Authority also seeks an undetermined amount of punitive damages for LPL’s “complete failure to supervise Walker.”
Mr. Walker formerly worked out of Quad City Bank and Trust in Moline and Sauk Valley Bank in Sterling, allegedly pressuring and misleading investors, according to the complaint.
Damages are being sought through the Financial Industry Regulatory Authority’s arbitration process in Chicago. Andrew Stoltmann, a Chicago attorney representing investors, said anyone who opens an account at any brokerage firm also agrees to binding arbitration as a first step to recovering damages.
Mr. Stoltmann said seven of the 10 clients of Mr. Walker’s were from the Quad-Cities area. Three others were from the Sauk Valley area.
He said his clients were told by Mr. Walker to invest in Aspen Exploration Inc., a Texas-based oil exploration company. Mr. Walker allegedly sold more than $25 million in unregistered securities for Aspen, according to Mr. Stoltmann.
“All of the money is gone and people sustained huge, huge losses,” Mr. Stoltmann said. “They were told not to worry, that their investment was going to come through.
“They were told this by Walker and other people affiliated with Aspen.”
Mr. Stoltmann‘s complaint alleges, “Walker’s efforts in selling the Aspen related security for Linsco clients was well known at Linsco, Sauk Valley and Quad City Bank.”
According to the complaint, one couple from the Quad-Cities invested more than $500,000 in the securities, financing part of the investment with a $100,000 loan from a 401K plan and a $108,000 home equity loan.
Mr. Walker could not be located for comment.
A spokeswoman for Quad City Bank and Trust confirmed Mr. Walker is no longer there. She referred inquiries to LPL attorney Peter Gillies in Boston. Mr. Gillies could not be reached for comment.
“Walker told the claimants for every $25,000 they invested in one of the Aspen wells, they would received between $800-$1,000 monthly for the next 20 years,” the complaint said.
Jim Nix, an attorney with the Illinois Secretary of State’s Security Department, said he filed an emergency order to suspend Mr. Walker’s broker’s license. He said LPL terminated Mr. Walker’s employment.
“The department is working on a case against Mr. Walker that would revoke his license,” Mr. Nix said.
Those hearings are scheduled to take place July 14 and 15 in Chicago. Mr. Nix’s agency regulates the registration of all stock brokers and investment advisers in the state, he said.
No criminal charges have been filed in connection with the case.
Mr. Stoltmann is requesting damages of $3,785,539 on behalf of all of his clients. He is also seeking an addition $1,126,269 for four of those clients under the Illinois Elder Abuse Statute.
Mr. Stoltmann said the case will probably be decided in 2009 by the Financial Industry Regulatory Authority.