NEW YORK--(BUSINESS WIRE)--Zamansky & Associates LLC announced today the filing of a class action lawsuit against David Lerner Associates, Inc. (“David Lerner”), its senior officers, Apple REITs Six through Ten (“Apple REITs”) and their principal, Glade M. Knight, in the United States District Court, District of New Jersey, Case No. 2:33-av-00001. The lawsuit was brought on behalf of all persons who purchased, subscribed or otherwise acquired shares in the five offerings non-traded Apple Real Estate Investment Trusts (Apple REIT Six, Apple REIT Seven, Apple REIT Eight, Apple REIT Nine and Apple REIT Ten) sold by David Lerner. If you were a substantial investor in the Apple REITs, you should contact our office to protect your legal rights and discuss inclusion in the lawsuit.
The Class Action Complaint alleges that David Lerner acted negligently in its sales, marketing and underwriting of more than $3.2 billion of securities in Apple REITs to DLA’s brokerage customers. DLA allegedly sold Apple REITs, which invested in extended stay hotels such as Marriott and Hilton, to many elderly, retired and/or unsophisticated customers, as conservative investments that paid safe and secure returns from earnings. The Complaint alleges that DLA negligently misrepresented the risks associated with the Apple REITs which were not conservative investments, and the source of the returns. The Company also alleges that DLA misstated the fundamental business model of the Apple REITs, and omitted material information about how the Apple REITs were intended to operate.
The Complaint further alleges that DLA negligently failed to disclose to investors that Apple REITs were sold at artificial prices of $11 per share, and that its 7-8% returns paid to investors were not from income or funds from operations but paid from new investor money or borrowing. Since 2007, DLA also allegedly failed to disclose that the Apple REITs were not financially healthy but that they had deteriorated far below the artificial $11 values on investors’ account statements. The Apple REITs also, as alleged, had not paid dividends from earnings for over seven years, and that 7-8% dividends were likely unsustainable in the future. DLA allegedly breached its due diligence obligations, and obligations as financial advisor to customers, and investors have unknowingly suffered large unrealized losses.
For its efforts, DLA received more than $600 million in fees and commissions which represented 60-70% of DLA’s business annually over the last seven years. DLA received 10% of all funds invested, which included underwriting fees and marketing expenses. The Complaint alleges that DLA was unjustly enriched at the investors’ expense.
The Complaint alleges that the Apple REITs and its primary principal, Glade M. Knight, as liable for DLA’s acts under agency law. DLA was the exclusive selling agent for the Apple REITs, and sold to its captive customer base of over 120,000 accounts. DLA used radio, the internet and investor seminars to sell Apple REITs. The Complaint alleges that the financial fortunes of DLA and the Apple REITs were so intertwined that the Apple REITs and Knight are liable for its negligence.
If you were an investor in the Apple REITs through David Lerner, please contact Zamansky at (212) 742-1414, or email at jake@zamansky.com, to discuss the lawsuit or your rights as an investor. Zamansky & Associates, a leading securities arbitration and class action firm, filed the lawsuit along with other prominent class action and securities firms listed below.