Broker James Michael Johnson faces a two-year suspension and $50,000 fine for negligent misrepresentations and omissions.
In November 2015, James Michael Johnson agreed to FINRA sanctions and the entry of findings that he made negligent misrepresentations and omissions regarding securities investments to customers of his member firm without the firm’s knowledge.
Johnson allegedly approached firm customers, a married couple, offering them a 10-percent interest in a land development company in West Virginia. The company, West Virginia Farm Properties, LLC (WVFP) was formed to develop rural land into a residential neighborhood. In his discussion with the couple, he led them to believe:
- All development costs had been covered
- Houses were ready to be built on the property
- The couple’s investment would help WVFP start building immediately
- The house-building infrastructure was ready to go
Unfortunately for the couple, all of these statements were inaccurate.
In addition to the statements during the discussion, Johnson provided printed materials to the couple promising “$5 to $9 million” (in his own handwriting) as profit potential. He also provided a handwritten note promising that their expected profit in just three years would be $2 million.
Johnson also failed to disclose material facts to the couple, including the fact that:
- WVFP had only days earlier purchased from Johnson and another WVFP member the same interest being sold to the couple at a substantially lower price than the couple was being charged
- Seven months earlier, the same interest in WVFP was sold to another investor for substantially less than the couple was paying
- WVFP, for the months leading up to the couple’s purchase, had been covering costs through capital calls on its members
- The WVFP project did not have full approval from the county, and in fact, was appealing before the West Virginia Supreme Court
- Johnson’s associate and original investor in WVFP had been indicted on Ponzi scheme charges and sold his interest at the request of the other owners only three months earlier
- WVFP had $8.3 million in outstanding debt
- One of WVFP loans was in arrears, facing examiners pressuring the bank regarding the loan
To make matters worse, Johnson then convinced the couple to purchase a $70,000 note from WVFP to retain an expert to secure Housing and Urban Development (HUD) financing for the project, promising that the HUD financing was “free money.” At no point did the $70,000 get directed to pay the expert nor did the couple’s note ever get repaid.
Johnson has been the subject of multiple securities arbitration claims including one claim that had damages granted of $600,000.00. Johnson was employed by Commonwealth Financial Network until April 2012. From March 2012 through November 2013, First Allied Securities, Inc employed him.
Unfortunately, this situation is not uncommon in the securities investment world. Silver Law Group is here to help investors who find themselves victim to fraudulent and/or misleading securities advisors. Our team of attorneys represents investors nationwide and is ready to help you explore your rights and potentially recover your financial losses.