Woodbridge class-action suit expands to Treasure Coast brokers Klager, Gilchrist, Hannah

Jan. 30--An ongoing class-action lawsuit now claims three Treasure Coast brokers helped prop up a $1.2 billion "Ponzi scheme."

The civil suit filed in federal court in West Palm Beach alleges Al Klager of Atlantic Financial Services in Vero Beach, Gordon C. Hannah of Retirement Planning Solutions in Stuart and James H. Gilchrist of Florida Tax Advisory Services in Fort Pierce participated in a "civil conspiracy" to defraud investors by selling investments in Woodbridge Group of Companies.

In a December 2017 lawsuit, the Securities and Exchange Commission dubbed Woodbridge a Ponzi scheme, alleging the company violated multiple securities laws.

Unlike the SEC lawsuit, the class-action suit targets those who sold investments for Woodbridge.

"We believe that those individuals are culpable and have a responsibility to these clients who they solicited investments from," Jonathan Butler, an attorney representing the investors, told TCPalm.

More: Woodbridge's alleged Ponzi scheme hits home for Treasure Coast seniors bilked of savings

"At this point, we're giving the sales reps the benefit of doubt that they weren't knowingly engaged in a Ponzi scheme," Butler said. "At best, they dropped the ball. At worst, they ignored blatant red flags."

Florida's combination of elderly people and their money make it a popular target for schemes like this, Butler said.

"We may well be titled the Ponzi scheme capital of the world in South Florida," Butler said.

The suit was filed Jan. 6, but the three Treasure Coast brokers weren't added until Friday. None of the three Treasure Coast brokers were licensed to sell securities, and the Woodbridge investment itself was unlicensed, according to federal registration documents and the SEC suit.

Klager, whom the suit alleges sold $20 million in Woodbridge investments and made $1.2 million in commissions, told TCPalm he was duped, too.

More: Beware of these scams

"I have my money and my family's money in it, too," Klager said. "I wouldn't have put more of my own money into it back in October if I knew (the bankruptcy) was going to happen."

The amount of money Klager made, according to the lawsuit, shows brokers who sold Woodbridge investments may have profited more from the investment than originally reported.

The lawsuit claims Woodbridge paid brokers such as Klager 9 percent interest on money invested, while brokers offered investors 5 to 8 percent interest and kept the difference. All told, Woodbridge paid its brokers more than $64.5 million in commissions, the lawsuit alleges.

The suit also names Klager's wife, Michele, who is listed as the company's assistant treasurer and secretary as a defendant.

"Al and Michelle Klager's actions in providing a constant and significant source of investor funds were critical to the success of the Woodbridge scheme and conspiracy as it allowed (Woodbridge Owner Robert Shapiro) and Woodbridge to continue to defraud investors throughout the country," the lawsuit says.

Meanwhile, Vero Beach resident Gerald Roy claims to have invested $450,000 in Woodbridge, according to the suit. Others, such as two Palm Beach County residents named in the suit, claim to have invested over $1 million each.

Klager disputes the SEC's distinction Woodbridge operated like a Ponzi scheme.

Asked what research he did to verify Woodbridge's claims before investing other peoples' money, Klager said he visited one of Woodbridge's Beverly Hills properties and pulled public records that allegedly showed the property was worth more than Woodbridge paid.

"They obviously are legit," Klager said he thought at the time. "They had to be."

Klager is confident investors will get their money back; but Butler is more cautious, given some of that money is already gone.

At least $21 million of investor money was spent to finance Woodbridge owner Robert Shapiro's lavish lifestyle, which included private jets, luxury cars and country club memberships, the SEC suit alleges.

"As with any Ponzi scheme, the likelihood of recovering enough assets to make all investors whole is at best a tough proposition," Butler said.

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