He lost $250,000 to bad investments and must sell his house.
Dennis Lundgren, of Baldwinsville, spends summer hours reading the Bible in his backyard. He was severely burned in an airplane crash in 1974 and has had dozens of corrective surgeries. He was awarded a settlement after the crash but has lost $250,000 of it to investment scams. After barely surviving a plane crash that burned him so badly he required 50 surgeries, Dennis Lundgren thought he’d put the trauma behind him.
The Baldwinsville man was wrong. A Syracuse investment adviser convinced him to put his $250,000 nest egg from the settlement into a documentary film and a treasure hunting company. That was 2004, and the retired pilot has not seen a dime in returns.
Today, Lundgren, 68, relies on Social Security. He’s put his house on the market, and his wife has returned to baby-sitting.
“I’m wiped out of money,” Lundgren said. “I’m completely destroyed, financially.”
In June, Lundgren filed an arbitration claim with the Financial Industry Regulatory Authority, an independent regulator of securities firms..
Lundgren represented by The Pearl Law Firm of Syracuse and Rochester, is asking for his $250,000 investment back, plus interest and punitive damages. He filed the claim against Ronald H. Sirota, who was a registered representative of MetLife from 2002 to 2007 in its Syracuse office; and Metlife Securities Inc.
Nineteen others who invested in the movie and/or the treasure hunting company through Sirota, have been added to the case, said Birgitta Siegel, one of Lundgren’s lawyers.
Lundgren charges that: Sirota, while working at Metlife, sold him “risky and unsuitable private placements,” and Metlife failed to supervise Sirota, resulting in the loss of his entire investment. The claim alleges Sirota also failed to disclose the risks and misled Lundgren with promises of quick returns.
In the past, Sirota has been fined by regulators, sued by customers; and he was discharged by MetLife in June 2007 after a customer complaint, according to the securities industry’s online licensing database.
Sirota, who runs Strategic Financial Planning in Syracuse, said he plans to vigorously defend his case.
“The only accurate thing in the claim is that he (Lundgren) invested in both projects,” said Sirota, a financial planner and accountant with no affiliation to a securities firm.
The case revolves around what investments a person should be put into and whether they are fully informed about the risks.
The Financial Industry Regulatory Authority, also known as FINRA, requires an investment be suitable for the investor given that person’s education and risk tolerance, said Dennis Hebert, of Hebert Financial Strategies, who teaches ethics to brokers. He is board chairman of the Financial Planning Association of Central New York and the group’s ethics chairman. FINRA also requires full disclosure of the risks, he said.
Some investments require the investor to be “accredited,” which means the investor can withstand high risk. Such an investor typically makes $200,000 annually or has net worth of $1 million or more, according to the Securities and Exchange Commission.
Lundgren’s lawyers contend Sirota violated FINRA rules by recommending an investment that was unsuitable to an unsophisticated investor who wasn’t accredited for that type of risk and couldn’t afford to lose his principal.
“What could be more unsuitable than something so speculative, risky and illiquid,” said his lawyer, Robert Pearl. “If Mr. Lundgren has limited resources and is counting on that money to sustain him, it would be foolish to put it in something you can’t get it out of immediately.”
Lundgren said he didn’t meet the guidelines for the investments.
Sirota said Lundgren met the criteria to invest, it was a suitable recommendation, and he never misled him. Sirota said no one has lost any money in the projects: The movie “Jesus, the Lost Years” and a treasure-hunting venture, “Auguste Expedition LLC.” Sirota said it’s just taking a lot longer to generate returns than his consultants had projected.
“Sales of the DVD are happening every day, and anyone who sticks with the project will be rewarded,” he said. “Everybody will be made whole.”
Sirota said the treasure hunt was always a 10-year deal, and Lundgren knew the risks.
“There was never any lack of disclosure,” he said. “I never said it was risk free. How can anyone invest in a film that’s never been marketed before and expect it to be risk free.”
The tale of how Lundgren was drawn into the investment begins with the accident in the mid-1970s that led him to become a deeply religious, trusting man. Lundgren was helping another pilot practice for a flight test when the man froze at the controls and the four-passenger Cherokee crashed, engulfing Lundgren in flames. Lundgren was trapped in his seatbelt. Flesh was burned off his arms, shoulders and face; he needed multiple skin grafts, including replacement of his lips and outer ears.
Lundgren received a $1,937,000 settlement from Metropolitan Life Insurance. He placed some of it in an annuity with Met Life and invested another chunk with a broker in Buffalo, money he subsequently lost. Scared by that experience, he decided to return to MetLife to invest what he had left.
“They did good by me the first time,” he said. “I’d been burned by a previous broker, and I didn’t want to lose any more money.”
At MetLife, Lundgren said he was referred to Sirota, who he was told specialized in handling larger sums. Lundgren said he told Sirota how he’d lost money and wanted to be sure he didn’t lose what he had left. Lundgren said Sirota charged him $5,000 to look over what the previous adviser had done and concluded there had been improprieties.
Lundgren said he trusted Sirota because he worked for MetLife.
“I’m an excellent pilot, and I’m proud of my skills,” he said. “But I’m not an investor, and I had to trust that somebody knew what they were doing.”
At their first meeting, Lundgren said he bonded with Sirota, discussing religion. Lundgren had become intensely religious after the crash. Sirota showed Lundgren “bits and pieces” of a film project by the Bent Pyramid, a movie production company, about Jesus’ first five years. On the walls in his office were posters promoting the movie “Jesus: The Lost Years.”
Lundgren said Sirota told him it was being filmed in Egypt and needed investors, and then he produced a list of investors, including Lundgren’s own dentist. Lundgren said he was told there’d be a quick turnaround on his $150,000 investment.
“It looked really legitimate,” he said. “Being a Christian, I felt I could invest in this project and also promote my faith. He told me there was room left for one more investor, and that could be me.”
Later in 2004, Lundgren said Sirota told him he had another solid investment, a private placement in a treasure-hunting venture. He said Sirota told him that treasure that had been recovered from the ship was stored in Key Bank’s vault in downtown Syracuse.
Lundgren said Sirota told him the expedition to excavate a ship that had sunk in 1761 off the coast of Nova Scotia needed more investors. Special equipment, including a giant vacuum, was needed to help recover silver and gold coins, jewelry and more. Lundgren said he saw photos of the underwater site, the boat captain and the equipment, and he looked through a huge book with pages of photos of preserved coins.
“It all looked real and sounded legitimate,” Lundgren said. “I had no reason to doubt him.”
Sirota promoted the concept to investors, and in several newspaper accounts in 2004 he was identified as a partner. The partners were quoted saying the excavation was funded by private investors and had cost $1.8 million so far.
Lundgren’s lawyers are also charging that Sirota didn’t disclose that he was a principal in both ventures, a conflict of interest they say.
A documentary about the excavation and recovered artifacts aired on the National Geographic channel in March 2004.
Lundgren said he made several appointments with Sirota to go to Key Bank and see the “treasure,” but an excuse by Sirota always prevented that visit. He said he never got any accounting of where his money had gone. Lundgren said he never saw a penny from that investment.
“I trust people, and I take them at their word, so I really didn’t doubt him,” Lundgren said. “But my wife had a feeling something was wrong.
In July 2007, the Lundgrens attended a swank premiere of “Jesus: The Lost Years” at a Carousel Center movie theater. His wife, Sandy Lundgren, was convinced her husband had been swindled. She’d had doubts for months, but because it was his settlement, she tried to stay out of it.
“All these investors were at that premiere, and I looked around and thought, ‘Could I be that wrong?’” Lundgren recalled.
His wife said she wasn’t fooled by the glitz, glamour and delectable hors’doeurves. She turned to her husband as he bit into a jumbo shrimp and remembers telling him “Eat all you can — there’s your investment.”
Shortly after that, Lundgren said he began calling, e-mailing and going to see Sirota, demanding his money back. He was told that was impossible.
“I was taken by an expert,” Lundgren says today. “He was really, really smooth.
Lundgren is frustrated.
“I’m scared to death,” he says. “Where am I going to get a job at my age, and how am I going to support my family? I feel like this has put me in a very dangerous position at this point in my life.”
Contact Elizabeth Doran at edoran@syracuse.com or 470-3012.
Ways to protect yourself
There are steps investors can take to protect themselves from bad investments. Here are some tips from Dennis J. Hebert, board chairman and ethics chair of Financial Planning Association of Central New York and owner of Hebert Financial Strategies:
Check the broker. Go online to FINRA.org and click on broker check. You can check the background, history and complaints or actions against a licensed broker. “If you see a history of complaints and disputes, that might make you wonder,” Hebert said.
Be skeptical. If a return sounds too good to be true, it probably is. Ask yourself what you are missing. Exercise caution and remember “buyer beware.”
Go to the Net. If it’s something you never hear about, search for it online and see if “scam” pops up.
Avoid the obvious. Don’t bother asking for client recommendations: He or she isn’t going to give you anyone who is dissatisfied.
Meet the adviser. What does your gut tell you? It’s often accurate. Ask a lot of questions, and see if your investment philosophies match. If something makes you nervous, pay attention to that. Get an attorney and accountant involved if you’re unsure.
Don’t be stampeded. Pressure to invest should raise a red flag. You should be given time to think about it. “Very few deals end today,” Hebert said. “And in few cases are you the last investor or one of a limited number. Those are all big red flags.”
Check your investment online. You should be able to access your account and see where your money is going.
Know your risk tolerance. How much money are you willing to lose, and if you have principal you can’t lose, make that clear. Investing in a private placement, or an outside venture, is only for those with a very high risk tolerance.