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Top Independent Advisor Under Investigation

Top Independent Advisor Under Investigation

Frank Bluestein, an independent advisor formerly of Maximum Financial in Waterford, Mich., had the distinction of being number four on our “America’s Top 100 Independent Advisors” list (click here to see the list) with $1 billion in assets under management. Alas, Bluestein is currently being investigated by Michigan state securities regulators, and, possibly, the SEC.

Bluestein’s CRD reveals that in October, 10 customer disputes were logged against him totaling approximately $1.57 million in alleged damages. According to Bluestein’s CRD, on October 12 the Michigan Office of Financial Regulation notified GunnAllen, his broker/dealer, that Bluestein was being investigated. Because, according to the CRD, he “participated in the sale of certain LLC interests to individuals, unbeknownst and undisclosed to GunnAllen, where those investments are subject to numerous investigations.” In short, from the complaints on his CRD, it appears that Bluestein is charged with selling unregistered securities to his clients. Kathy Fagan, a media spokeswoman for the Michigan Office of Financial and Insurance Services, says she can’t comment on an ongoing investigation. When Registered Rep.’s “Top 100 Independent Advisors” list was created, Bluestein had a clean CRD. And, anyway, the list is based strictly on assets under management. To determine this, Rep. editors survey broker/dealers and fund wholesalers.)

Bluestein was allegedly one of the individuals involved in a fraudulent scheme to entice his clients to invest with Detroit-area resident Edward May, and his firm E-M Management Co. LLC. The SEC filed a lawsuit against May, and his firm, on November 20, charging him with de-frauding $250 million from as many as 1,200 investors between 1998 and July 2007. May was selling shares of limited liability companies, which they claimed had received revenues from telecommunication contracts with Las Vegas hotels, casino and resorts. According to an SEC press release, the contracts were phony

Bluestein could not be reached for comment.

May “relied on a network of individuals, some of who organized ‘investment seminars’ to entice investors to invest with E-M,” the SEC’s release alleges. Investors were told that these limited liability companies were contracted to provide and install telecommunication systems in establishments such as the Hilton, MGM Grand, Motel 6, Tropicana and Sheraton, according to the SEC. Not only did May and E-M allegedly share copies of fake contracts with clients, but investors were also promised returns in the form of monthly payments for a period from 12 to 14 years, or, at the very minimum, investors were “guaranteed,” payments for the first 20 to 24 months after they invested.

Although May and E-M Management are the subject of the SEC’s lawsuit, the SEC offered no comment on whether Bluestein was under investigation other than to say that further investigation into the case of May and E-M Management will continue.

However, a day before the SEC charged Bluestein, Detroit’s FOX 2 television station aired an investigative segment called “Hall of Shame,” featured Bluestein’s alleged fraudulent activity. According to the segment, prior to Maximum Financial shutting it’s doors, a sign in front of Bluestein’s Waterford office read, “When You’re Tired of Losing,” followed by his phone number. FOX 2 reporter Rob Wolcheck caught Bluestein coming out of an unmarked small office, and asked him about the investigation, to which Bluestein replied, “I feel like a victim here too, you know, I loved this man [May]; I thought he was the greatest man in the world.”

Bluestein’s affiliation with GunnAllen started in March of 2005 and ended in October. According to the firm’s National Sales Manager, David Levine, GunnAllen declined to accept Bluestein’s resignation, and terminated his association with the firm. Bluestein was previously registered with registered investment advisor (RIA) Questar Capital Corporation in Minneapolis, Minn., from 2000, and regional Oppenheimer & Co. Inc., from 1999 to 2000. Bluestein, who is no longer registered with FINRA, had a Series 24, and was dually licensed as both a registered rep and as a fiduciary (an investment advisor representative or Series 65). Bluestein’s CRD indicates that he was half owner of Maximum Financial with Louis Wright, who was not named in the dispute, and according to Wright’s CRD, has no consumer complaints against him; Bluestein also has interests in two car washes, rental properties and, beginning this past March, an affiliation with Vertical Lend, a reverse-mortgage company based in Mellville, L.I.

The SEC’s case against May and E-M Management is the latest in a series of 46 actions brought against frauds targeting senior citizens, the agency said.

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