Five states claimed securities violations against Woodbridge

Ryan Summerlin
Glenwood Springs Post Independent
Aspen Glen is a high-end residential area 3 miles north of Carbondale.
Chelsea Self / Post Independent |

Woodbridge Group, a national investment firm with a major Roaring Fork Valley real estate presence that is under fraud investigation by the U.S. Securities and Exchange Commission, has in recent years also faced litigation in several states over claims of securities violations.

These states include Arizona, Texas, Massachusetts, Pennsylvania and Michigan. These cases alleged that Woodbridge offered and sold unregistered securities, didn’t provide investors with information required by law and in some cases alleged that Woodbridge also had defrauded investors by not providing full disclosure.

The fraud allegations, in at least some of these state cases, appear to revolve around the company failing to disclose to investors that securities agencies in other states had ordered it to stop selling unregistered securities and that Woodbridge had failed to disclose investment risks.

Several of these states issued cease-and-desist orders, requiring the firm to stop offering or selling unregistered securities or otherwise violating securities laws.

To date, Woodbridge has settled actions in Pennsylvania, Texas and Massachusetts, while it is still in settlement discussions in other states, Robert Shapiro, Woodbridge president, wrote in an email to the Post Independent.

“So far every state action that has been settled was settled with no admission of guilt nor finding of fraud,” said Shapiro, who lives part time in Aspen Glen, the epicenter of the company’s real estate holdings in the valley.

Meanwhile, at the federal level, the SEC has for the past year been investigating whether Woodbridge has been defrauding its investors. The SEC “is investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities,” according to a court filing.

Most recently, the SEC applied to a U.S. district court in Florida for an order forcing 235 Woodbridge-affiliated limited liability corporations to fully comply with a subpoena for documents​. ​which the agency says are critical to determining whether the company “is operating a fraud on its investors.”

The SEC says the 235 LLCs are “interwoven into the structure of the products Woodbridge offers for investment.” SEC investigators believe that these companies are “owned and/or controlled by Woodbridge’s President, Robert Shapiro.”

In his email, Shapiro said, “Woodbridge notes that the SEC expressly concedes that the agency ‘has not concluded that any individual or entity has violated the federal securities laws.’” Asked if he owns or controls the 235 subpoenaed LLCs, he wrote “no comment.”

“We have provided over 4 million pages of documents and continue to cooperate with their overly broad request for documents,” he wrote.

After those LLCs did not respond to the subpoena, the SEC also applied for a court order forcing their compliance.

“Woodbridge has raised more than $1 billion from several thousand investors nationwide through multiple investment offerings using various forms and structures,” according to the SEC.

In 2015, in Massachusetts alleged the company was selling unregistered securities. The Massachusetts securities division ordered the company to pay a $250,000 civil penalty and issued a cease-and-desist order. Later in 2015, the Texas State Securities Board also accused the company of offering unregistered securities and of failing to disclose to investors the Massachusetts order, as well as various investment risks. The Texas board issued an emergency cease and desist order.

The Arizona Corporation Commission alleged that Woodbridge had been selling unregistered securities, had conducted transactions with unregistered “dealers or salesman” and had committed fraud in connection with the sale of securities. A cease-and-desist order from the Arizona commission says that the company committed fraud by not disclosing the previous accused violations in Texas and Massachusetts. Before a couple of Arizona investors put in their money, “Woodbridge Group misrepresented to them that, ‘Woodbridge and its predecessors have never been found to have violated any securities law,’” according to the commission.

Earlier this year Pennsylvania’s Department of Banking and Securities alleged that a Woodbridge company used an unregistered agent to sell securities. The department fined the company $30,000 and ordered that it comply with the state’s securities act.

In August, the Michigan Corporations, Securities and Commercial Licensing Bureau also issued a cease-and-desist order against the company. The bureau found evidence that Woodbridge Mortgage Investment Fund had sold “First Position Commercial Mortgages,” in which about 230 investors had invested more than $14 million. However, those “notes were not federally covered, exempt from registration or registered,” according to the bureau’s court filing.

Investigators from Michigan also asserted that Woodbridge failed to give investors sufficient “financial information to demonstrate its ability to pay returns promised by its advertisements” or information about various cease and desist orders in Massachusetts, Texas and Arizona.

The Michigan bureau also ordered the company to cease and desist selling the unregistered securities and pay a $500,000 civil fine.

“Woodbridge continues to offer, in all the states where it operates including (Pennsylvania, Texas and Massachusetts) other investment opportunities in the form of securities that (pursuant to the filing of private placement memoranda with the SEC) are exempt from registration under federal law,” Shapiro wrote.


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