The investors' attorney is running ads to find others who bought the bonds.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Three local investors who lost money on what they thought were government-backed bonds are suing Butler Wick & amp; Co. and one of its brokers, alleging they committed securities fraud, breach of contract and other offenses.
Larry Frangos of Youngstown, Linda Kosec of Poland and Terrence M. Kaleel of Canfield claim in the lawsuit that they bought the bonds from Butler-Wick broker John Luklan in 1997.
They based their investment decision on his claims that the securities were tax-free, risk-free and backed by the county of Medina, Ohio, with a guaranteed return of between 6 percent and 8 percent.
In fact, though they were labeled County of Medina, Ohio, Subordinated Housing Revenue Bonds, the bonds were unsecured promissory notes, a high-risk, "highly speculative" type of security not backed by Medina and offering no guaranteed return, according to the lawsuit.
The three defendants lost all their money: Frangos, $125,000; Kosec, $10,750; and Kaleel $20,000, a total of $155,750.
Butler Wick Atty. Franklin Bennett said he had just received a copy of the lawsuit Thursday, had not had time to study it and could not comment specifically.
"I can tell you that I'm very confident Butler Wick will put together a vigorous defense in this case," Bennett said.
The lawsuit states the bonds were issued by a private development firm to finance construction of a private nursing home, The Oaks at Medina. The facility burned down while it was under construction, resulting in a total bondholder loss of $10.75 million.
James S. Jones, a Poland attorney representing the three plaintiffs and who specializes in suing security firms, said he is running ads in newspapers all over Northeast Ohio this weekend, seeking other investors who lost money on the bonds.
It's too late to sue the developer or the law firm that put together the bond plan, he said, but investors have until December to sue brokers in the case.
The three plaintiffs are accusing Butler Wick and Luklan of breach of fiduciary duty, fraud and misrepresentation, along with securities fraud and breach of contract,
They are asking for at least $100,000 each in punitive damages, plus repayment of the cash they invested, interest and legal fees. The case is assigned to Judge Maureen A. Sweeney, and the plaintiffs are asking for a jury trial.