Employer to pay $10M

AP

> Comment on this story

OMAHA, Neb. (AP) — A former employer of two ex–brokers who face fraud charges has agreed to pay $10.3 million in a settlement with 249 people over the improper selling of risky investments.

An arbitration order filed by the Financial Industry Regulatory Authority last week describes the terms of the settlement between VSR Financial Services Inc. and former clients of Rebecca Engle and Brian Schuster.

Both Engle and Schuster were charged with eight felony counts of securities fraud earlier this month. Several lawsuits have been filed against them and their former employers, but many former clients pursued claims in arbitration because they were barred from suing by the terms of their investment agreements.

Court documents filed in the lawsuits and criminal complaints say investors were defrauded out of at least $20 million.

Most of the investors involved in the arbitration or lawsuits wanted conservative, stable investments with little risk because they were nearing retirement age or were already retired when they got involved with Engle and Schuster. They say the brokers instead invested their money in high–risk enterprises in Florida and never fully explained the risks.

Lawyers who represent the investors declined to comment on the arbitration award. Originally the investors had asked for VSR to pay $26 million in damages.

VSR officials, who are based in Overland Park, Kan., did not immediately respond to a message seeking comment left late Wednesday.

Engle and Schuster, who played fullback for Nebraska from 1992 to 1996, worked with each other in Nebraska City at times between 2000 and 2007. The brokers were affiliated with at least three different companies — Capital Growth Financial LLC, Wachovia Securities LLC and VSR — during those years.

Arbitration claims are still pending against several of the other companies.

The investors say Engle and Schuster sold securities in American Capital Corp. and Royal Palm. According to court documents, Engle and Schuster described the Florida companies in glowing terms, but they were actually quite risky investments.

Those two Florida companies were both bought by PrimEdge Inc., and Schuster became the president and chief executive of PrimEdge. But PrimEdge does not appear to be in business anymore, and the Florida Secretary of State’s office lists PrimEdge as an inactive corporation.

Engle lost her securities dealing license in February 2008 as part of an agreement with state regulators.

Last summer, Engle filed for Chapter 11 bankruptcy protection in Arizona. In the bankruptcy filing, Engle said she had assets worth between $500,000 and $1 million, but estimated that she owes between $10 million and $50 million.