Five seniors lose life savings

Monticello broker sued

By FRITZ MAYER

MONTICELLO, NY — Another lawsuit has been filed against Monticello broker Lloyd Barriger and other companies and individuals connected with the Gaffken-Barriger Fund.

A lawsuit filed on October 31 in federal court in White Plains alleges that Barriger and his associates committed fraud against five investors who live in the region or previously lived here. The total investments from the individuals is nearly $600,000 and, according to the complaint, those investments are now worthless. Attorney Ron Litchman, who has offices in Liberty and New York City, filed the complaint.

The Gaffken-Barriger Fund took money from investors and promised a return of at least eight percent. The fund also borrowed money from Textron Financial Corporation. In turn, the fund loaned money to commercial real estate developers and charged them much higher interest rates?about 16 percent. As the real estate market collapsed, the fund came into serious trouble.

Among the various charges contained in the complaint is one that alleges that fund managers “…held out to plaintiffs the fund was a safe, secure, liquid, fully collateralized and secured interest-paying investment; whereas, in fact, to the contrary, [the] defendants managed the fund as a highly-leveraged arbitraging enterprise....”

The complaint also alleges, “As a direct result of [the] defendants’ wrongful conduct, the plaintiffs, each of whom is retired or on the eve of their planned-for retirement, has lost all or most of their entire life savings.”

In a series of letters to investors through the period of 2005 through March 2008, when the fund was frozen and interest payments to investors were halted, according to the complaint, communications to investors indicated that the fund was in good shape and that there was no hint of trouble on the horizon.

In March 2008, when the fund was frozen, a letter from Barriger explained that the fund was caught up with the same financial woes that were sending shock waves through the financial industry. “While we do not make the following comparisons as an excuse, we point out that the fund shares the same problems as many on Wall Street have faced lately, such as Bear Stearns, Merrill Lynch, UBS, Lehman Brothers, Citibank, the State of Florida, local government investment pools and many leveraged real estate funds….”

The complaint alleges that the value of the investment of all five investors is now zero.

The complaint also lists the estate of Andrew McKean as a defendant. According to the complaint, McKean was a vice president of the fund and responsible for the management of the investments.

The complaint alleges that McKean’s death, which occurred on September 28, was a suicide; this has been confirmed by the New York State Police who added, however, that there was no foul play suspected. Further, the suit alleges that McKean, as a key member of the fund, was the subject of a life insurance policy that named the fund as a beneficiary. The suit says, “Defendant Barriger and the other defendants intend to dissipate those insurance proceeds for their own benefit, to compensate themselves or their employees, agents, cohorts, allies, co-conspirators, accomplices and co-defendants, or otherwise, without any meaningful economic benefit to the plaintiffs.” The complaint says that the amount of the policy was not revealed to investors, and that any funds from the policy should be used for the sole benefit of the investors.

The plaintiffs are Martha Graham, Maria Grimaldi, Lloyd Heller, Paula Manzolillo and the Creamton Maple Trust, which is a trust for the benefit of Carl Mills.

The lawsuit follows a similar one filed by Narrowsburg resident Frank Owens, who filed a complaint against the fund on October 1, seeking to recover a $2 million investment.

Barriger did not return a call seeking comment.