Barriger wins Round One

Legal battle to recoup risky investments continues

By FRITZ MAYER

WHITE PLAINS, NY — A federal judge has sided with the defendants in one round of an ongoing legal battle involving stockbroker Lloyd Barriger.

Barriger and the Gaffken-Barriger Fund are being sued in two separate suits by Frank Owens, a resident of Tusten, and five other area residents. The plaintiffs claim that Barriger fraudulently induced them to invest in the risky fund and they asked the court to appoint a receiver to ensure that assets of the fund would not be dissipated, thus preventing the plaintiffs from collecting a judgment should they win the lawsuit.

In an order issued in U.S. District Court in White Plains on March 23, the judge said no. In his ruling, Judge William Conner said that there is already significant oversight of the fund liquidation by at least three outside entities. Also, Conner said, there are no pending criminal charges against Barriger or the other defendants. He wrote, “This case presents little danger of management breakdown.”

More importantly, Conner wrote that the appointment of a receiver would not be appropriate because a majority of fund members indicated that they do not want that to happen. Fifty-five members of the fund provided sworn statements opposing the appointment of a receiver. This occurred after a meeting of some 65 investors and creditors on January 29, during which the defendants discussed the implications of appointing a receiver. Conner wrote, “We will not use our equitable powers to resolve a dispute among investors in favor of a miniscule majority.”

The two lawsuits were filed in October last year. Payments and withdrawals from the fund were halted in March 2008.

The Gaffken-Barriger fund took money from investors, who were promised a return of at least eight percent. The fund also borrowed money from Textron Financial Corporation and loaned money to commercial real estate developers and charged them interest rates of about 16 percent.

The investors claim, among other things, that they were misinformed about the nature of the fund. Owens lost $2 million as a result of the freezing of the fund, while the other five plaintiffs lost a total of about $600,000. Owens’ lawyer said despite this ruling, the lawsuit would most definitely go forward.