Summary judgment affirmed in unregistered securities case

In Partington v. Pennington, the Fourth Circuit in an opinion by Judge Luttig, joined by Judge Shedd and Senior Judge Michael of the W.D. Va., affirmed the rulings by Judge Turk in a complex case brought by a group of clergy, lay persons, and churches, claiming they were ripped off in the investments made on their behalf. Judge Turk ruled, among other things, that the lead plaintiff was without standing to raise some of its claims under the federal securities laws.

The Court described the allegations about what happened to the money:

"Partington claims that, in 1999, one R. Ray Levy approached Charterhouse and induced it to purchase viatical insurance contracts as investments for the trusts Charterhouse administered, promising above-market returns. Clients of Charterhouse apparently invested more than one million dollars in these viatical contracts; it invested more than $34,000 in funds from the Partington trust. The viatical contracts were purchased from Financial Federated Title & Trust ("FinFed") using a broker controlled by Levy. In late 1999, Partington received notice that the entire investment from his trust in the viatical
contracts was lost. All in all, of the 115 million dollars nationwide that was given to FinFed for the purpose of purchasing viaticals, only about six million dollars was actually so used.

Allegedly, Levy also persuaded Charterhouse to advise its clients to purchase senior notes from defendant U.S. Capital Funding, Inc. ("U.S. Capital"), a company Levy controlled, which notes purported to fund U.S. Capital’s loans to well-known companies. Partington claims that Charterhouse used over $52,000 in funds from the Partington trust to purchase such a note from U.S. Capital, and that Charterhouse defendants persuaded numerous other ministers to invest in these notes. He asserts that members of his proposed class purchased over seven million dollars of these notes. U.S. Capital is now in bankruptcy, and has refused Partington’s requests for payment on the note. Partington claims the investments made for the benefit of the Partington Trust all were made after consultation with and direction from him, without any input from his church."