Officials with the N.C. Secretary of State’s securities office have issued a final consent order in a case involving Empowered Investor, the investment firm co-owned by State Sen. Thom Goolsby.
Securities officials announced they have revoked the securities licenses of Goolsby, a Wilmington attorney and two-term senator, and Empowered Investor co-owner James Upham.
As part of the consent order, Goolsby, Upham and Empowered Investor had their investment adviser registrations revoked. The order also requires the three parties wait 10 years before seeking to register as investment advisers again.
Goolsby, Upham and Empowered Investor were ordered to cease and desist any securities or financial practices in North Carolina.
Melissa Gott, an attorney representing Goolsby, said Goolsby never had his securities license as stated by the Secretary of State’s securities office.
Goolsby was automatically registered as an “investor adviser representative” for Empowered Investor because he owned 50 percent of Empowered Investor as stipulated by state statute, according to the consent order.
The order specifically relates to an investment strategy employed by Empowered Investor—the “10-20-50″ investment plan.
“This plan supposedly invested clients’ money in a way where investments losing more than 10 percent would be sold to prevent further loss, investments earning more than 20 percent would be sold to capture the gains, and no more than 50 percent of the clients’ accounts would be invested in securities at any one time,” a press release from the securities office states.
Securities investigators determined the plan frequently was not followed, which resulted in greater client losses than if failing investments had been sold once they suffered a 10 percent loss, according to securities investigators.
Investigators also found clients were not told their money was being invested in a way that was different than being advertised.
According to articles of dissolution filed with the Secretary of State, Empowered Investor was dissolved as a corporation on March 14.
Multi-plaintiff lawsuit settled
The “10-20-50″ investment plan was also the subject of a multi-plaintiff lawsuit filed against Empowered Investor, Goolsby and Upham last year.
The lawsuit was filed in New Hanover County Superior Court on July 10, 2013, and transferred in August 2013 to N.C. Business Court after it was deemed “mandatory complex business,” dealing in securities law, according to court records.
The matter was voluntarily dismissed by the plaintiffs on Sept. 12, 2013, and on Sept. 16, 2013, the American Arbitration Association initiated arbitration between the parties, according to Mitchell Baker, an attorney representing the plaintiffs.
Arbitration is ideal in a case like this, Baker previously explained, because it can be a quicker process than litigation, which can take several years.
“You pick three judges who generally are experienced in the area, instead of a jury of 12 people,” Baker said. “It is preferable in complicated cases such as securities cases.”
Once a judgment is issued, it’s final and there’s no appeals process.
“Our cases were resolved to the satisfaction of all parties,” Baker said when reached today.
The lawsuit claimed Goolsby and Upham told clients they would adhere to a “10-20-50” investing rule. But the suit stated they instead invested in “highly volatile and speculative investments,” which were not suitable for the clients.
Losses cited by clients in the lawsuit ranged from 20 percent to 95 percent.
Gott previously said the claims were without merit.
“This is a business that was ultimately not a success,” Gott said. “Thom Goolsby dedicated a great deal of energy and his own money in this venture. He never received even one paycheck. However, he worked hard to see to it that all the debts of the corporation were paid and investors compensated. That’s just the kind of person he is.
“A lawsuit was filed last year and quickly dismissed. The parties later amicably resolved all matters.”
No third term for Goolsby
Goolsby announced in January he wouldn’t seek his third term representing New Hanover County’s District 9 in the State Senate. The Republican said he’d step down at the end of his term to spend more time with his family and on his Wilmington law practice.
“My wife and I are blessed with two wonderful young daughters and they need me at home more often than service in the Senate allows,” he said in a release. “For this reason, I will focus on my family and law practice and not seek re-election this year.”
Voters first elected Goolsby in 2010, over former UNCW chancellor Jim Leutze, a Democrat.
Since announcing he would not seek another term, Goolsby has endorsed attorney Michael Lee for the District 9 seat. Lee won the May 6 GOP primary election and will face Democrat Elizabeth Redenbaugh in November’s general election.
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Caroline Curran is the managing editor of Port City Daily. Reach her at (910) 772-6336 or email@example.com. On Twitter: @CGCurran