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Banking & Finance

Radio's Investment Advisor Left Questions

By Ken Little, posted Oct 2, 2009

Kenneth C. Waters Jr. was liked by just about everyone. The well-known radio infomercial host and financial advisor in Wilmington enjoyed the confidence and trust of his clients.

So when Waters committed suicide in July in Atlantic Beach, shock and disbelief were the prevailing sentiments.

Now, many of the people who invested with Ken Waters in a venture called Pinetown Investment Group, LLC, find themselves out of substantial sums of money. Many have hired lawyers, who are trying to recoup their clients’ investments.

Still, few who knew Waters can find it in their hearts to say anything disparaging about him.

“He came across as being genuinely concerned, interested and involved with his clients. I considered him a friend,” said Larry Clark, dean of the Cameron School of Business at the University of North Carolina Wilmington, and a client of Waters.

Clark had no stake in Pinetown and was never approached by Waters about the investment program.

“He was my financial advisor,” Clark said. “It was not on my mind he could possibly have problems personally or professionally.”

Waters was 44 when he died around July 17. He left behind a wife and two young daughters. His estate is being sorted out by a law firm retained by the family. Many onlookers have more than a passing interest in the outcome.

“I suspect, at the end of the day, there is not going to be enough money in Pinetown to pay off the investors that exist,” said Wilmington lawyer Martin Ramey, who represents several of the people who invested with Waters.

In the last months of his life, Waters approached an unknown number of potential clients about a 46-acre property in the Beaufort County community of Pinetown. By giving him money to build roads, utilities and ditches on the land, Waters told investors they would receive a generous return when logging and timber operations commenced.

Depending on who Waters approached, individuals were promised interest payments as high as 20 percent on their investment every six months once timber rights were sold, with the first payout due on July 31.

Records show that Waters sold the land on June 11 for $66,500. He did so without informing any of the Pinetown investors, Ramey said.

Waters had other problems besides making interest payments on the Pinetown venture. Records show an Internal Revenue Service tax lien of more than $709,000 that was filed in 2008, and he owed more than $14,000 to the state of North Carolina in back taxes.

Waters marketed his services under the name Heritage Investment Services, LLC, a nonexistent company not listed with the N.C. Department of the Secretary of State. Another company he formed, Heritage Investment Advisors, LLC, was dissolved by the state in 2003 for failure to file annual reports. He moved his office to his Landfall home last year without informing many of his clients, Ramey said.

Waters had worked with securities and investment advisor H. Beck, Inc. At least two of Waters’ clients filed written complaints with the Maryland-based brokerage in the weeks prior to Waters’ death, alleging that he liquidated their accounts without their knowledge. Waters told friends before his death that he had left H. Beck.

“One of my investors said he had gotten a letter that said he was affiliated with H. Beck Securities Broker and Ken had been gone from H. Beck for months,” Ramey said.

Ramey has two clients that invested a total of $100,000 in Pinetown. Other claims against the estate filed in New Hanover County Superior Court list investors seeking $180,000, $60,000 and $48,000. All were expecting interest payments by the end of July.

It’s hard to determine how many people invested in Pinetown or were owed money by Waters for other ventures, Ramey said.

“It is difficult to tell if there was ever a list or such a list existed. He gave my investors a promissory note in exchange for loaning the money to the investment group,” Ramey said. “They would get a 20 percent return and they would pay out every six months.”

The Wilmington law firm of Baker & Slaughter had at least 12 clients by mid-September who invested in Pinetown.

“Right now, we’re just trying to determine where the money went. We think it was as many as 30 people who invested money in the Pinetown investment group,”
partner Mitch Baker said.

“Apparently all (their) money was gone but we can’t find any evidence that any timber was cut,” he said.

Baker said the law firm representing Waters’ estate, Ward & Smith, informed him that only $30,000 remains in Pinetown-related bank accounts.

“I would guess $2 to $3 million was invested,” Baker said. He anticipates civil court action this month on behalf of the firm’s clients.

A well-informed host

First on WAAV-AM and then for several years on The Big Talker FM radio station in Wilmington, Waters hosted a weekly show discussing the world of investing. It was called “Financial Freedom With Ken Waters.”

“You could of called it an infomercial for his organization, but that was not what he talked about. It was just him sharing his knowledge of what was currently happening in investments and finances,” said Paul Knight, general manager and vice president of Sea-Comm Media, which owns The Big Talker and several other area radio stations.

Knight consulted Waters before making recent business decisions. He valued the advice.

“He’s missed. He was a good old guy,” Knight said. “As a person, he was a great guy. He was always enjoyable to speak with.”

Clark, the UNCW business school dean, was impressed when he first heard Waters on the radio years ago.

“I think he was very knowledgeable. He had very, very good insights. They were like lectures from a professor,” Clark said. “He just didn’t do the same thing every week, he actually put some thought into those (radio shows). They were informative pieces. They were not sales pieces.”

Clark later met Waters and ultimately became a client.

“He would sometimes kid me he would like to be a financial professor,” said Clark, who appreciated Waters’ “love of the financial spectrum and what things were happening in international markets.”

“I thought he was a good financial advisor,” Clark said. “I personally am not aware of any way I’ve been injured financially.”

Waters was not the sort of financial advisor to apply pressure on clients to make investments against their will, Clark said.

“I met with him enough times. He never pushed anything toward me for a consideration where problems occurred,” he said.

But like many others who knew Waters, Clark is torn by the damage his friend may have caused to others.

“I would not be very surprised if it turns out there are a lot of people hurt by what Ken Waters did,” Clark said. “If I felt I had lost something or know I had lost something I would certainly be considering legal counsel.”

The last time Clark spoke with Waters was in early summer.

“I did not detect anything with Ken. He was concerned how the market was affecting clients,” Clark said. “He was always very conscientious about his role and how the clients were doing.”

Clark said it never dawned on him that Waters may be experiencing personal or professional difficulties.

“I continue to be shocked at the level of the revelations and I only hope things will not be as bad or at the level they could be,” Clark said.

Waters was well-known in the area and had many friends.

“He ran in pretty prominent circles. He lived in Landfall and was somebody who was well known and by all accounts, well-liked,” Ramey said.

Intent apparent

No matter how bad things were going for Waters, those who knew him said they couldn’t have imagined he would contemplate suicide. But based on what police found at the rented house where the body was found, there was no doubt Waters planned his death.

The Atlantic Beach Police Department was called by the rental agent on July 17 because Waters’ car was still in the driveway of the home, three days after he was to have checked out.

Waters’ body was found in the sealed-off garage, outside a tent containing a charcoal grill. The cause of death was ruled carbon monoxide poisoning.

“The thought that had to go into something like this, purchasing a tent and the grill that was in there, it didn’t look like anything that was a spur of the moment thing,” said police Lt. Jeff Harvey, who investigated the death.

Police found a notepad upstairs containing telephone numbers of people who were to be notified, in the order they were to be called. They found a briefcase containing documents detailing investments and clients.

Police also found a quantity of lottery tickets in the house, along with a book describing different methods of committing suicide. The upstairs bathtub was full of water, Harvey said.

“It looks like he was going to do it one way or another,” the officer said.

Knight said Waters “always had a positive attitude” and had spoken with him several days before he died.

“I could not see him doing what he did so yes, it was a shock,” Knight said.

 “Who knows what goes on in the private lives of individuals unless you wake up with them every day, and even then sometimes you don’t know. But the evidence is the evidence, and that is what is surprising.”

Ironically, The Big Talker was home to the radio show of another popular investment advisor who died under unusual circumstances. Danny Alvis, who left dozens of investors scrambling to recoup money after his death in the crash of his private airplane in 2007, remains the subject of numerous lawsuits as his assets are indentified.

Knight draws no comparisons between the business practices of the two men, and said Waters’ credentials were reviewed before he was allowed to purchase air time on the radio station.

“We did the regular checks. (Waters) was very much on the up and up,” Knight said. “You could tell with Danny, he was flying by the seat of his pants. That guy just knew how to make people feel good.”

Ramey has heard second-hand accounts about Waters’ demeanor in the weeks before his death that may indicate something in his life was in disarray.

“He was juggling a bunch of balls and one of the balls dropped, and it was one of those things you can’t recover and everything will come crashing down,” he said.

Sorting out the situation

While some lawyers representing Pinetown investors recruited by Waters may pursue civil lawsuits, Ramey is considering other options. He will file an arbitration claim with the Financial Industry Regulatory Authority this month on behalf of his clients. The claim can be filed based on Waters’ association with H. Beck Inc.

“Brokers are not allowed to sell opportunities outside the brokerage. There is some potential liability for Beck in that instance we will be pursuing in arbitration,” Ramey said.

Additionally, at least one claim has already been filed against Waters’ estate on behalf of a client, Ramey said.

A lawsuit will be filed on behalf of the Baker & Slaughter clients this month, Baker said.

Most Pinetown investors are aware of Waters’ death and more “are coming in,” Baker said.

“As far as we can tell, he was handling their other accounts just fine,” he said. “With (Pinetown), the money’s gone and it’s shocking to everyone.”

There is some question what Waters was even selling. The Pinetown land Waters owned was acquired from his father several years ago and timbered before it was sold, Ramey said.

“He made some money off it. No one here saw what he had done with the land and (understood) they wanted to attract timber operators to the land,” he said.

“They understood you have to build the infrastructure for logging to occur. Was the land Ken referred to as Pinetown the land Ken actually owned or was it the land he was going to timber from other neighbors? There is no record or recording of encumbered properties in Pinetown, so there is nothing they can go in and (foreclose).”

Baker’s clients “just want to get the truth.” 

“It was very upsetting to everybody and I understand he had a very nice family and everybody liked him and that’s the sad thing about it,” he said.

Everyone familiar with the situation is uniformly sympathetic to Waters’ wife Kara and the couples’ two daughters.

“You kind of get the sense there was a tremendous amount of financial pressure on him at the time,” Ramey said.

“Here is a man who had two lovely kids and a family and seemed to be living a great life. It makes you wonder what would make someone walk away from that.”

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