OTLA Trial Lawyer Spring 2021

18 Trial Lawyer • Spring 2021 Cody Hoesly By Cody Hoesly OTLA Guardian “T hings look different here,” goes the old slogan of the Oregon Tourism Commission. And there are a lot of things that draw folks to live here that they cannot get in other states. Our securities law is not usually listed among the foremost of Oregon’s advantages, but it should be. When investors have been scammed, Oregon is the best in the na- tion at helping them recover what they lost. I’ve represented many kinds of inves- tors over the years, from the janitor who, on retiring, threw all his PERS money into what turned out to be a real estate scam, to the sophisticated businessperson who just didn’t see it coming, “Every- thing looked so professional and promis- ing!” I am glad I can always tell clients, “At least you live in Oregon.” A case in point The benefits of Oregon’s approach to securities regulation is obvious. Take, for example, the case of Lake Oswego invest- ment company Iris Capital. Iris was a home-grown investment scheme put together by Shayne Kniss, an investment advisor and soon-to-be marijuana entre- preneur. Iris’ apparent purpose was to take advantage of the real estate collapse of 2010 by purchasing repossessed resi- dential real estate. Kniss planned to re- habilitate and “flip” the properties ( i.e. , sell them quickly at a profit). Ultimately, Kniss sold investment notes and limited partnership interests in four separate funds to dozens of investors. The investments, however, were doomed from the start. Among other things, the entities and projects funded by the investors suffered from a lack of financial controls, chronic undercapital- izat ion and mi smanagement . For example, Kniss embezzled over $500,000 in investor funds, using the money to fund a marijuana business he was start- ing. Predictably, the Iris scheme col- lapsed, but not before it had raised more than $5.7 million. While some of the investors had sig- nificant other assets on which to live, for others the loss of their investment in Iris was a huge blow. One investor, for example, was a retiring janitor who took a lump sum payout of his PERS account and invested it all with Iris. He was promised his investment was safe and would yield reliable returns, but he ended up living off of Social Security and a home equity line of credit he had to take out on his home, which had previ- ously been paid for. My firm worked together with Esler Stephens & Buckley and Stoll Berne to bring suit to help the investors recover their losses. Because Iris had only a few remaining assets, and Kniss had squan- dered all the money he’d embezzled (and was ultimately sent to federal prison), we focused our claims on other participants such as the lawyers who drafted Iris’ marketing materials. Before filing suit, we engaged in ex- tensive settlement discussions with those participants, including a review of their documents. These efforts resulted in settlements with some participants, but not all. We subsequently brought suit against two law firms and, after some motion practice, reached a settlement with them, too. The settlements resulted in the Iris investors getting back ap- proximately 80% of what they had in- vested. This result would not have been pos- sible under federal law or the law of any other state. Oregon Securities Law things look different here