United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
S. Shah United States District Judge.
Michael and Laura Hollerich followed advice from their
registered investment advisers, defendants Robert Acri and
Kenilworth Asset Management, to invest in two real estate
development projects. After investigations by FINRA, the SEC,
and the Illinois Secretary of State, Acri was banned from the
securities industry. The Hollerichs brought this action
against Acri and Kenilworth for violating the Securities
Exchange Act of 1934, the Investment Advisers Act of 1940,
the Illinois Securities Act, and common law fiduciary duties.
The Hollerichs move for summary judgment on those claims with
respect to Kenilworth. For the following reasons, the motion
for summary judgment is granted.
in this case have been largely unresponsive. The Hollerichs
have filed several motions for default judgment against both
Acri and Kenilworth. See ; ; ; ;
. One such motion was successful; I granted
a motion for default judgment against Acri and I entered an
order of judgment against him. . As for Kenilworth, I
denied the Hollerichs' motion for default judgment and I
did not enter an order of judgment against Kenilworth. .
I also vacated the technical defaults against Kenilworth and
I ordered Kenilworth to pay the Hollerichs' reasonable
fees and costs. .
being given a chance to defend the case, and even after being
sanctioned, Kenilworth failed to file a response to the
Hollerichs' motion for summary judgment or a response to
the Hollerichs' Local Rule 56.1 statement of
facts. The Hollerichs' “reply”
brief requests that their statement of facts be deemed
admitted and that their motion be granted. See 
at 1-2. That request is denied in part. The absence of
Kenilworth's responses does not relieve the Hollerichs of
their burden of persuasion; the Hollerichs still must show
that they are entitled to judgment as a matter of law.
Raymond v. Ameritech Corp., 442 F.3d 600, 608 (7th
Cir. 2006). It appears that very little effort went into
drafting the Hollerichs' complaint and statement of
facts. Both documents largely consist of copied and pasted
portions of the SEC's cease and desist order.
See , [107-1] at 17-24. Those same portions of
copied text also appear in Mr. Hollerich's declaration,
see [107-1] at 1-13, which the Hollerichs repeatedly
cite in their statement of facts. Although Kenilworth's
failure to respond means that the material facts set forth in
the Hollerichs' statement of facts will be deemed
admitted, that is only true to the extent that the facts are
supported by evidence in the record. N.D.Ill. L.R.
56.1(b)(3)(C); see also Raymond, 442 F.3d at 608.
Furthermore, Kenilworth's failure to respond operates as
a waiver of any objections to the admissibility of the
Hollerichs' supporting evidence.
judgment is appropriate if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).
A genuine dispute over a material fact exists if “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Facts are
construed and all reasonable inferences are drawn in favor of
the nonmoving party. Bell v. Taylor, 827 F.3d 699,
704 (7th Cir. 2016).
Acri's and Kenilworth's Investment History
was a broker-dealer registered with the SEC. [107-1] at 19;
 ¶ 10. In 2002, Acri founded the firm Kenilworth,
an investment adviser registered with the SEC. Id.
For ten years, Acri controlled Kenilworth: he maintained its
bank accounts, hired its employees, determined its policies
and practices, and he made decisions about what investments
should be offered to its clients. Id. ¶ 11. In
February 2012, Clayton Lawrie took control over
Kenilworth's accounts. Id. ¶ 72. Six months
later, Acri resigned as a principal and terminated his
ownership of Kenilworth. [107-1] at 19. Lawrie continued to
manage the firm until 2014. Id. ¶ 66.
he resigned, Acri convinced the Hollerichs to transfer a
large portion of their assets to Kenilworth in 2009, so that
he could advise them in their investments. Id.
¶ 19. Lawrie also helped bring the Hollerichs in as
clients of Kenilworth. Id. ¶ 74. Approximately
two years later, Acri recommended that they invest in the
Woodmar Project, a plan to develop a parcel for retail near
Hammond, Indiana. Id. ¶¶ 20, 22. Acri did
not tell the Hollerichs whether Praedium, Woodmar Hammond, or
Prairie issued the promissory note, id.
¶ 21, but he stated that the note had more than a fifty
percent loan-to-value ratio, that it would be secured by
certain real estate, and that it bore a fifteen percent
annual interest rate. Id. ¶¶ 20- 21. As a
result, the Hollerichs followed Acri's advice and they
invested $25, 000 in the Woodmar Project. Id. ¶
22. Despite the Hollerichs' repeated demands, Acri never
provided them with a copy of the promissory note.
Id. ¶ 23.
also recommended that the Hollerichs invest in the Quentin
Woods Corporation project, a plan to develop a parcel for an
assisted living facility in the Village of Palatine,
Illinois. Id. ¶¶ 6, 30. Acri showed the
Hollerichs QWC's building plans and he explained that the
only obstacle to the project was the zoning permit, but Acri
assured the Hollerichs that the permit would be granted soon.
Id. ¶ 32. Once the building was complete, Acri
told the Hollerichs that they would have the option of
receiving payment in full on their promissory notes or to
convert their investment into an ownership stake in the
facility, which meant the Hollerichs would be equity owners
in the business. Id. Again, the Hollerichs took
Acri's advice and invested $150, 000 with QWC.
Id. ¶¶ 33-34; [107-1] at 10; [107-2] at 5.
Acri prepared and executed the agreements between QWC and the
Hollerichs,  ¶ 35, because Acri was the president
and a shareholder of QWC. Id. ¶ 6.
the QWC project did not progress as planned, Acri told the
Hollerichs that he gave Joan DeSouza, who Acri referred to as
a developer and a consultant, approximately $120, 000 of
their investment as a “down-payment” for her
services in advancing the project. Id. ¶ 51.
Later on, Acri informed the Hollerichs that the zoning permit
had not been approved and that he was working with DeSouza to
get the Hollerichs' money refunded. Id.
¶ 52. The Hollerichs believe that QWC never submitted a
zoning permit or pursued its approval with the Village of
Palatine. Id. The Hollerichs requested proof of
Acri's communications with DeSouza, but he never supplied
any such documentation. Id. ¶ 53. Instead, Acri
suggested that Mr. Hollerich sue DeSouza because DeSouza no
longer had the Hollerichs' funds. Id. ¶ 57.
Acri also recommended that Mr. Hollerich take control of QWC
and invest more money into the project. Id.
Hollerichs requested records relating to their investments in
the Woodmar Project and the QWC project, but Acri and
Kenilworth never complied. Id. ¶ 50. The
Hollerichs sent letters to Acri to notify him of the
outstanding loan amounts and interest for the promissory
notes, id. ¶ 61, and of the breaches to the QWC
agreements, id. ¶ 58. Eventually, the
Hollerichs began moving their money, approximately $500, 000,
out of Acri and Kenilworth's control. Id. ¶
55. The Hollerichs say they never received any payment on
their contracts or other promised consideration for their
$175, 000 worth of investments through Kenilworth in the
Woodmar Project and the QWC project. Id. ¶ 63.
2013, FINRA began investigating Acri's involvement in the
sale of alternative investments and defaulted promissory
notes. Id. ¶ 37. This investigation led to
FINRA permanently barring Acri from associating with any
FINRA member in any capacity. Id. ¶ 38. The
following year, the SEC examined potential misconduct by Acri
involving Kenilworth's clients, id. ¶ 39,
and it published a press release titled “Chicago-Area
Attorney Charged After SEC Exam Spots Fraud in Real Estate
Investment Offering.” Id. ¶ 41. The SEC
also issued a cease and desist order that imposed a remedial
sanction on Acri: $55, 000 for disgorgement, $4, 478.96 for
prejudgment interest, and $55, 000 for a civil money penalty.