Key facts
- Phoenix American Hospitality LLC and CEO W.L. "Perch" Nelson settled an SEC suit over an alleged $86 million investment scheme.
- The firm and CEO allegedly misrepresented hotel investment funds to over 2,000 retail investors.
- Phoenix American will pay a $591,000 civil penalty, and Nelson will pay $118,000 and face a five-year ban from officer/director roles.
- The SEC claimed the funds were not profitable and distributions were largely funded by investor capital.
- Nelson and Phoenix American agreed to the settlement without admitting to the allegations.
The Securities and Exchange Commission has settled a civil action against Dallas-based Phoenix American Hospitality LLC and its CEO, W.L. “Perch” Nelson, who were accused of misrepresenting two hotel-focused investment funds to raise approximately $86 million from more than 2,000 retail investors.
The settlement, which requires court approval, mandates that Phoenix American Hospitality pay a civil penalty of $591,000, while Nelson will pay $118,000 and be prohibited from serving as an officer or director for five years. Both parties agreed to the terms without admitting to the SEC's allegations.
According to the SEC's complaint, filed in the Northern District of Texas, Nelson and his firm allegedly claimed that the two REITs possessed diversified portfolios of profitable hotel properties that would yield investors regular distributions of up to 12% annually. However, the SEC stated that one REIT actually held only a preferred equity interest in a single hotel until early 2024, and neither fund was profitable. The distributions made to investors were largely funded by returning investor capital, the SEC alleged.
Nelson allegedly directed a consulting firm to create and disseminate untrue statements in marketing materials. Phoenix American Hospitality reportedly repeated claims that one REIT had as many as 11 hotels, using social media, emails, and webinars to solicit investors. Nelson, who has been president and CEO of the company for nearly 20 years, claimed in a December 2022 webinar that the first REIT had acquired 11 hotels worth about $120 million.