(CN) - A New Jersey family says the publisher of the "Wall Street Digest" advised them to invest millions in suspect hedge funds - including a Ponzi scheme - without disclosing that he was being paid to push the investments. The family says it lost more than $6 million investing with Donald H. Rowe, who for 32 years has published what he calls "the world's most widely read investment newsletter."
Five members of the Formica family say they relied on Rowe's financial advice for 15 years and invested millions in mutual funds that Rowe claimed to have thoroughly checked out.
Richard, Marilynn, Ami Marie, Matthew and Kevin Formica sued Rowe, The Wall Street Digest and Carnegie Asset Management in New Jersey Federal Court.
The family says it lost nearly $4 million in the Nadel-Moody Funds alone, which Rowe described as one of the best he had ever come across.
The Nadel-Moody Funds were a Ponzi scheme; fund manager Arthur Nadel pleaded guilty this week to 15 counts of fraud after fleecing clients for than $162 million.
The Formicas say Rowe made about $10 million in referral fees from the Nadel Fund.
Rowe "clearly never verified his statement that Nadel-Moody were using 'a computerized investment program to produce the best track record and the most consistent returns had ever seen,'" the lawsuit states, "because had he performed adequate due diligence, he would have uncovered that Nadel-Moody were not trading any securities whatever."
The Formicas seek damages for securities fraud, common law fraud, negligent misrepresentation, negligence, breach of fiduciary duty and beach of contract. They are represented by Douglas Hirsch of Sadis and Goldberg in New York City.
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