Two investors were recently awarded $1.37 million from the pockets of the country's biggest independent brokerage based on complaints of civil fraud and elder abuse.

A couple initially filed a lawsuit against LPL Investment Holdings Inc., which operates Direct Invest, LLC based out of Boston. The couple initially sued for $8 million as the suit originally included two other firms as defendants. A judge dismissed claims against those companies due in part because one of them was not found to be liable in the case and the other had shut down.

The couple's complaint stemmed from their investment in fractional interests in commercial real estate property. They had just sold some apartment buildings that they previously owned and wanted to put that money into fractional real estate interests. The couple figured that they would make enough money off this new investment to replace the income lost from the apartment buildings.

Also, many individuals incorporate this sort of investment in their estate plan. By investing in fractional real estate interests, the investor can hold off capital gains taxes levied against money recently earned from selling real estate properties. If the investor takes that money and invests in other types of real estate within a certain time period, the capital gains tax is deferred.

This agreement through Direct Invest, LLC was not what the couple had bargained for. Instead of receiving rental income, the brokerage paid them with borrowed money and a return on their own funds. The couple was also subjected to hefty fees on the money they invested.

A lawyer for the couple said that the company purposely structured the deal in a complex manner to make it difficult to decipher.

Source: Reuters, "LPL to pay $1.37 million in alleged elder abuse case," Feb. 15, 2012