Broker Defense: If It Ain't Broke, We're Not Liable
A Florida jury ruled that Merrill Lynch must pay $6 million for selling unsuitable investments to George Rothman, who was a wealthy New Jersey philanthropist before he died in 2004. The lawsuit was filed in 2000 on behalf of Rothman's trustees, which are his two daughters and Citicorp. The $6 million fine could get even bigger--the jury will decide next week how much Merrill Lynch should pay in punitive damages.
The Rothman trustees accused Merrill Lynch and its broker, Karen McKinley, of taking advantage of his deteriorating mental state and moving his money from tax-free muni bonds into variable annuities, which carry much bigger broker commissions. According to the Bergen County Record, McKinley told the Rothmans they would not pay commissions or fees, when in fact Merrill Lynch collected $2.5 million in fees. McKinley herself took home $600,000 of that.
Merrill Lynch has asked the trial judge to set aside the verdict, according to the paper. If the judge does not, the brokerage will appeal.
But Merrill Lynch's attorneys might not be so happy with comments from the firm's spokesman on the jury's conclusion. "The verdict is astonishing in light of the undisputed fact that the Rothmans, who were wealthy, sophisticated investors, made $10 million on the annuities at issue, and did not lose money," said Merrill Lynch spokesman Mark Herr.
So, in other words, you can't sue us for selling you unsuitable investments if those investments made you money? What's $2.5 million when you make a $10 million return? The P.R. machine might want to work on that one.
And then there's the matter of Karen McKinley's record. Based in Palm Beach, Florida, McKinley has been with Merrill since 1983. According to her record with the FINRA, which regulates securities brokers, arbitrators ordered Merrill Lynch pay a McKinley client $538,086 in 1997 for unsuitable investments and account churning.
And then again in 2002, Merrill Lynch paid $21,661 to settle claims that McKinley made unsuitable investment recommendations to a client.
And those are just the ones we know about. A recent study by the Public Investors Arbitration Bar Association showed that FINRA expunges the records for many arbitration settlements made by brokers. The group found that 71 percent of arbitration settlements made during 2006 were not required to be part of the brokers' public records.
by Megan Barnett
- Huffington Post Is Worth How Much???
- Dec 1 2008 12:26PM EST
- First Photoshopped Love Handles, Now This
- Dec 1 2008 11:31AM EST
- His 401-Koz Keeps Growing
- Nov 26 2008 9:00PM EST
- Slim Pickings? Or Great Timing?
- Nov 26 2008 1:46PM EST
- Who's the Grinch in This Story?
- Nov 26 2008 8:57AM EST
- When $1 Buys More Than $100 Million
- Nov 25 2008 5:45PM EST
- Another 500-point Swing? So What.
- Nov 25 2008 1:15PM EST
- One Bailout for Wall Street and Detroit
- Nov 25 2008 10:52AM EST
- Tiger Woods Actually ... Loses?
- Nov 24 2008 3:54PM EST
- You Know Things Are Really Bad When...
- Nov 24 2008 2:15PM EST
- Beauty and the Beast
- Nov 24 2008 1:05PM EST
- Ooh La La! A Jobs Plan!
- Nov 24 2008 11:55AM EST
- Calling the Election, 82 Years Ago
- Nov 21 2008 12:45PM EST
- We Are All Patent Reviewers
- Nov 20 2008 3:12PM EST
- What if Carmakers Stopped Advertising?
- Nov 20 2008 1:46PM EST









