An elderly woman has been awarded $77m after alleging a bank frittered away tens of millions of dollars placed in trust by her convict son.
A 78-year-old woman who inherited tens of millions from her jailed son's venture capital investments has won a lawsuit against a major US bank for questionable management of a family trust.
Wells Fargo and Doug Morriss (the woman’s son and venture capitalist at a different firm, Acartha Group) were closely aligned in a scheme to defraud the trusts,” she alleges in court documents, adding that Wells Fargo received more than $12 million in interest, loan fees, trust fees and custody fees tied to its participation in the trusts.
The son, who was sentenced to prison for five years in 2013, had helped raise millions of dollars in private equity and venture capital funds through his venture firm and other companies until he filed for bankruptcy in January 2012, listing more than $35 million in debt. His mother was named as a beneficiary and co-trustee on both family trusts.
What’s more, both her son and Wells Fargo “concealed their conduct from Barbara Morriss year after year until almost all of the trust assets were gone,” the court filing continues.
Barbara Burton Morriss sued Wells Fargo in earlier 2012, alleging the bank breached a fiduciary duty by failing to fully disclose financial transactions in two family trust accounts that lost millions of dollar.
Wells Fargo spokeswoman Vince Scanlon said the bank was “disappointed” by the verdict and was considering its legal options, including whether to appeal.
Wells Fargo argued it should not be held liable for any losses of the Morriss trust, the plaintiff’s personal trust, because it and predecessor banks Offitbank and Wachovia were never trustees, but merely custodians for the portion of trust assets held at the bank. Offitbank merged with Wachovia in 1999 and Wells Fargo bought Wachovia in 2008.
The case sheds light on rules in Canada, which is seen to be lagging behind the U.S. in embracing the idea of imposing fiduciary standards on advisors. For Paul Shelestowsky, a senior wealth advisor with the Meridian Credit Union, it’s up to advisors to continue to be transparent about activities and fees with clients.
“One of the mottos I use with my clients is ‘I don’t control the markets, but I do control how I give advice,’ and that is an important distinction,” he told WP. “A big part of financial advice is helping clients from making decisions that are emotionally driven, and might work against them.”