A South Carolina jury awarded $8.1 million last month to Francis Maybank, a former adviser who sold his wealth management business to BB&T Corp. He alleged in the lawsuit that the company mismanaged his “retirement nest egg” with a risky strategy. The verdict, reached by a jury at the Court of Common Pleas for the Thirteenth Judicial Circuit in Greenville, S.C., included $3.1 million in actual damages and $5 million in punitive damages.
The Plaintiff filed the case against BB&T Corp. and two of its units in 2011. It was alleged that Maybank, a South Carolina resident, founded a trust and asset management company that BB&T acquired in 2001. BB&T bought Maybank’s firm, which managed $700 million in client assets, with 246,000 shares of BB&T company stock. Maybank hired BB&T’s wealth management division in 2006, when nearing age 74, to advise him on investing his retirement portfolio. It was alleged in the Plaintiff’s complaint:
The BB&T advisers were required to act in Mayfield’s best interests because they were so-called “fiduciaries,” but instead put the company’s interests first by not recommending that Mayfield sell off the company shares and diversify his investments across multiple asset classes to minimize his market risks. BB&T recommended a complex investment strategy involving a type of derivative, a security whose value was linked to the performance of underlying BB&T stock, which BB&T advisers said would help him to reduce his concentration in the company’s shares while raising cash which he could invest in a diversified portfolio.
They did not disclose to Maybank that the strategy would force him into an expensive cycle of rolling over one derivatives transactions into another, which locked him into paying more fees and incurring greater tax liabilities while depleting the amount available to him for investments.
Craig McCann, an economist in Fairfax, Va., who testified on behalf of Maybank during the trial, said that the Defendants “were really leveraging up investments and making it riskier, under the guise of diversifying and lowering the risk.” The firm and its advisers were said to have violated their fiduciary duties by not explaining the speculative nature of the strategy or fees he would have to pay, which included a $1.3 million upfront charge.
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