Feb. 9, 2021, by Jay Cridlin
Beverly Schottenstein, part of an Ohio retail dynasty, had alleged her grandsons had improperly managed her money.
A financial arbitration group has awarded nearly $19 million to a 94-year-old Bal Harbour woman who claimed her two grandsons, then brokers at JP Morgan Securities, mishandled her money by forging her signature and making unauthorized purchases.
Beverly Schottenstein, whose family fortune came from a string of retail chains, including DSW, American Eagle Outfitters and American Signature Furniture, filed the complaint through the Financial Industry Regulatory Agency, or FINRA, a non-governmental organization that enforces rules and settles disputes involving stock broker-dealers.
In its ruling, regulatory agency arbitrators found Schottenstein’s grandsons, Evan and Avi Schottenstein, as well as JP Morgan, liable for fraud and abuse of fiduciary duty. The Schottenstein men were also found liable for elder abuse in the eyes of Florida law.
The case now goes to a court in South Florida, where a federal judge in Miami will turn the ruling into a judgment, unless the case is settled before then.
“Our client is very happy with the award, and we’re happy that we were able to secure this for her,” said Guy Burns, a managing partner with Tampa law firm Johnson, Pope, Bokor, Ruppel and Burns, which represented Beverly Schottenstein. “We’re looking forward to getting it paid promptly and closing this chapter in her life and letting her move on. She’s 94 years old, seems to be in good health and reasonably robust for someone her age. Hopefully she’ll have an opportunity to put this behind her and enjoy life going forward.”
According to the regulatory agency complaint, Evan and Avi Schottenstein began managing their grandmother’s money several years ago — first Evan with Morgan Stanley in 2009, then both when they began working for JP Morgan in 2014.
Beverly Schottenstein alleged that her grandsons made a number of “extremely complex, highly risky” investments worth more than $72 million, which led to losses of more than $10 million, but yielded the men and JP Morgan hundreds of thousands in fees.
Between 2015 and 2018, the claim alleged, the men were responsible for hundreds of transactions worth hundreds of millions of dollars, including many where they and JP Morgan stood to earn a profit as market makers, or broker-dealers that trade particular stocks.
Burns said any trading in Beverly Schottenstein’s name was unauthorized, with her grandsons forging emails in her name in order to get certain trades approved, and later encouraging her to destroy paperwork involving her JP Morgan transactions.
“She didn’t have a computer,” Burns said. “It was clear that they were overreaching and abusing their authority. They didn’t ask for permission for any of these transactions. They were just trading on their own.”
That federal regulatory agency invoked Florida’s elder abuse statute in its ruling opens the case to criminal investigation “if some prosecutor wanted to pick this up and file charges for elder exploitation or wire fraud — which they were, I believe, guilty of,” Burns said.
One of Evan and Avi Schottenstein’s attorneys, Jon Brennan, said in a statement that they were “deeply disappointed by the result” and considering a motion to have the ruling vacated. He said evidence at the hearings “overwhelmingly demonstrated that Mrs. Schottenstein’s account was invested in full accordance with her wishes.”
“The award is inconsistent with the substantial evidence presented at the hearing,” Brennan stated, “which showed that over the entire time Evan Schottenstein served as his grandmother’s financial advisor, Mrs. Schottenstein’s accounts profited by more than $30 million.”