Institutional Malfeasance: Another Ugly Form of Elder Abuse

My cousins Evan and Avi Schottenstein are not the Menendez brothers. They did not kill our nonagenarian grandmother. Yet, in misappropriating her fortune for years as they worked as her “financial advisors” at J.P. Morgan, and in using her advanced age against her in a shameful attempt to influence people into thinking she had dementia, they did kill something inside her: they killed her trust.

Not every case of elder abuse is financial—but far too many are, and the abuse rarely occurs in a vacuum. For my grandmother, her situation was a combination of psychological and financial abuse perpetrated by family members who were aided and abetted by the biggest bank in the world, J.P. Morgan.

Beverley’s shocking accusations against J.P. Morgan and her grandsons Evan and Avi ranged from forgery on federal subscription documents to wire fraud to illegal statement shredding to the creation of a fictitious email account. These are criminal accusations punishable by several years in jail. For a woman who had always lived an incredibly quiet life, Beverley’s need to defend herself—and retrieve a portion of her lost savings—went from being a private family embarrassment to an international saga after the feature article by Bloomberg News came out one week after the verdict.

The Financial Industry Regulatory Authority, or FINRA, is a private American corporation that acts as a self-regulatory organization. I had never heard of FINRA before my grandma’s case. It was formed to monitor member brokerage firms and exchange markets. To put it simply, if you’re having a problem with a bank or broker, you have to go through FINRA. After more than two years of legal preparation, five weeks of trial, and my grandmother enduring 11 grueling hours of cross-examination under oath, the FINRA arbitrators who heard her case ultimately ruled in her favor. They publicly judged her experience a clear case of “elder abuse,” constructive fraud, abuse of fiduciary duty, and fraudulent misrepresentations and omissions. The award was a headline-making $19 million.

Evan, the main culprit, was ordered to repay my grandma $9 million plus half her legal fees—a fraction of what he caused her to lose in unrealized earnings. In addition, his younger brother Avi was ordered to pay $602,251, essentially the commissions he earned, and J.P. Morgan got off with $4,708,550 plus the rescission of an illegal investment worth $4,291,450. In total, J.P. Morgan was ordered to pay $9 million and the other half of my grandma’s legal fees, the exact same amount as Evan.

Though she technically won her trial, Beverley’s victory was hollow. What her grandsons started, J.P. Morgan, FINRA, and a handful of lawyers are finishing. Evan and Avi still have their brokerage licenses as FINRA “investigates” their crimes. While they vacation in Bal Harbour, Florida with their parents—who live one floor below my grandma in the same high-rise condominium building—my cousins are in the process of settling with Beverley for a grand total of $4 million of the approximately $10 million they were jointly ordered to pay. To add insult to injury, as part of their settlement negotiations they are demanding that my grandmother refrain from further disclosing anything negative about them.

Though J.P. Morgan adhered to FINRA’s ruling, nearly half of the $9 million for which they were found liable came from simply giving my grandma back her money after Evan admitted he forged her name and illegally committed $5 million to an illiquid private equity fund. My grandma now owes her attorneys 40% of her $9 million winning against J.P. Morgan and 35% of her $4 million settlement with Evan and Avi. While the headlines read that my grandma “won” over $19 million in her FINRA arbitration trial, she is walking away with less than half her award. The REAL verdict: institutional abuse!

J.P. Morgan, a multinational bank with trillions of dollars in assets, got away with paying Beverley next to nothing. After the verdict, her lawyer told me J.P. Morgan alone should have been held accountable for the entire $19 million award. Instead, FINRA put half the onus on my cousins, not the bank that had a fiduciary duty to oversee them. In its act of “self-regulation,” FINRA protected J.P. Morgan, not the injured individual. J.P. Morgan had a fiduciary responsibility to monitor what Evan and Avi were doing within my grandma’s account. But in the five years J.P. Morgan held onto Beverley’s money, Evan and Avi’s supervisor called my grandma one time to check on her. Evan and Avi kept their jobs for months after losing our grandma’s account, an account that made up more than 80% of my cousins’ entire brokerage portfolio. After they were fired, J.P. Morgan paid for Evan and Avi’s lawyers—lawyers who went after a 94-year-old woman like sharks.

Clearly the system is stacked against the investor. So where does justice lie for investors when it comes to brokers and their big bank enablers? Not in the halls of J.P. Morgan. Not with FINRA. My grandma’s accusations were of such a serious criminal nature, she deserved the right to bring the accused to public trial. She shouldn’t have had to rely on contingency-based arbitration lawyers to try her case in front of three private FINRA arbitrators. She shouldn’t have had to sign nondisclosure agreements with the accused before the trial. She shouldn’t have had to wait 19 months for a FINRA verdict. She shouldn’t have to pay her lawyers almost half of her winnings. She should not now be settling with the perpetrators for less than half of what they owe her months after they were found liable on every single count.

Is this justice for a soon-to-be 95-year-old woman who has been through hell and back? If this can happen to my grandmother, it can happen to any of us. It’s time to see what we can do to fix the systemic problem within our banking system.