By Jim Weiker – Feb 17 2021
Beverley Schottenstein isn’t exactly sure when she suspected her grandsons were cheating her.
Perhaps it was when they shredded her bank statements. Or maybe it was when she discovered they had created an email account in her name. Or when she noticed hundreds of thousands of dollars spent from her account.
But by the end of 2018, Schottenstein, a member of one of central Ohio’s most prominent families, was confident something was wrong.
The following year, she made the momentous decision to take action against her own family members, grandsons Evan and Avi Schottenstein, and their employer, JPMorgan Securities, for mishandling an account worth more than $80 million.
“For a long time, I was suspicious and I wasn’t at the same time. I just didn’t want to believe this,” said the 94-year-old widow of Alvin Schottenstein, part of the family that built a central Ohio retail fortune through Schottenstein Stores, Value City Furniture, DSW, Big Lots and American Eagle Outfitters.
“You don’t want to think your own grandkids are going to steal from you, but they were really doing this.”
From our archives: Read some of The Dispatch’s historic coverage of the Schottenstein family
Earlier this month, a panel with the Financial Industry Regulatory Authority (FINRA), which mediates disputes between money managers and their clients, agreed with Schottenstein. The panel ordered the grandsons and JPMorgan Securities to pay almost $19 million to Schottenstein, who lives in a Bal Harbour, Florida, condominium, after moving from Columbus in 2009.
In addition, the panel found Evan Schottenstein and JPMorgan guilty of “elder abuse” under Florida law. The ruling must be approved by a federal court in Miami.
The Schottenstein brothers’ attorney, Jonathan Brennan, with the New York firm Maynard Cooper & Gale, said he and his clients are considering asking the judge to vacate the ruling.
“Our clients are disappointed by the result and believe it is not justified by the facts or the law,” Brennan said in an email. “The award is inconsistent with the substantial evidence presented at the hearing.”
JPMorgan Securities spokeswoman Veronica Navarro Espinosa said she could not say whether the bank would contest the judgment. She noted that neither Evan nor Avi Schottenstein worked at JPMorgan any longer.
The brothers, who live in New York, were fired in the summer of 2019, after their grandmother’s complaint to FINRA.
“These advisers are no longer with the firm, and their actions do not represent our values as a company,” she said.
‘Totally inappropriate for Mrs. Schottenstein’
The $19 million judgement was well below the $69 million Beverley Schottenstein and her attorneys sought, but Schottenstein and her supporters see it as vindication of her claims that she had been exploited for years.
“It was definitely a clear case of elder abuse,” said Beverley Schottenstein’s granddaughter, Cathy Schottenstein Pattap, who is writing a book about the case entitled Twisted.
According to documents filed with FINRA, Evan Schottenstein began handling much of his grandmother’s money in 2009, when he was a financial adviser with Morgan Stanley.
“(Evan’s) parents begged me to give him a job,” Beverley Schottenstein said. “I knew he wasn’t qualified, but his mother pleaded with me, so finally I said, ‘Well, give the kid a chance to learn about it.’ Before you know it, Evan was taking over. I didn’t realize how he was, I really did not. To me he was still a child.”
In 2014, when Evan and his younger brother, Avi, joined JPMorgan as financial advisers, they persuaded their grandmother to move her account to JPMorgan so they could manage it. The money was in a revocable trust, meant not merely to support her but to provide for her heirs. At the time of the transfer, the trust’s assets were valued “in excess of $82 million,” according to FINRA filings. According to Beverley Schottenstein, Evan Schottenstein received a $1.5 million bonus from JPMorgan to move her account to the firm.
The following month, the Schottenstein brothers began using the money to purchase “autocallable structured notes,” which Beverley Schottenstein’s attorneys described in FINRA filings as “highly complex, extremely illiquid investment products that were totally inappropriate for Mrs. Schottenstein.”
Over the next 12 months, the brothers bought 66 of the notes for more than a total of $72 million, costing their grandmother more than $10 million in losses, according to FINRA filings. The brothers claimed their grandmother requested a majority of the purchases, a claim her attorneys called “patently absurd” in the FINRA filings.
“The trading activity in Mrs. Schottenstein’s account was unauthorized and fully unsuitable for her,” said Scott Ilgenfritz, one of the Tampa, Florida, attorneys representing Beverley Schottenstein.
“Given the facts of the case, that Evan and Avi Schottenstein are Mrs. Schottenstein’s grandchildren, it makes what happened here particularly troubling and frankly, sad.”
Ilgenfritz said the exact amount that Evan and Avi earned from managing their grandmother’s trust was disputed in the FINRA case, but he said it was “in the millions of dollars. The trading activity generated significant revenues for both JPMorgan and Evan Schottenstein.”
Brennan, Evan and Avi’s attorney, said the accounts performed well under the brothers’ management,
“Over the entire time Evan Schottenstein served as his grandmother’s financial adviser, Mrs. Schottenstein’s accounts profited by more than $30 million,” he said in an email.
Brennan also disputes Beverley Schottenstein’s claims that her grandsons kept her in the dark about her investments.
“Given the extensive contact between Mrs. Schottenstein and her grandson (over 2,400 calls while at J.P. Morgan), the evidence overwhelmingly demonstrated that Mrs. Schottenstein’s account was invested in full accordance with her wishes,” he said.
Beverley Schottenstein, however, said Evan repeatedly rebuffed her efforts to find out what was happening with her investments.
“He said, ‘Don’t worry, I’m making a lot of money.’ I said, ‘Show me what you’re doing,’ and he said, ‘I can’t be bothered with that now,’ ” she said. “I know they wanted my money from the very beginning.”
Kept in the dark
The autocallable investments were one of five ways Evan Schottenstein “financially abused” his grandmother, according to the filings. In addition, he and his brother made other unauthorized trades, many of them in stocks in which JPMorgan was a “market maker,” which offered the advisers a premium commission.
The brothers, for example, sold 36,000 shares of their grandmother’s Apple stock in 2014, when the stock was trading for about $27 a share. Today, it sells for more than $130 a share.
Such trades were “outrageous and unconscionable,” Beverley Schottenstein’s attorneys argued in the FINRA filings.
The FINRA filings also accuse Evan and Avi Schottenstein of shredding their grandmother’s paper statements, and, unbeknownst to her, forging her name to create an email account where her electronic statements were sent.
“I called Evan and said, ‘I haven’t been getting any papers from you,'” Beverley Schottenstein said. “He said, ‘At JPMorgan, they don’t send old people statements every month because they’re too old to understand.’ I said, ‘What are you talking about?’ And he said, ‘Don’t worry, everything’s taken care of.'”
Beverley Schottenstein said her inability to learn anything about her investments upset her so much that she called JPMorgan Chase Chairman and CEO Jamie Dimon, one of the nation’s most prominent business figures.
“I was crying, I told the man what was going on. They said, ‘Mr. Dimon can’t speak with you,'” she recalled. “I told them who I was and said, ‘They’re taking my money, they’re taking my money. I never heard anything from them after that.”
In September, 2018, Beverly Schottenstein said she was shocked to learn JPMorgan Chase stopped payment on her checks. After getting her back statements from a bank branch, she “could not believe” what she saw, according to a diary entry, which was entered in the FINRA case.
“Every month — 2016-18 0151 thousands and thousands of dollars has been used from my account without my knowledge,” she wrote. “As of today, 10/31/18, I would say they took over $1,000,000.”
After the brothers invested $5 million of their grandmother’s money in a Cayman Islands private equity fund in December 2018, a family member reviewed Beverley Schottenstein’s investments and alerted her of that transaction and others.
Schottenstein decided to take action. On Jan. 8, 2019, in a handwritten letter, she instructed her grandsons to make no further investments and started the process of transferring her assets from JPMorgan.
The letter ignited a family firestorm. According to Beverley Schottenstein, her son (Avi and Evan’s father), who lives below his mother in the Bal Harbour high-rise, demanded she write another letter allowing her grandsons to manage the account.
“He came up and started begging me to do this, not to do that,” Beverley Schottenstein said. “Evan was there. He said he’d give me some money, and he offered to give me a million dollars if I’d just drop everything.”
She instead hired attorneys to pursue her FINRA case, which also accused JPMorgan of “egregious misconduct” by failing to supervise Evan and Avi Schottenstein.
On Feb. 5, the panel found Evan, Avi and JPMorgan liable for fraud, abuse of their fiduciary duty and of misrepresentation. The panel ordered Evan Schottenstein to pay $9 million in compensation to his grandmother plus $172,630 in court costs. Avi Schottenstein was ordered to pay $602,251 in compensation.
JPMorgan Securities was ordered to pay $4.7 million in compensation and to reimburse Beverley Schottenstein $4.3 million for the Cayman Islands investment, plus $172,630 in court costs.
Cathy Schottenstein Pattap said the dispute has been embarrassing to the family, which has deep roots and a long tradition of philanthropy in central Ohio.
“It’s been really a nightmare for the whole family and particularly devastating for my grandmother,” she said. “This has affected her relationship with that entire side of the family. Many people equate riches with happiness. That’s not necessarily the case.”
Her grandmother said she is no longer in contact with Evan and Ari or their parents, even though she occasionally sees them at the condominium pool or common space.
“I feel bad about it, naturally,” she said. “But I was mistreated. Very much so.”