Money Manager Ordered to Pay South Florida Family $3.2 Million

Daily Business Review
May 2006

An arbitration panel has ordered a Philadelphia money manager to pay $3.2 million to a Miami Beach family for improperly investing the family’s money during the dot-com bust.

The family of Sydell Sandler, 82, filed a complaint against Janney Montgomery Scott in 2004 after losing $1.1 million on its investment, said Darren Blum, a partner at Blum Law Group in Coral Springs who represented the Sandlers before the NASD panel in Boca Raton.

Janney managed 40 accounts containing several million dollars of the family’s money from 1996to 2002. The total investment was not disclosed.

The family allowed the firm to invest the funds in “moderate risk” stocks like the Standard & Poor’s 500, Blum said.

The case went to arbitration under the company’s account agreement.

The arbitration panel found Janney liable for failure to supervise, inappropriate concentration of investments, breach of contract and breach of fiduciary duty. The award issued earlier this month accrues 5 percent interest per year until it is paid.

“Janney does not believe the award was proper and will be filing an appeal” within 30 days, said Paula Shaffner, a partner at Saul Ewing LLP in Philadelphia who is representing Janney.

Lionel Moses Bourassa, a financial advisor who is still with Janney, invested a large portion of the money in technology companies and mutual funds that invested heavily in tech companies, Blum said.

Bourassa even advised the family, whom he had known for years and had befriended, to invest in a tech company that he has invested in, according to Blum.

“He recommended these and similar risky and aggressive stocks to [the] claimants, without regard for their stated investments objectives or risk tolerance,” the complaint said.

When the tech stocks began to drop, Bourassa sold his personal shares without telling the family, Blum said.

Some of the shares dropped from $200 a share to about $20.

“Clients started asking about getting out. He said to continue to hold it,” Blum said. “Meanwhile, he sold thousands of shares in his own account.”

An investment in the S&P 500 index would have netter $6million instead of losing $1.1 million, he said.