It sounds like some over-the-top plot from a TV soap like Empire or Scandal or even the movie The Wolf of Wall Street.
A successful entrepreneur, one of this region's richest men, hands much of his fortune over to an ambitious woman to invest in her role as stock broker for a high-profile Wall Street firm. But it turns out the man, who is married, and woman are also intimately involved.
As the man ages, his mental faculties decline. Yet the volume of trading activity on his accounts soars, generating millions in fees and commissions to the firm and broker — whose career had risen to star status celebrated by Barron's magazine for managing clients with whopper-sized accounts.
Only after the man dies does his wife, long aware of his infidelities, realize the magnitude of the girlfriend/broker and investment firm's gains gleaned from the assets of a man suffering from Alzheimer's.
Such a tale may some day deserve a movie. But for now it is very real, claims a recent legal complaint. And it is playing out this year not in a traditional Tampa Bay courtroom but in closed-door arbitration hearings — typical of how most investor claims are resolved these days.
What's different here is that the case involves hundreds of millions of dollars and should serve as a warning to all families with aging, wealthy relatives.
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Lynnda Speer, who turns 75 this month, was married 52 years to Home Shopping Network co-founder Roy Speer. The entrepreneur's wealth back in 2000 topped $1 billion and put him on the Forbes 400 list of richest Americans. In 2012, Roy Speer died at the age of 80 after years of declining physical and mental health.
Home Shopping Network, of course, is today known as HSN, a household name and St. Petersburg company with nearly 7,000 employees and valued at $3.5 billion.
Now Speer's widow, who lives in Pasco County and has spent much of her time in Bible study, is suing Morgan Stanley Wealth Management along with financial adviser Ami Forte, 57, and branch manager Terry McCoy. When Morgan Stanley first briefly disclosed this dispute in its own annual report, the Tampa Bay Times last month made brief mention of the matter, citing what appeared to be a potential $170 million lawsuit.
But the devil is in the details.
Some of those were recently shared in an interview by Lynnda Speer's attorney in this case, securities lawyer Guy Burns of the area law firm Johnson, Pope, Bokor, Ruppel & Burns. The lawyer has a long track record helping clients who claim they were overcharged by investment firms. In 2009, he argued before the U.S. Supreme Court a case involving excessive fees charged by the U.S. mutual fund industry.
In the Speer case, says Burns, his client seeks more than $170 million — a lot more — from Morgan Stanley, Forte and McCoy. The sum: $400 million. That consists of $100 million in compensatory damages but also $300 million in punitive damages, a sum allowable under a state statute to discourage exploitation of the elderly.
As Roy Speer's widow and personal representative of his estate, Lynnda Speer says Morgan Stanley and Forte in the Palm Harbor branch engaged in excessive trading, unauthorized use of discretion and abused their fiduciary duty. Roy Speer's accounts managed by Morgan Stanley and Forte ranged from $150 million to $200 million in size depending on the stock market's value.
During the last five years of Speer's life, says Burns, Forte and her colleagues at Morgan Stanley put through approximately 12,000 unauthorized trades in Roy Speer's accounts — including the Roy M. Speer Charitable Foundation and the Speer Family Trust — generating commissions of nearly $40 million.
That's an average of 200 trades a month for five years.
Neither Lynnda Speer nor her children had access to these accounts while Roy Speer lived. That's why the years of Morgan Stanley trading, mixed with her husband's amorous ties with Forte, proved so shocking after Speer died and the account records became accessible. According to Burns, an accountant Roy Speer hired to help advise him had warned him his accounts were not well managed. But Speer grew angry and the accountant left Speer four years before he died.
And where was Roy Speer during much of this time?
"During the last several years of his life, Roy Speer suffered from significant diminished mental capacity, as well as from substantial physical infirmities," says Burns. "He was wheelchair bound and diapered, could not drive and was attended to daily by a full-time caregiver."
Burns said as it became more obvious Roy Speer was in decline, he was given a neurological test that included simple memory challenges and some basic math. When asked what was "15 minus 7" Speer was, according to a hospital report, "only able to surmise (the answer) 8 with great difficulty."
Burns said Roy Speer also became unable to read, requiring others to tell him what his mail said.
When first asked for comment, Morgan Stanley Wealth Management spokeswoman Christy Jockle offered this statement. "We believe the claims are without merit and we are contesting them vigorously through the legal process."
When contacted days later by the Times seeking any further response — given the additional details just described by Burns — Morgan Stanley declined to say more. "Our comment stands, without any elaboration," Jockle said Thursday in an email and followup phone conversation.
Mandatory arbitration hearings, conducted through FINRA (the self-regulating Financial Industry Regulatory Authority) have been ongoing for five weeks and will continue with additional hearing dates through at least early July. The three-person arbitration panel will have up to a month to reach a decision.
Morgan Stanley has yet to begin its defense.
What does Burns expect from Morgan Stanley? He anticipates the Wall Street firm will argue that Roy Speer was an aggressive entrepreneur who was able and willing to take investment risks with active trading.
The opposite is closer to the truth, Burns suggests. Roy Speer was indeed a risk taker in business, as entrepreneurs must be. But when he earned money, he was a conservative investor. We should learn the outcome of this battle over the fate of Roy Speer's fortune later this year. While most arbitration findings are confidential, Burns says Lynnda Speer will insist this one be made public.
Contact Robert Trigaux at email@example.com. Follow@venturetampabay.com.