by Brian Mahany
Wm. Skelly, founder of Skelly Oil, created a trust back in 1955 to benefit his daughter and grandchild. Skelly died long ago but the trust continued and was left to JPMorgan Chase to manage. Instead of making money for the trust’s intended beneficiaries, an Oklahoma judge says the bank lined its own pockets.
Banks have a fiduciary duty to trusts and their beneficiaries. The dictionary defines “fiduciary duty” to mean a person in whom another has placed the utmost trust and confidence to manage and protect money or property. That didn’t happen in the Skelly trust.
JPMorgan Chase breached its duty to the trust by selling stocks in the trust and using the money to purchase the bank’s own investment products. The bank was thus able to double dip by charging both a fee / commission on the sale of the stock and purchase of the proprietary investment products and still charge trust and management fees. It was a great day for the bank but cost the trust millions.
The conduct was so bad – the judge called it “reckless disregard” of the rights of others – that the court indicated it will also going be awarding punitive damages. According to published reports, the bank says it will appeal.
Several years ago the bank added Skelly’s granddaughter as a co-trustee. Normally that might help the bank avoid liability for the double dipping but not here. If the beneficiary is also managing the trust its harder to find fault with the bank’s conduct. In this case, however, the judge found that the bank suggested the granddaughter become a trustee and knew that she has cognitive disabilities. In other words, the court lays the fault squarely on the bank.
Trust officers owe a very high duty to their clients. Unlike a traditional brokerage account, bank trustees are required to do everything in the best interest of the client. That means absent some very compelling reasons, no double dipping, no churning an account solely to generate commissions and no selling products with higher than average commissions.
Skelly’s granddaughter, Ann Fletcher, has won the first round. Unfortunately, the big players on Wall Street have deep pockets and large war chests. The appeal could take a few more years. Depending on the what the judge does at the punitive damages phase, the stakes could get much higher. Already the court has awarded $18 million in damages to Ms. Fletcher and against Chase.
The fraud lawyers at Mahany & Ertl help victims of fraud, fiduciary mismanagement and malpractice get back their hard earned money. Our asset recovery team has already recovered millions of dollars for our clients. Presently we have the largest federal false claims act case in the country against a financial institution – in November of 2011 HUD adopted our case against Allied Home Mortgage ($2.4 billion).
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct dial). All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and Minneapolis, Minnesota. Professional malpractice and fiduciary fraud cases handled in many jurisdictions.