GenSpring Family Offices Names New CEO

In a significant shakeup at GenSpring Family Offices—the wealth management division of SunTrust—both GenSpring’s CEO Maria Elena Lagomasino and CIO Jean L.P. Brunel have left the firm.  Some reports indicate that both left GenSpring to begin focusing on serving overseas clients as a global multifamily office. Whatever the reason, their tenure at GenSpring was not without its problems.

The legal team of Vernon Healy and Dovin Malkin Ficken are currently handling a number ofcases against GenSpring.  The cases allege that GenSpring misrepresented investment strategies by claiming it was putting investors’ money into funds with bond risk and a minimum downside of exposure. Nevertheless, in the wake of the financial collapse, the portfolio of those investors dropped significantly while the bond market in general increased in value. “GenSpring now has a record of being both reckless and negligent with the funds our clients entrusted to them,” said Chris Vernon, founding partner at Vernon Healy, a firm that handles securities fraud cases. “While we hope that the new executive team will exercise more care going forward, we are making sure our clients, who entrusted very significant funds to GenSpring, receive relief for their damages.”

Vernon Healy and Dovin Malkin Ficken’s promise to keep vigilant is especially significant as GenSpring’s newly named CEO, Thomas M. Carroll, brings with him a wealth of new client opportunities. Carroll is being moved from SunTrust’s Sports and Entertainment Group, an area of business GenSpring has not notably focused on in the past. Carroll’s experience dealing with athletes and entertainers is likely to open doors to managing the money of an entirely new segment of ultra-high net-worth investors for GenSpring.

“Even as we wait for a decision on the case we previously filed, we are investigating whether any of GenSpring’s other high net worth investors, including professional athletes and entertainers that already invested with the firm, have suffered damages as a result of GenSpring’s investment strategy,” said Chris Vernon.

GenSpring faces lawsuit over hedge funds in $57 million portfolio in case filed by Vernon and Dovin legal team

Naples, Fla. —GenSpring Family Offices breached its fiduciary duty and committed gross negligence when it failed to adequately diversify the $57 million portfolio of an ultra high net worth individual and misrepresented that hedge funds it recommended would perform like bonds, according to an arbitration claim filed by the law firms of Vernon Healy and Dovin Malkin & Ficken.

The legal claim filed today on behalf of a retired Florida entrepreneur seeks more than $11 million, including rescission of more than $6 million in hedge funds that are now illiquid that GenSpring represented would be “as safe as bonds with upside.” GenSpring also represented that the multi-strategy hedge funds would be far more liquid than they have turned out to be, according to the claim.

The Dovin Malkin & Ficken and Vernon Healy team are representing ultra high net worth individuals in an aggressive nationwide investigation of GenSpring Family Offices. The team previously filed an additional claim charging that GenSpring failed to diversify the $30 million portfolio of an ultra high net worth investor.

In addition, the Dovin legal team has already received a $1.3 million arbitration award — representing a win — against GenSpring in which the arbitrator found that GenSpring breached its fiduciary duty when it used hedge funds instead of bonds for much of the bond risk portion of that investor’s portfolio.

“These funds had a severe lack of transparency and control attributable to the fact that their multiple managers in the various sub funds could employ essentially any strategy they chose at any particular point in time.  Thus, GenSpring could not adequately determine what strategies these managers were following, and whether these strategies provided ‘bond-like’ risk,” according to the claim filed today by the team headed by securities fraud attorneys Chris Vernon and Ed Dovin.

The retired entrepreneur’s colleague, trained as a CPA, began raising concerns about the hedge funds in the investor’s portfolio in late 2007 and 2008, according to the claim. GenSpring repeatedly dismissed the concerns and sought to dissuade liquidation of the hedge funds by the investor, the claim asserts.

Prior to the financial crisis, the hedge funds with purportedly bond-like risk recommended by GenSpring were actually moving in lock step with equities and GenSpring was aware of that fact, according to the Vernon Healy and Dovin Malkin & Ficken claim.

“In truth, and contrary to its representations, GenSpring did not have a reasonable basis to believe that multi-strategy hedge funds would perform like bonds, provide diversification from equities or remain liquid in the event of a need to reallocate,” the claim states.

GenSpring’s stated benchmark for the so-called “bond risk” feature of the hedge funds it recommended, the Lehman Bond Index, actually moved opposite of stocks in accordance with historical norms and went up more than 5 percent — while the multi-strategy hedge funds in the portfolio that GenSpring represented had bond-like risk actually went down roughly 25 percent in 2008, the claim says.

“Here again our legal team is prosecuting a case involving hedge funds cloaked in secrecy,” said securities fraud attorney Chris Vernon. “High net worth individuals and institutions are now seeking to hold GenSpring and other firms accountable for representations that were made with no reasonable basis in fact — given the lack of transparency surrounding certain hedge funds and fund of funds.”

GenSpring Family Offices is owned, in part, by a wholly-owned subsidiary of SunTrust.  GenSpring has stated it has more than $17 billion under management and its clients are among the wealthiest families in the world.

The securities attorneys at the Vernon Healy and Dovin Malkin & Ficken law firms collectively have more than 60 years of experience representing investors who are victims of securities fraud and all manner of financial fraud and negligence.

Based in Naples, Florida, the securities attorneys at the Vernon Healy law firm have conducted aggressive nationwide investigations of hedge funds, structured products, reverse convertibles, fixed income products, bond funds, hedge funds, non-traded REITs, and various securities fraud cases and Ponzi schemes. The firm’s investigations and advocacy on behalf of investors have been featured in AARP magazine and Forbes in the past year.

For more information contact:

Chris Vernon
Vernon Healy, attorneys at law
(239) 649-5390
www.vernonhealy.com
www.wealthmanagerattorney.com

GenSpring Family Office investigation by Vernon Healy and Dovin, Malkin & Ficken continues with another case filed

Naples, Fl. — GenSpring Family Offices breached its fiduciary duty when it failed to adequately diversify the $30 million portfolio of an ultra high net worth individual and misrepresented that hedge funds it recommended would perform like bonds, according to an arbitration claim filed by Dovin, Malkin & Ficken and Florida based co-counsel Vernon Healy.

The Vernon Healy law firm, co-counsel on the investigation, has broad experience representing ultra high net worth individuals and families in securities fraud and financial disputes. The Dovin, Malkin & Ficken law firm has already secured a $1.3 million arbitration award against GenSpring. In that case, the arbitrator found that GenSpring breached its fiduciary duty when it used hedge funds instead of bonds for much of the bond risk portion of that investor’s portfolio.

The new claim asserts that GenSpring proposed a diversified strategy that would allocate portions of the portfolio between “equity risk” and “bond risk.”  However, in one meeting attended by GenSpring CEO Mel Lagomasino and Senior Executive Partner Michael Zeuner, the investor was told that GenSpring doesn’t believe in bonds and instead uses low-volatility hedge funds with “bond-like risk” for the bond portion of its clients’ portfolios, according to the claim.

“GenSpring explained to [the investor] that this approach had been thoroughly tested in all market conditions. GenSpring was so confident in these multi-strategy hedge funds that they explained they took much of the risk out of investing by leveling out market cycles with consistent market neutral returns in all environments,” the claim states.

GenSpring represented that this strategy allowed it to quantify the ultimate downside risk a client might experience to an exact number which would in effect show a maximum loss a portfolio might sustain, the claim states. The Florida investor filing the claim was told in a worst case scenario his portfolio would sustain a loss of 10.4 percent, according to the claim.

“How GenSpring could precisely quantify downside protection and describe these funds as having a bond-like risk profile raises significant questions for GenSpring,” securities fraud attorney Chris Vernon said. “The strategies of the particular hedge funds it was recommending to this client were cloaked and obscured in layers of secrecy.”

“As a result of GenSpring’s breach of fiduciary duty and gross negligence, the Trust lost nearly $2.5 million more than it would have had the “bond” portion of the portfolio been invested in accordance with the ‘benchmark’ standard provided in the signed investment contract,” the claim states.

The LB aggregate bond index in the benchmark went up 5 percent, moving opposite stocks in accordance with historical norms, at a time when the multi-strategy hedge funds pushed by GenSpring dropped 23 percent, according to the claim.

“These funds had a severe lack of transparency and control, and it’s apparent that GenSpring could not adequately determine what strategies they were following despite GenSpring’s representations to the contrary,” said Ed Dovin, securities attorney with Dovin, Malken & Ficken.

The securities attorneys at the Vernon Healy and Dovin Malkin & Ficken law firms collectively have more than 60 years of experience representing investors who are victims of securities fraud and all manner of financial fraud and negligence.

Based in Naples, Florida, Vernon Healy has conducted aggressive nationwide investigations of structured products, reverse convertibles, fixed income products, bond funds, hedge funds, non-traded REITs, and various securities fraud cases and Ponzi schemes. The firm’s advocacy on behalf of Lehman note investors was recently featured in a March 2011 AARP Magazine article “The Time Bomb in Your Nest Egg” discussing the dangers of investing in structured products.

For more information Contact

Chris Vernon, attorney at law

239-649-5390

www.vernonhealy.com

Investigation of brokerage firms pushing Alexander Read option trading strategies expanded by attorney Neal Blaher and Vernon Healy law firm

Naples, Fla. – Brokerage firms that recommended wealth manager Alexander Read, his hedge funds and options trading strategies are the focus of a nationwide investigation of brokerage firm misconduct launched by the investor rights law firm of Vernon Healy and attorney Neal J. Blaher.

Securities attorneys at Naples, Florida-based Vernon Healy have broad and deep experience representing high net worth families in investment disputes and securities fraud matters.  And Neal J. Blaher has secured a FINRA arbitration award against a discount brokerage firm based on the firm’s inclusion of Alexander Read Investment Management in its advisor network, which conferred the firm’s “seal of approval” on Alexander Read.

The investigation by the two law firms has uncovered that full service brokerage firms like Wachovia, now known as Wells Fargo, promoted and recommended Alexander Read.

“We believe multiple brokerage firms are liable to investors for their reckless or negligent due diligence process – or complete lack of due diligence – in vetting and improperly including Alexander Read as an approved hedge fund or money manager for its client base,” Blaher said.

Alexander Read held itself out as a financial planning firm to capitalize on the securities industry’s increasing reliance on so-called independent portfolio managers.  In the wake of the scandals of the past decade, Wall Street firms have increasingly sought to deflect liability by encouraging their brokers to sign customers up with third-party wealth managers. The brokers then often refrain from making individual investment recommendations themselves.  Firms that did their due diligence would have discovered that Alexander Read’s marketing pitch as a broad-scope financial planner was inconsistent with Alexander Read’s significant focus on risky option trading.

“We believe that clients with little or no experience in options, as well as clients for whom option trading was unsuitable, were thrown into the high risk world of option trading by their trusted brokerage firms through the recommendation of Alexander Read,” said Chris Vernon, founding partner of Vernon Healy.

Investors’ rights attorney Blaher adds: “When 2008 brought the fall of the securities markets, the option trading of Alexander Read exposed clients to far greater losses than those suffered by investors whose portfolios had been suitably and properly managed.”

Before the collapse of 2008, Alexander Read created a hedge fund that had options trading as its sole function.  By trading options within a hedge fund shell, Alexander Read’s specific transactions were obscured from the eyes of the firm’s clients.

“More and more high net worth families and institutions are re-evaluating the opacity of hedge funds as we’ve seen major frauds perpetrated against wealthy investors in recent years,” Vernon said.

The securities attorneys at the Neal J. Blaher and Vernon Healy law firms collectively have more than 60 years of experience representing investors nationwide who are victims of securities fraud and all manner of financial negligence.

For more information contact:

Christopher Vernon
Vernon Healy law firm
(239) 649-5390
www.wealthmanagerattorneys.com
www.vernonhealy.com