Securities Lawyers Blog
Former Merrill, Lynch Pierce, Fenner & Smith, Inc. (Merrill Lynch), Deutsche Bank Securities (Deutsche Bank), Inc., and Oppenheimer & Co., Inc. (Oppenheimer), broker Karl Edward Hahn (Hahn) was ordered by the Financial Industry Regulatory Authority (FINRA) to pay former clients over $11 million for misconduct in April 2013. Hahn was accused of common law fraud, negligent misrepresentations, and breach of fiduciary duties.
Hahn worked at Merrill Lynch from 2004 until 2008, at Deutsche Bank from 2008 to mid-2009, and at Oppenheimer from 2009 to early 2011. Hahn allegedly recommended various unsuitable investments to customers including covered calls, a premium financed life insurance policy, and $2.3 million fraudulent real estate financing project “involving East Coast” properties. Hahn allegedly recommended the life insurance policy for the the large commissions he stood to earn. Hahn also allegedly pocketed the money that was supposedly going to finance the East Coast properties.
Other claims made against Hahn include churning of investment accounts. Churning is a type of financial fraud where the broker engages in excessive trading in a client’s account for the purpose of generating commission but does not provide the investor with suitable investment strategy.
In one customer complaint, the customer brought claims against Merrill Lynch, Deutsche Bank, and Oppenheimer as well as Hahn. All three settled with the customer with Merrill reportedly paying $700,000 before a FINRA arbitration hearing began. The arbitration panel eventually found in favor of the customer against Hahn and ordered Hahn to pay $4.1 million in compensatory damages and $6.4 million in putative damages. Thereafter, on August 3, 2013, a motion to confirm the arbitration award was filed in federal court asking a federal judge to order Hahn to pay the $10.5 million award.
In another customer action in February 2013, Hahn was ordered by another FINRA arbitration panel to pay the customer $934,000. The customer claimed that Hahn sold them life insurance and misrepresented to them that the insurance was at “no risk or cost” to them, and would “protect their assets in life and death.” The life-insurance policy allegedly turned out to be a high-risk policy. Further, the client’ took out additional debt and loans in order to finance the payment of investment premiums. For his actions, FINRA’s enforcement division barred Hahn from the industry.
The attorneys at Gana Weinstein LLP are experienced in investigating claims of financial abuse. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover. Call 800-810-4262 to speak with an attorney.