Franklin Resources Says $156M Lost-Shares Suit Is A 'Scam'

Johnson gave Miele’s father a block of stock, then worth $100,000, as a reward for the loan, and it was put in a trust for the baby son.

Miele lays blame on Franklin for initially failing over the years to deliver shareholder correspondence, which he says was consistently addressed to his deceased father for 15 years and got lost in the mail.

Sinister Turn

The narrative in the lawsuit takes a more sinister turn when Johnson, after learning that the unclaimed shares would be declared lost property by the state of New Jersey, allegedly enlisted help in locating Miele from the securities dealer whose firm had underwritten Franklin’s initial public offering in 1971.

That dealer, Eugene Mulvihill, had helped Johnson secure the 1973 loan from Miele’s father. In 1986, Mulvihill was permanently barred from the securities industry after pleading guilty to fraud and forgery, according to the complaint.

By 1991, the Bank of New York held $186,000 in uncashed dividend checks for the stock, which was held in the name of F.N. Wolf & Co., the successor to Mulvihill’s Mayflower Securities, according to the lawsuit. The Bank of New York’s offers to track down Miele were never taken up by Johnson and Franklin, even though they had Miele’s Social Security number since 1973, Miele said.

Miele learned of the forgotten shares only three years ago after Johnson met his sister and expressed hope that the children received the Franklin stock, according to the complaint.

‘Hit Man’

Miele says that when he initially contacted Mulvihill to inquire about the stock, Mulvihill spoke of “the money I gave you in 1990,” the source of which he had never told Miele about, according the complaint.

After further hurried phone conversations, Mulvihill finally told Miele that his uncle had cashed all the dividends and that if Miele investigated the matter, Mulvihill’s associate “would hire a Russian hit man to kill [Miele III] and your family,” according to the complaint.

Mulvihill died of a heart attack 10 days after that conversation at age 78, Miele said.

Miele contends that due to the negligence of Franklin and Johnson, he’s now entitled to 2.53 million Franklin shares, after splits, which he values at about $136 million. He’s also demanding $20 million for dividends he never collected.

The case is Miele III v. Johnson, 15-cv-00199, U.S. District Court, Northern District of California (San Francisco).