As Peter Deutsch sat in his spacious lakeside getaway in upstate New York one steamy July morning, the last thing on his mind was relaxing. The wealthy wine merchant was on a risky mission. He’d decided to buy control of a troubled Chinese company and then float a rescue plan. To do that, he’d have to snap up at least 5 million shares of its thinly traded stock in a matter of days. It was either that or kiss goodbye the $40 million he’d already invested.

With the waters of Lake George gently lapping onto his property, Deutsch turned to his iPad, opened his brokerage account, and tapped “buy.” Bingo. He picked up a few thousand shares. He tapped “buy” again. Nothing. Figuring it was a glitch, he reached for the phone. “What’s going on, guys?” he recalls asking one of his reps at Fidelity Investments. “I’m putting through important trades here.” The rep, he says, didn’t have a clue.

Deutsch says his unease turned to shock later that day when he fielded a call from a Fidelity employee he’d never spoken with before. Deutsch remembers the man informing him that Fidelity was “uncomfortable” with his purchases of China Medical Technologies, a Beijing-based maker of cancer-treatment devices. Effective immediately, the man told Deutsch, he could no longer buy the stock.

And with that, a hefty slice of his family’s net worth was toast.

The impasse with Fidelity in the summer of 2012 took Deutsch by surprise. The previous year, Fidelity Family Office Services, a unit of the second-largest mutual fund group in the U.S., had sent a sales team to woo Deutsch with tales of the bespoke services FFOS lavished on its ultrawealthy clients. Here he was, less than a year later, and he couldn’t even make a trade.

For Deutsch, 53, discovering the real reasons behind Fidelity’s change of heart has become a consuming passion, along with fighting to be made whole again. The battle—details of which emerge in part from internal company e-mails and sworn testimony, which were all filed in federal court—has stretched from industry arbitration to the U.S. Department of the Treasury.

Among the things Deutsch learned, according to papers he filed in the U.S. District Court for the Southern District of New York: While he was trying to gain control of China Medical, he had a formidable rival—Fidelity, the very firm whose family office he says had promised him seamless trade execution and conflict-free service. Fidelity, he alleges, was secretly buying the stock so aggressively that it drove up the price of China Medical’s shares at a time when the brokerage was supposed to be helping him build his stake. What’s more, he says, even as FFOS was making nice, another part of Fidelity was using his shares against his wishes for its benefit—and then it stopped him from trading to cover up its own misdeeds.

Deutsch is seeking as much as $400 million to $500 million in damages from Fidelity in arbitration before the Financial Industry Regulatory Authority. The amount is what Deutsch claims he could have earned if Fidelity hadn’t prevented him from reaching his goal of a 66 percent stake in a company he’d already poured tens of millions of dollars into.

Fidelity is contesting the claims. The firm says it prevented Deutsch from trading out of concern he was trying to illegally manipulate China Medical shares, according to documents entered into court and people familiar with the company’s views. Fidelity took the case to federal court last year in an attempt to hold onto documents it said were protected by the Bank Secrecy Act; Deutsch had sought the paperwork to use in the Finra arbitration. The court battle ended last September after the judge ordered Fidelity to turn most of the documents over to Deutsch. As of early April, the arbitration is ongoing. “While it’s our practice not to discuss ongoing litigation, we strongly and completely refute the assertions made by the plaintiffs in this matter,” says Fidelity spokesman Adam Banker. “This suit is entirely without merit, and we are vigorously defending against it.”

To some Fidelity executives, however, the blowup between Deutsch and the company didn’t come as a shock. David Whitlock, a senior Fidelity compliance official, saw trouble ahead when he learned, two days after the fact, that the firm had cut Deutsch off. “It won’t surprise me if this ends up a nice big legal mess involving them, his adviser, the company, the SEC, and the firm for the next few years,” he wrote to colleagues in an e-mail that was filed in court.

First « 1 2 3 4 5 » Next