A client of Creative Planning and Charles Schwab & Co. is suing the firms for allegedly engaging in negligent and reckless trade options in his account, causing him to lose $9.5 million in Boeing stock.
Bruce Bilow of Oceanport, N.J., in the complaint filed August 25 in the Superior Court of New Jersey for Bergen County, claimed he has “sustained substantial damages, including, but not limited to, a substantial income tax liability” due to breach of the fiduciary duties of the firms.
The complaint said Bilow opened two discretionary options accounts in June with Creative Planning. It said he had inherited 45,695 Boeing shares of stock from his father, “which collateralized a $2 Million PAL Account loan, and were used as the underlying security at risk from the aggressive options trading strategy recommended and implemented by financial advisor Phillip Attebery.” The second individual, non-retirement margin account was the options account linked to the PAL Account, the complaint said.
Bilow’s accounts were managed by Attebery and Brandon Hanna, director of complex strategies. Schwab acted as the custodian of the accounts, the complaint noted.
The complaint said Attebery represented the aggressive options investment strategy as “extremely safe and that it would generate income” and would assist Bilow in paying down his margin loan and preserve the Boeing stock.
But Bilow, the complaint said, had advised Attebery and Hanna that he “absolutely did not want to sell any of the Boeing stock” and that he instead wanted it preserved in the accounts.
“This reckless and negligent stock options investment strategy ultimately led to the sale and loss of all of the Plaintiff’s Boeing stock,” the complaint said. “Attebery and Hanna acted negligently and breached the standard of due care that they owed to the Plaintiff.”
The suit targets Creative Planning for lack of training and supervision of Attebery and Hanna, who are not named as defendants in the complaints. The firm “failed to establish adequate procedures, processes and systems to supervise account activity in a fiduciary options trading account,” the complaint said.
Schwab, it said, did not abide by its policies, rules, procedures and regulations that prohibited the trading of options in the PAL account. The lawsuit went on to say that the firm was negligent in that it “permitted defendant Creative, by and through Attebery and Hanna, to utilize the PAL Account for the implementation of its options investment strategy regarding the Plaintiff’s Boeing stock,” causing Bilow to lose 45,695 shares of Boeing Stock valued at about $9,500,000.
Bilow is seeking compensatory and other damages including “incidental and consequential” damages, as well as legal fees.
His attorney, Jeffrey Herrmann of Cohn Lifland Pearlman Herrmann & Knopf of Saddle Brook, N.J., did not return a phone call to his office.
Creative Planning and Schwab did not respond to requests for comment.