By the time Peter Doelger signed the paperwork to have JPMorgan Chase & Co. handle his fortune, he had built a company spanning the US, sold it to a conglomerate and bet the proceeds on stocks and oil, beating the markets.
By 78, he said he was worth at least $50 million. And, according to his family, he was starting to show signs of dementia.
What followed over the next half-decade was an almost total wealth wipeout, as Peter’s wife, Yoon, said they increasingly depended on JPMorgan’s advice for managing their portfolio, only to watch it lurch ever closer to zero. They ended up with $1.5 million, selling their Boston condo and moving in with relatives.
The details of how things unraveled are now spooling out of dueling high-stakes legal claims in Boston federal court—testing the degree to which a major financial firm might be held responsible if a wealthy client slides into dementia and their investments sour. The Doelgers filed first, seeking to recoup tens of millions of dollars from the nation’s biggest bank.
“We had 100% trust in them that they will manage our assets,” Yoon, 76, said during an interview at her sister’s apartment in Boston. “We didn’t expect them to make us a fortune but at least make us comfortable.”
Peter, now 86, can’t recall much of what happened. His hands trembled in the interview as he tried to tell the once-familiar story of how he started his company. When the topic turned to more recent years, he struggled to follow. A court-ordered exam declared him unable to testify in the litigation, and both sides have agreed not to contest it.
The couple’s situation spotlights an issue that has always lurked on Wall Street but is surging in scale as the baby boom generation retires with a record stockpile of wealth. Legions of boomers have enough saved to be deemed “accredited” or “sophisticated” investors under US securities laws, qualifying them to buy into riskier, complex asset classes with juicy commissions for intermediaries. Yet many of those clients will inevitably face cognitive decline. The industry lacks a formal system to detect when that happens.
In a study testing financial sophistication, households of accredited investors at least 80 years old typically scored worse than unaccredited investors a few decades younger. The authors—Michael Finke, a professor at the American College of Financial Services, and Tao Guo, retirement research director at Morningstar Investment Management—recommended the US consider revising rules for elderly customers.
“This case screams out for more attention to how waning cognitive abilities affect older people’s capacity for financial decision-making and independent financial management,” said Naomi Karp, a consultant on aging, law and policy who worked as an analyst for the Consumer Financial Protection Bureau. “We need to put more responsibility on financial firms since they are well-positioned to detect warning signs.”
That should include more training for staff and managers to spot red flags and intervene, she said.
Though the Doelgers are relying on their son-in-law, a lawyer, to represent them, the battle threatens to wipe out their remaining savings.
JPMorgan has filed a counterclaim in the same lawsuit, saying the Doelgers’ accusations have no merit and pressing them to pay its burgeoning legal costs, as well as other unspecified damages. The couple doesn’t have the right to seek redress, the firm argues, because Peter signed a letter upfront in 2015, attesting to his sophistication and interest in making outsize, risky bets on oil and gas partnerships.
Over the years, JPMorgan representatives helped him add to those investments, loaning him millions of dollars to leverage up the wagers, and sold him a debt swap that ultimately worsened his situation, according to the couple’s lawsuit. Yoon, a Korean immigrant with a degree in fine art, recalled her husband telling her after meetings to discuss investments that he didn’t understand what was said. Neither did she.
In its defense, JPMorgan has said Peter was a successful energy-industry CEO with experience in oil and gas investments when he transferred his holdings to the bank.
“JPMorgan repeatedly suggested to Mr. Doelger that he diversify and reduce his overall exposure,” the bank said in a statement. “Mr. Doelger signed an agreement, delivered to Mr. Doelger and his personal attorney, acknowledging that advice and affirming that he was ‘financially knowledgeable and sophisticated’ and ‘fully aware of the concentration risk.’”
The bank said it has policies and procedures for protecting elderly and vulnerable clients.
“No one at JPMorgan ever observed any signs of cognitive decline from Mr. Doelger when working with him, and neither Mr. Doelger, his personal advisers, or his family members ever told JPMorgan prior to this legal dispute that Mr. Doelger was suffering from any cognitive decline,” the company said. The claims “are contrary to the record and will be vigorously contested in court.”
Beer Baron
The Doelger family’s wealth began taking shape alongside JPMorgan itself in 19th century Manhattan. Peter’s great-grandfather—a German coppersmith also named Peter Doelger—immigrated to the city as a young man and set up a brewery just before the Civil War, introducing lager to New York’s masses. Soon after legendary banker J. Pierpont Morgan moved into his brownstone on Madison Avenue, the beer baron commissioned a towering mansion on Riverside Drive. The Doelger brewery empire thrived until Prohibition and eventually collapsed. Artifacts of its brand are still found throughout the city.
The younger Doelger carved his own path. After graduating from Middlebury College, Peter set up shop in Boston and in the 1970s founded a company that helped homeowners lower energy bills by scrutinizing attic insulation and windows. The venture grew into a nationwide network of contractors before Peter sold it to Honeywell in 1995. He reaped an eight-figure payout, according to court documents filed by JPMorgan. He and Yoon married in 2000.
Peter loaded his portfolio with various assets: pre-IPO shares in biotech companies, an MIT professor’s high-frequency-trading fund, Korean real estate and municipal bonds. He also began dabbling in securities known as master limited partnerships, or MLPs. The investments, which trade on exchanges, focus on natural resources such as oil and gas.
Goldman Alums
MLPs can be notoriously mercurial. They offer significant cash payouts and tax advantages, but the Securities and Exchange Commission warns they are also “acutely sensitive” to oil and gas prices.
Peter invested in MLPs through a Lehman Brothers subsidiary. After that firm’s collapse, JPMorgan became custodian. He opened a brokerage account there and secured a $6 million credit line, using some of it to ramp up investments. From 2009 through 2014, his bets on MLPs outperformed the S&P 500, generating tens of millions of dollars in gains and cementing a strategy that he sought to continue, JPMorgan said in court documents. While keeping their upscale condo in Boston, the Doelgers bought a $7 million Palm Beach mansion and a Paris apartment and held memberships at four private clubs, the bank said.