Best-selling crime writer Patricia Cornwell has walked away with a massive $51 million award in a lawsuit against her financial advisory firm.Cornwell accused New York-based Anchin, Block & Anchin LLP and its former principal, Evan Snapper, of losing tens of millions of dollars of her fortune just years after she hired them in 2005.
A federal court jury ruled the firm had been negligent in managing Cornwell’s accounts, which lost $89 million and dragged her net worth down to $13 million.
And it could get a lot worse. A judge is expected to rule on a whole different set of charges Thursday –– that the firm violated consumer protections –– which could as much as triple the damages, the Boston Globe reports.
This is a huge win. That a federal court has held a financial advisory firm accountable for losses incurred during a recession means it could become a lot harder for firms to chalk up mismanagement to economic triggers that are beyond their control.
And it could also give regulators the extra boost they need to tighten fiduciary duty standards for advisory firms.
“We are deeply gratified by this victory,” Cornwell said in a statement. “This case was about a lot more than financial mismanagement. It is our belief that Anchin, Block & Anchin not only took advantage of us, they also tried to damage our reputations and put us in legal jeopardy.”
Anchin has been tight-lipped but has offered this statement to news outlets:
“In the days ahead we will be exploring our legal options, including appealing today’s verdict. We continue to believe the firm acted professionally and appropriately.”
We tracked down Cornwell’s original complaint to find out more. Scroll down to read the full document below.
The firm allegedly used Cornwell’s account like a blank check:
“[Cornwell’s advisor Evan Snapper] pleaded guilty in 2011 to lying about the source of 21 contributions of $2,300 each to Hillary Clinton’s presidential campaign,” according to the AP.
In the original complaint, which was filed by Cornwell and her wife in 2009, Cornwell lays out a ton of other unexplained charges the firm paid on her behalf.
-They allegedly used Cornwell’s cash to finance a private helicopter.
-Cornwell allegedly found a check for $5,000 written from her account to Snapper’s daughter for her bat mitzvah.
-By 2007, Anchin allegedly paid itself $1 million “without providing bills, or billing detail or back-up”.
-One of Cornwell’s business associates was allegedly paid $11,000 as a “gift” but never received it.
-Checks and transfers made to a car company that related to cars Cornwell claims she never owned.
-And reimbursements for Anchin employee expenses, including entertainment and travel purchases allegedly made by Snapper.
And all long, Cornwell claims the firm never supplied monthly or quarterly balance sheets and financial statements.
Cornwell essentially gave the firm complete financial control over her assets, including her business, Cornwell Enterprises, Inc. (CEI).
Snapper is quoted in the complaint as telling Cornwell the firm would “do everything for its clients including buying and delivering their toilet paper.”
It was ideal for the author, who admitted to having bi-polar disorder and needed an advisory firm that would hold the reins so she could write in peace (she was currently earning eight figures/year in the crime-writing business).
That meant letting the firm handle everything from bills and taxes to registering her cars and, of course, choosing her investments.
“Anchin selected all such investments without input from Ms. Cornwell,” the complaint alleges. “Upon finally learning of the extent of the investment losses, insisted that the investments be transferred to bonds.”
Cornwell claims Anchin missed a crucial step –– asking her how much risk she was willing to take on.
“Apart from this conversation, no one … ever discussed with Ms. Cornwell or Dr. Gruber their risk tolerance and investment objective,” the complaint says.
Word to the wise: If you walk into an financial advisory office and two of the first words out of their mouths aren’t “risk” and “tolerance,” that’s a good sign it’s time to run for the exit.
Cornwell is best known for her popular mystery novels featuring Kay Scarpetta.