Wells Fargo owes a former client more than $400,000 after a FINRA arbitration panel ruled that the firm had been negligent in permitting the client's ex-wife to empty his IRA over a period of nearly 10 years, according to a copy of the award.
Mark Schroeder, a doctor in St. Louis, opened his IRA with A.G. Edwards in 1999, according to his attorney, Chad Beaver. A.G. Edwards later merged with Wells Fargo.
In August 2001, his then wife – who was not listed on the account and was not a party to the arbitration proceedings – had the address changed on the IRA to a P.O. Box she controlled, according to Beaver. He says that that year she made her first withdrawal – $30,000 – and continued for the next ten years until she emptied the account.
Schroeder's ex-wife could not be reached for comment.
Schroeder was unaware of these activities – he let his wife manage their finances until their divorce in 2010, his attorney says. "She was also his office manager and responsible for overseeing his medical practice," says Beaver.
In the months following their divorce, Schroeder began getting his finances in order, according to Beaver. The Kansas City, Mo.-based attorney says that his client didn't discover what happened to his IRA until January 2012.
"He asked for statements on the account and that's when they told him the account was worth $0," Beaver says.
Beaver says that no one at Wells Fargo contacted Schroeder about his ex-wife's withdrawals during that time period, something that Schroeder also alleged in arbitration, according to a copy of the award.
"His testimony was that when he opened the account it was an individual SEP IRA, and no one else was authorized to do anything on the account. So the last thing on his mind was that someone would have an opportunity to steal money from the account," Beaver says.
A Wells Fargo spokesman declined to comment on the case.
MADE WHOLE AGAIN
Schroeder filed his arbitration claims in 2015. The panel of three arbitrators, based in Kansas City, ruled in his favor, ordering Wells Fargo to pay $106,000 for attorney fees and $317,000 for compensatory damages – the exact amount that had been taken out of the account, according to Beaver.
"In our view, the award makes him whole," Beaver says. "We wanted to keep it simple for the arbitrators and we asked the arbitrators to give the money back. And we believe that they did the right thing by giving him the exact dollar amount."
Three advisers were also named in the case. But the panel dismissed claims against them "based on a lack of evidence that the moving parties were involved in the alleged violations," according to a copy of the award.
The panel also granted expungement requests for the three advisers, something that Schroeder did not oppose, according to the award. Beaver says that Schroeder's original broker died in 2008.
An expert witness testified on the advisers' behalf that their names were required to appear on account statements "and did not evidence any involvement or duty on the part of" the advisers, according to the award.