Samuel and Loraine Pipino claim the bank misled them, causing them to lose more than $1.4 million in trust funds established for their autistic children
A Canfield couple is suing an Akron-based bank, saying the bank misled them into making risky investments that caused them to lose more than $1.4 million in trust funds they had established for the benefit of their autistic minor children.
Samuel D. and Loraine M. Pipino said they clearly instructed First Merit Bank that they wanted to invest trust assets in “extremely safe and risk-free vehicles,” the Pipinos’ lawsuit says.
Instead, bank officials convinced the Pipinos to invest trust assets in exchange-traded financial instruments, known as Ultrashort Securities, which bank officials said were consistent with the couple’s conservative investment plan, the suit said.
Prospectuses for each of the Ultrashort Securities describe the funds as “extremely volatile investments, designed for an investor with high risk tolerance.”
The suit alleges the bank, which charged $500 to $1,000 per transaction, “engaged in excessive transactions ... to generate excessive sales and transaction commissions.”
The Pipinos initially sued First Merit in 2010 in Mahoning County Common Pleas Court, where the case was assigned to Judge R. Scott Krichbaum.
First Merit tried to remove that suit to federal court, but U.S. District Judge Benita Y. Pearson returned it to common pleas court “for lack of federal subject-matter jurisdiction and untimely removal.”
The Pipinos recently dismissed and refiled the suit in common pleas court to give the parties more time and opportunity for pretrial exchange of evidence, said Forrest A. Norman of Cleveland, one of the Pipinos’ lawyers.
Bank officials and their lawyers did not respond to requests for comment.
While the initial suit was pending, First Merit subpoenaed gambling records from casinos in West Virginia and Canada, but these records showed only one line of credit at a casino on one trip by the Pipinos, Norman said.
First Merit apparently was trying to show that the Pipinos had significant risk tolerance because they gambled, but, in reality, the Pipinos have been to casinos only four or five times in their lives, Norman said.
What little gambling the Pipinos did was with money that was totally separate from the trust funds for their children, Norman said, calling First Merit’s subpoenas for casino records “a fishing expedition” and “character assassination.”
The legal dispute arose in another forum, when First Merit sued the Pipinos in Cuyahoga County Common Pleas Court in Cleveland, saying the bank is entitled to recover more than $25,000 in expenses it incurred while acting as their agent from the bank’s Cleveland office.
In that complaint, the bank points to an agreement the Pipinos signed, which says the bank isn’t liable for losses incurred in its good-faith handling of the couple’s investments.
In a motion to dismiss the Cleveland lawsuit, the couple argues that the bank hasn’t established an obligation by the couple to indemnify the bank.
First Merit should present its defense “on the merits in the context of the Pipinos claims” against the bank, the couple argued.