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Widow of Merrill FA Seeks $30 Mln for Value of His ‘Book’

1/2/2019

AdvisorHub

The widow of a Merrill Lynch broker who allegedly specialized in helping employees at Facebook and other “high-technology” firms invest proceeds of their stock options has sued Merrill for $30 million, claiming its distribution of his “book” without paying him or his estate violated his contract and the Family and Medical Leave Act.

Richard Hanson, who joined Merrill’s San Francisco office in the summer of 2007 from UBS Financial Services, took a leave of absence following a massive heart attack in June 2016 and died in December 2017, according to the lawsuit filed in federal court in the Northern District of California last week. The firm allegedly distributed his accounts among several advisors without compensating him or his estate during his leave, and also “sabotaged” his client relationships prior to his leave, it claims.

“Merrill Lynch failed to accommodate Hanson for his disability prior to his death and assigned his clients and customers to other advisors without his knowledge or consent, further eroding the book of business,” said the complaint filed by his widow, Cristina Espinola. “Hanson never received compensation for the transfer of these accounts to which he was entitled under his agreement(s) with Merrill Lynch.”

Espinola was “unsophisticated” regarding her late husband’s pay, but believes he earned annual “base compensation” of about $600,000, an amount that may have represented only his disability pay, according to the lawsuit.

“Hanson had told her that if he left Merrill Lynch another broker firm would pay him upwards of thirty million dollars just to recruit him,” it says.

Aaron Feldman, Espinola’s lawyer at a Walnut Creek firm that specializes in estate planning, said in an email that the claim is derived from his client’s “understanding of what her husband was entitled to” based on conversations they had about a potential move from Merrill. He said he could not comment further on the contract claims because he has not had a chance to review Hanson’s broker agreements.

“The account servicing and distributions were handled in accordance with our normal procedures,” William Halldin, a spokesman for Merrill, said in an e-mail.

The lawsuit asserts that Merrill “recognized the value” of the accounts Hanson brought with him from UBS when it structured his compensation package, but offered no specifics. Espinola attempted to find out what rights Hanson and his estate had to the “substantial” book of business, but the firm never responded to her requests, according to the complaint.

Employment lawyers who represent customers and brokers against financial services firms said Espinola’s claim of employment contract violations in an account-distribution event appears to be unique.

“When someone goes out on leave, firms have to do something with his business,” said Philip Aidikoff, a partner at Aidikoff, Uhl & Bakhtiari in Beverly Hills, Calif., who is not involved in the case.

Espinola’s lawyer may be on stronger ground arguing FMLA or estate law violations in federal court than he will with employment law arguments, said Aidikoff, noting that Merrill is likely to petition to have the case moved to arbitration.

In addition to citing contract violations, the lawsuit alleges that Merrill’s failure to accommodate Hanson’s disability prior to his death and its assignment of his customers to other advisors “without his knowledge or consent” interfered with his federal FMLA rights. It also alleges “unjust enrichment” by Merrill for not paying him compensation and bonuses he would have been owed.

Hanson first registered as a broker in 1996 with Pruco Securities and also worked at Pillar Financial Services, Salomon Smith Barney and Piper Jaffray before joining UBS in 2000, according to his BrokerCheck history. It has no disclosures of complaints, regulatory or other legal actions over his 19-year career.


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