Because they’ll win – the claimants are trying to blame the bank for investment decisions their own financial advisors made. I made the same point last year when this suit was first filed, but here’s a good update, with comments from a better lawyer.
Jeffrey Blomberg, a partner in the Greenwich office of international law firm Withers Bergman LLP, commented that while he didn’t have an opinion as to the merit of the plaintiffs’ entire case, “They are trying to fit a square peg in a round hole. The plaintiffs are trying to impose fiduciary duties on a custodial relationship where they don’t generally apply.”
Even if the newly implemented SEC rules regarding investment advisers who have custody of client assets, which the NY Times’ Floyd Norris penned a column on today, had been in effect at the time the Westport National arrangements were entered into, they wouldn’t apply to the bank because it was acting as a custodian for the IRA and not as investment adviser to an IRA.
“In this case, I don’t see where the bank had a duty to monitor how the assets of their customers were invested,” says Blomberg. “This suit appears to be applying duties of an investment advisor to the bank, who appears to have been acting merely as a custodian with specific contractual obligations.”
With Westport Bank’s largest shareholder having very deep pockets it’s easy to see why plaintiffs would try to go after the bank, but it appears they are really trying to hold a third party accountable for someone else’s mistakes — a notion the bank reminds customers of when they question the ethics in this sad saga