Feb 14 U.S. securities arbitrators ordered
Deutsche Bank Securities Inc to pay a couple and their trusts a
total of $934,000 after a onetime adviser allegedly swindled
them in a multimillion-dollar insurance deal.
The ex-adviser, Karl Hahn, is equally responsible for the
sum, according to a ruling by a Financial Industry Regulatory
Authority arbitration panel on Tuesday.
Hahn worked in Boston for Deutsche Bank's private wealth
management division, a unit of Deutsche Bank AG, from
2008 to 2009. FINRA permanently barred him from the securities
industry last year after a series of customer and regulatory
complaints, according to a public disclosure report.
Susan and Michael Myers filed the case in 2011 on behalf of
themselves and several trusts, alleging civil fraud and
negligent supervision of Hahn, among other misdeeds, according
to the ruling. The case involved their purchase of a risky type
of life insurance in which policyholders finance premiums with
loans typically tied to variable interest rates.
The Nevada-based couple initially sought $2.2 million in
compensatory damages and more than $13 million in punitive
The case is an example of the risks a brokerage can face
when its advisers participate in certain business dealings
outside of the firm. Brokerages typically have strict policies
about such dealings, which in some cases can also violate
Deutsche Bank is facing other litigation stemming from
Hahn's alleged conduct.
While Hahn advised the Myerses through Deutsche Bank, he did
not tell them that his father would receive a "significant"
commission from the sale of the life insurance policy - an
arrangement that could have prompted his recommendation,
according to a complaint in a separate court case stemming from
A Deutsche Bank spokeswoman declined to comment. Efforts to
reach Hahn were unsuccessful. The panel did not include reasons
for its ruling, as is typical in FINRA arbitration cases.
David Thomas, a San Francisco-based lawyer for the Myerses,
said he is pleased by the ruling, which includes $834,000 in
damages and $100,000 in legal fees. His clients believed
Deutsche Bank and Hahn were to blame for the life insurance
transactions, which caused "substantial losses," he said.
In other cases involving Hahn, New Hampshire federal
prosecutors charged him in 2010 with wire fraud related to an
alleged $1.9 million real estate scam, according to court
documents. Hahn worked out a plea deal, but then changed his
mind, according to the documents. The status of the case is
Hahn's legal troubles also include a $2.55 million federal
court judgment obtained by Deutsche Bank last year. The lawsuit
stemmed from the unpaid balance of a $2.8 million bonus he
received upon joining Deutsche Bank, according to court
documents. Signing bonuses are structured as loans that are
forgiven over time, typically within seven to 10 years.
The FINRA panel also dismissed a claim the Myerses filed
against Oppenheimer & Co, where Hahn worked after Deutsche Bank.
An Oppenheimer spokesman said the panel found no liability for
wrongdoing against the company and that Hahn had worked there
"for a very short time during the period in question."