JPMorgan client who lost a $50 million fortune to dementia is denied a lawsuit

A once-wealthy client of JPMorgan Chase & Co. whose portfolio collapsed as he slipped into dementia, lost a legal battle seeking to recover his fortune from the bank.

A federal judge in Boston has dismissed a lawsuit filed by Peter Doelger, 87, and his wife, Yoon, who accused the firm of holding him to an improper investment. In an open ruling Friday, the judge said it did not appear JPMorgan knew about Peter’s deteriorating cognition during the years he lost a fortune the firm had estimated at more than $50 million.

While the ruling prevents them from going to court, the couple still faces a countersuit from JPMorgan, which is trying to recoup its costs in the three-year legal battle. A family lawyer said they are interested in appealing the judge’s decision.

The rise and fall of the Doelgers’ fortunes, chronicled by Bloomberg in December, tested whether Wall Street firms can be held responsible for the losses of clients whose ability to understand their portfolios declines. Financial firms screen clients to make sure they are sophisticated enough to make complex investments — but industry practices for monitoring their knowledge as they age are less regulated.

It’s a growing problem as American retirees live longer atop a record wealth stock.

In the Doelgers case, JPMorgan helped Peter invest most of the money in the portfolio in oil and gas partnerships – to an extent that far exceeded the company’s internal guidelines. Although Peter attested to his expertise in such assets, Yoon said her husband lost his ability to understand them and increasingly relied on the company’s advice. The investments wiped out their fortunes in half a decade.

U.S. District Judge Angel Kelley in Boston found that the Doelgers failed to show that JPMorgan breached its duties — setting high bars for alleging that a firm took advantage of a client’s cognitive impairment.

The judge said the Doelgers, their family and other representatives failed to notify JPMorgan that Peter had been diagnosed with a mental illness. Yoon’s testimony that she told their primary contact at the bank that her husband had memory problems was not enough to trigger the lender’s internal policies designed to protect elderly customers, the ruling said.

“Ultimately, this is the heart of this action — whether there was reason for the defendants to know that Peter was suffering from mental and cognitive decline sufficient to render him incapable of making the financial decision that he did.” Kelley wrote. “As unfortunate as it is, the court finds that there is no evidence in the record to support the plaintiffs’ claim.”

A lawyer for the Doelgers said they feel strongly that justice has not been served.

“We believe the court erred in denying our elderly clients the opportunity to be heard at trial while allowing JPMorgan’s counterclaims for legal fees,” said the attorney, James Serritella, who is also the couple’s son-in-law. . “Meanwhile, JPMorgan continued the posture they started with, using their vast resources to fight an elderly couple whose savings had been wiped out, threatening to force Yoon and Peter, and even me, the attorney them, to pay JPMorgan’s legal fees.”

The bank praised the decision.

“In Judge Kelley’s carefully written brief and order, Judge Kelley noted that the plaintiffs have mischaracterized the record and made misleading, unsupported and untrue allegations against JPMorgan and its employees,” a company spokesman said in a communicated.

Screening for dementia

The case highlights how difficult it can be to determine after losses whether a customer’s knowledge has declined and whether a firm should have noticed.

Thanks to years of bull markets, more Americans are wealthy enough to be considered “accredited” or “sophisticated” under U.S. financial rules — allowing firms to offer them more complex and potentially riskier investments. The industry has no formal system for detecting situations where customers can no longer manage their own finances, leaving it up to individual firms to set internal policies.

At JPMorgan, employees are required to immediately report to a supervisor “any situation in which they have a reasonable basis to believe that diminished capacity and/or potential financial abuse, exploitation or neglect of an elderly or vulnerable client has occurred,” according to the documents. filed in the Doelgers case.

Signs of diminished capacity, according to JPMorgan’s policy, include memory loss, disorientation, difficulty performing simple tasks, impaired judgment, unusual mood swings and difficulty thinking abstractly.

In her testimony, Yoon described episodes in which Peter became confused during calls with the firm. And an expert witness for the Doelgers wrote in a report to the court that by the second half of 2019, her husband’s declining mental state would have been apparent to people at the bank.

Kelley said internal JPMorgan messages from the Doelgers’ primary contact, James Baker, complaining about Peter’s long and repetitive conversations were not evidence that Peter’s mental health problems were known or suspected by the bank. Baker told the court she was unaware of Peter’s declining mental health until the family sued JPMorgan.

“None of the emails relied upon by plaintiffs suggest that JPMC knew or even believed that Peter was behaving erratically or irrationally or that he was demonstrating memory loss,” Kelley wrote.

Medical experts

Kelley also rejected claims that Peter had been diagnosed with rapidly progressive dementia as early as 2014. In her ruling, she cited JPMorgan’s medical expert who reviewed two scans of Peter’s brain in 2014 and concluded that he did not they were abnormal for someone his age, though they might be. consistent with dementia if symptoms were present. She said the Doelgers’ conclusion was based on scans from 2014 as well as one from 2020, but that the family’s expert did not give a time frame for when he thought the dementia was first present.

The ruling does not address medical records filed in a 2015 emergency room visit stemming from Peter calling 911 from his car to report being followed. The doctor who examined Peter diagnosed him with “paranoid ideation; cognitive deficits; dementia.” A physician’s assistant who examined Peter noted that he could not remember three words—”red, cup, floor”—after three minutes.

At the time, Peter was in the process of setting up investments with JPMorgan. The family fortune was gone by mid-2020.

A judge who previously reviewed the case noted that Yoon and the family’s lawyers had certified to the court that Peter had reviewed and understood the lawsuit before filing it in 2021. A court-ordered examination later declared him incompetent to testify in the litigation and both sides. he agreed not to contest it.

“Big Boy Letter”

Kelley’s 44-page opinion adopts the magistrate’s earlier conclusion that the Doelgers failed to show that there were material facts in dispute that would warrant a lawsuit.

A dispute involved the Doelgers’ fortunes as JPMorgan prepared to take over their portfolio. In 2015, JPMorgan filings listed the family’s net worth at $100 million, when it was actually closer to $50 million, or potentially less.

The bulk of Doelgers’ portfolio was made up of general limited partnerships – investments linked to oil and gas contracts. Under JPMorgan’s suitability rules, such securities should be limited to just 5% of a client’s assets.

In 2015, Peter invested over $30 million in MLPs. This raised concerns within JPMorgan, which asked him to sign a “Big Boy letter” attesting to his understanding of such complex products and noting that he was encouraged to diversify his portfolio.

By signing, he agreed that he knew about MLPs, understood the risks of concentrated investments and had been warned by JPMorgan to diversify. The letter also said it would not hold the company responsible for any losses. JPMorgan claimed in court that a copy of the letter was sent to a lawyer for Peter at the time.

Doelgers allege that someone at JPMorgan knowingly overestimated Peter’s wealth to get the bank to approve concentrating bets on MLPs — such as by changing the pages of an account application after Peter signed it.

Discrepancies in JPMorgan’s records of Peter’s assets were not evidence of wrongdoing by the bank’s employees, Kelley ruled.

Ultimately, he discovered that Peter was best placed to know the value of his assets and confirmed those amounts by signing the Big Boy letter.

Top photo: JPMorgan Chase & Co. headquarters. in New York, U.S., Wednesday, Jan. 18, 2023. JPMorgan Chase & Co., the largest U.S. bank, said net interest income this year will be lower than analysts expected as the economy shows signs of sliding

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