At 93, She Waged War on JPMorgan—and Her Own Grandsons
Beverley Schottenstein said two grandsons who managed her
money at JPMorgan forged documents, ran up commissions with inappropriate
trading and made her miss tens of millions of dollars in gains. So she decided
to teach them all a lesson.
By
February 17, 2021, 9:00 AM GMT
Beverley Schottenstein was 93 years old when she decided to
go to war with the biggest bank in the U.S.
It was a June day, and the Atlantic shimmered beyond the
balcony of her Florida condominium. Beverley studied an independent review of
her accounts as family and lawyers gathered around a table and listened in by
phone. The document confirmed her worst fears: Her two financial advisers at
JPMorgan Chase & Co., who oversaw
more than $80 million for her, had run up big commissions putting her money
in risky investments they weren’t telling her about. It was the latest red flag
about the bankers. There had been missing account statements. Document
shredding. Unexplained credit-card charges.
Although some relatives urged Beverley not to make waves,
she was resolute. What the money managers did was wrong, she told the group.
They needed to pay, she said. Even though they were her own grandsons.
And pay they did. With the help of her lawyers, Beverley
dragged her grandsons and JPMorgan in front of arbitrators from the Financial
Industry Regulatory Authority, or Finra. She sought as much as $69 million.
After testimony that spread over months and ended in January, the panel issued
a swift decision in Beverley’s favor.
Finra’s arbitration process is private by design, and even
when settlements are announced few of the underlying allegations are made
public. In a brief ruling on Feb. 5, the panel found the bank’s J.P. Morgan
Securities LLC unit and the brothers who worked there, Evan Schottenstein and
Avi Schottenstein, liable for abusing their fiduciary duty and making
fraudulent misrepresentations. The arbitrators also found the bank and Evan
Schottenstein liable for elder abuse. It ordered JPMorgan and the bankers to
pay Beverley about $19 million between them, representing damages, legal fees
and the return of money invested in a private equity fund.
What the panel’s announcement doesn’t reveal is the
intergenerational financial struggle that culminated in Beverley taking on her
grandsons and a deep-pocketed Wall Street bank. That battle emerges in
financial documents, emails, correspondence and testimony from the Finra
arbitration, as well as interviews with family members, securities industry
records, real estate filings and other materials. Beverley and some of her
relatives say they decided to discuss her situation to warn of the potential
for elder abuse in every economic strata, and to draw attention to the major
financial institution they say helped fuel it.
“They made a lot of money on me, those kids—a lot of money,”
Beverley said in an interview before the ruling. “They had no right going that
far with JPMorgan. JPMorgan had to stop them, but JPMorgan was doing pretty
good also.”
The bank dismissed the brothers around the time Beverley filed
her complaint and paid their legal fees in the Finra dispute. “These advisers
are no longer with the firm, and their actions do not represent our values as a
company,” said Veronica Navarro, a bank spokeswoman. Jon Brennan, an attorney
for the brothers, said Evan and Avi believe the ruling wasn’t justified by the
facts or the law.
The money tensions were decades in the making. Beverley’s
late husband, Alvin Schottenstein, helped turn a family furniture chain in the
Midwest into what’s now a multibillion-dollar empire that has included Value
City, Big Lots Inc., Designer Brands Inc. and American Eagle Outfitters Inc.
Beverley’s part of the family cashed out of the business long ago. Evan and Avi
became financial advisers and offered her their services.
Their arrangement wasn’t unusual. It’s common and legal for
money managers to work for relatives. Family money, in fact, often provides the
seed for advisers to break into the business. What Beverley’s story shows is
just how far off the rails that kind of relationship can go.
Although Beverley blamed her grandsons for breaking the
rules, she also faulted JPMorgan for missing multiple chances to stop them. In
her filings with Finra, she alleged the bank reaped millions of dollars in
commissions by moving her money in and out of investments inappropriate for a
nonagenarian, while failing to supervise her grandsons and ignoring signs she
was being financially exploited for almost five years. The tens of millions her
lawyers sought largely represented investment gains they say she missed because
her grandsons chose exotic investments over index funds and the Apple and Big
Lots shares she once owned.
The panel’s ruling may not be the end of the matter.
Finra’s enforcement arm, which has the authority to ban
financial advisers, is also looking into the allegations, according to people
familiar with the matter who asked not to be identified discussing a nonpublic
investigation. They said New York state investigators in Manhattan have
requested information, too. In her Finra complaint, Beverley alleged that her
signature was forged on investment documents, potentially a criminal offense.
The arbitration panel didn’t directly address that allegation and its ruling
didn’t specify how the bankers may have misrepresented themselves.
Representatives for Finra and the Manhattan District
Attorney’s Office declined to comment.
JPMorgan, in Finra filings, said it “has no place in this
family soap opera.” It added that trading on Beverley’s account made money, was
reasonably supervised and was in line with her stated investment strategy. She
wasn’t charged account management fees and received discounted trading
commissions, it added.
Evan Schottenstein, 39, was his grandmother’s primary
broker, which means he drew commissions investing her money. Evan said in
filings that he acted in her interest. Avi, 33, was also a financial adviser.
He told Finra he provided administrative support to his older brother and
wasn’t involved in any alleged misconduct. Their lawyer, in the statement, said
Beverley’s accounts gained under Evan’s management and were “invested in full
accordance with her wishes.”
Beverley’s decision to go after her grandsons hit close to
home. That’s because one of her four children lives on the floor below hers.
He’s the father of Evan and Avi, who sometimes visit him.
Avi was at the condo complex with his young son on the day
in June 2019 when his grandmother decided to pursue arbitration. Beverley was
sitting on her patio several floors above, watching relatives swim in the
kidney-shaped pool below.
Avi confronted one of his cousins, Cathy Schottenstein
Pattap, who was poolside, she and Beverley said. He asked why Beverley wouldn’t
see him anymore and why she’d moved her account to another bank.
Then he realized his grandmother was watching from above. He
held his son out in front of him at arm’s length and then, according to
Schottenstein Pattap, he yelled up to Beverley: Why are you letting lawyers
rule your life? This is your blood.
Downstairs Neighbors
Mementos from Beverley’s nine decades cover her condo’s
walls and tabletops. There are photos of Beverley and her late husband Alvin
with their kids. A snapshot of Beverley and Alvin, beaming, with five
toddler-aged grandchildren. Family was always close at hand, and at some point
that may have become part of the problem.
Now 94, Beverley moved to Florida from her longtime home in
Columbus, Ohio, around 2009, settling into the condo in Bal Harbour, an
affluent area just north of Miami Beach. A few years later, her son Bobby and
his wife, Caroline, moved into the unit below.
It hadn’t been planned that way. Beverley’s brother had
bought the downstairs unit but died childless before he could move in. Beverley
said she was surprised to learn her brother had signed the place over to Bobby
before his death.
It was yet another tie between Beverley and Bobby’s family.
Years earlier, Caroline had suggested Beverley turn her financial portfolio
over to Evan, then a young adviser at Citigroup Global Markets Inc. Beverley
recalls her daughter-in-law telling her: “Let him go to work and you’ll make a
fortune.”
Beverley already had a fortune, by most standards. Alvin,
her late husband, was one of four sons of Ephraim Schottenstein, an immigrant
from Lithuania who sold overstock goods from a buggy before opening his first
shop in Columbus in 1917. The sons expanded Schottenstein Stores Corp., with
Alvin as its president, until his death in 1984. A half-decade later Beverley
and her children cashed out of the family business with a $90 million legal
settlement—about $18 million each for Beverley and her four children.
Relatives of one of Alvin’s brothers kept expanding the
Schottenstein retail business and wealth. They donated generously, putting the
Schottenstein name on an Ohio State University arena, an edition of the Talmud
and an honors program and residence hall at Manhattan’s Yeshiva University.
Beverley’s brood became, relatively speaking, the poorer side of the clan.
Members of Bobby’s family told relatives that he’d drained
their share of the settlement by the time Evan hit high school. They blamed bad
investments, according to Finra testimony from Schottenstein Pattap. Bobby and
Caroline declined to comment on the relatives’ specific assertions.
Evan and Avi graduated from Yeshiva, setting up in Manhattan
apartments their grandmother had bought years earlier. Beverley—who had growing
assets from her late husband, the settlement and other shares—said she was fine
with that, as long as the grandsons paid the management fees.
And starting in 2006, Beverley waved off concerns from some
members of her family and let Evan, then still in his 20s, manage some of her
stocks. She entrusted more assets to him about three years later when his unit
was taken over by Morgan Stanley. There, Evan was joined by Avi, who was part
of the firm’s financial advisory training program.
Evan scored another big break in early 2014. He called his
grandmother to say that he’d landed a job at JPMorgan. He explained he could
take her account with him and wouldn’t charge commissions or fees, she
recalled. Avi was moving over in a salaried role. Both would report to the same
supervisory manager.
Evan’s job came with a $1.5 million signing bonus in the
form of a forgivable loan. Beverley says she learned during arbitration just
what made Evan and Avi so valuable. It was her money. At least 80% of the
assets the brothers brought to JPMorgan to manage were hers, the arbitrators
were told.
An Unusual Visit
The brothers’ approach raised concerns with people close to
Beverley.
Schottenstein Pattap, a cousin of Evan and Avi, recalls a
visit with her grandmother several years ago. The two walked across the street
and shared a thin-crust cheese pizza at a local celebrity hangout. Beverley had
barely paid her bill when her phone rang. It was Evan, scolding her for eating at
a non-Kosher restaurant. “He was sitting in his office in New York with some
kind of spending alert on her credit card,” Schottenstein Pattap surmised. “It
was strange.”
Beverley’s caretaker also sounded an alarm. In 2018,
Schottenstein Pattap was talking on the phone with her grandmother when the
caretaker, Dawn Henry, told her about an unusual visit. Bobby and Evan, who had
access to Beverley’s private elevator and a key to the door off her back
stairwell, would often show up unannounced, sometimes scolding Beverley for
watching television on Shabbat. On this occasion, the caretaker told the
granddaughter, the downstairs neighbors arrived with a paper shredder.
They cleared out the drawers of papers, some with JPMorgan
letterhead, and sat at the kitchen table, shredding, according to Henry.
Beverley, in documents filed with Finra, said they’d shredded documents there
several times. JPMorgan told the Finra panel that Beverley had complained the
bank was sending “too much paper.” Evan told arbitrators that his grandmother
had asked for his help clearing it out.
Beverley’s own worries grew, too. A check she wrote to the
caretaker bounced. When she and Henry went to her local Chase bank, JPMorgan’s
retail arm, to ask why, they said they were told there’d been too much activity
on the credit card linked to her checking account. Puzzled, Beverley asked for
printouts of several months of her statements, explaining that her own paper
statements had stopped arriving in the mail more than a year earlier.
Looking at her statements, Beverley saw all sorts of charges
she said she hadn’t made.
It was September 2018. Her frustration was building. “You’ve
got to get rid of it,” she said in an interview. “You’ve got to—you’ve got to
explode.”
Around that time she started a diary.
“I don’t wish to hurt
anyone, but I must express my feelings on how I am being used,” she wrote in
the first entry of the journal, which was filed with Finra. “Every
month—2016-2018, thousands and thousands of dollars has been used from my
account without my knowledge,” Beverley wrote a few weeks later, ultimately
estimating the spending at more than $1 million.
That winter, a FedEx package arrived with materials about a
venture capital fund the bank said Beverley had invested in. The materials
described a Cayman Islands-based fund. Another granddaughter who was visiting,
Alexis Schottenstein, was alarmed to discover that her nonagenarian grandmother
had apparently committed $5 million to it, locked in for many years.
Through family friends, Beverley was put in touch with
wealth managers at another big bank who reviewed her finances. They found
excessive turnover, ad-hoc security selection, and lots of trades that Beverley
said she hadn’t approved. The Caymans fund, it turned out, was only the
beginning.
Dialing Dimon
Beverley sprung into action in early 2019. She sent Evan and
Avi a note, via the bank, to stop trading on her account. She left voice
messages for their manager. Hearing nothing for more than a day, she dialed the
bank’s headquarters in New York. She said she asked to speak with Jamie Dimon,
JPMorgan’s CEO. Someone would get back to her, she said she was told.
Then she wrote an amendment to her will and trust. After
trusting Evan with her life and estate, she wrote, she now intended to move her
estate to an independent adviser. In the amendment, which was later filed with
Finra, she documented the paper shredding and other suspicions.
Her will amendment also contained a curious accusation about
a safety deposit box she kept at a different bank. She wrote that Evan or
Bobby, who had a key to the box, had removed about $1 million in jewelry—gifts
from her late husband, including her 7-carat diamond engagement ring. That was
in 2016. The jewelry was still missing, she wrote.
The amendment was a placeholder until Beverley could draft a
new will. But Alexis—“in an effort to help Mrs. Schottenstein,” Beverley’s
lawyers told the Finra panel—sent her grandmother’s five-page amendment to
JPMorgan. Alexis believed that raising a red flag to the bank would spur it to
review the account and give it the attention it needed, she said in an
interview in January. “I thought, as naïve as I was, ‘Let’s get the adults
involved,’” she said.
It didn’t work out that way. Family relations, already
tense, were about to explode.
‘Upset for No Reason’
The next day, Beverley was still waiting for bank managers
to return her worried calls. She wasn’t aware Alexis had raised her allegations
to the bank, she said.
Bobby rushed through her back door. He told her JPMorgan was
investigating the claims she’d made in her will amendment. He pushed his mother
into a kitchen chair and grabbed a pen and paper, Beverley and Henry said in
interviews and in documents filed with Finra.
Bobby began dictating, they said. “The accusations are
false,” read a note that was signed by Beverley, notarized and faxed to the
bank. “I got upset for no reason.”
Alexis, who was visiting that day, snapped a picture.
Beverley’s lawyers submitted the photograph, of Bobby standing over his mother,
as evidence in the Finra case, along with the note they say her son “physically
forced” her to write.
As Beverley began moving her money to another bank, she
enlisted lawyers who commissioned the financial study she pored over at her
dining room table in June 2019. The document was written in the dispassionate
language of a financial analysis, but it confirmed her fears. “It appears that
Ms. Schottenstein’s broker sold her these risky, illiquid products without
regard for her financial wellbeing to generate extraordinary income for him and
for his employer,” the accountant wrote.
“I wasn’t dealing with $25,” Beverley said of her decision
to pursue her arbitration case. “It had to be done.”
The Finra hearings kicked off in October 2020, via video
because of Covid-19 lockdowns. Beverley rented a computer and hired an IT
specialist, who helped as opposing attorneys cross-examined her for 11 hours.
She also watched her grandsons on screen during their testimony in front of the
panel of three lawyers who served as arbitrators. The proceedings gave Beverley
and her lawyers a behind-the-scenes look at how JPMorgan handled her accounts,
including a concern raised inside the bank along the way.
Her paperwork with JPMorgan characterized her as an
aggressive investor. That could explain trading in instruments the attorneys
say were too complex and risky for someone of her age—like $72 million in
so-called autocallable structured notes that were traded in her account in 2014
and 2015, leading to losses the lawyers put at $10 million.
Given Beverley’s age and the size of her account, alarms
should have been ringing inside the bank, said Garrick Tsui, a former
investigator for Finra and the U.S. Securities and Exchange Commission who
isn’t involved in the case.
“If you’re 90 years old and you’re checking aggressive,
that’s going to raise a flag,” Tsui said. “I would’ve interviewed her to assess
whether she has the ability to make these decisions herself.”
Broadly, the bank and Evan argued, Beverley was market-savvy
and in the loop. JPMorgan told the panel that in 2014, four months after Evan
and Avi joined the bank, their manager called Beverley. He spoke with her about
her investment objectives and confirmed her risk tolerance, JPMorgan said,
citing the manager’s notes from the half-hour call. Beverley told him she had
been in the markets for more than 10 years and that Evan was doing a great job
with her account, according to the filing. The manager verified that she was
receiving and reviewing bank statements.
But internally, it appears JPMorgan in 2015 recognized
potential problems investing Beverley’s money in instruments such as the
autocallable notes. It blocked Evan from purchasing certain securities for her,
the bank told the panel. Evan’s manager testified that he talked with the
bank’s legal and compliance departments about checking Beverley’s trades more
frequently. The bank planned to have calls with her every six months, the
manager testified. But Beverley’s lawyers told the panel that the bank didn’t
check in with her after the initial call.
Beverley said Evan and Avi weren’t transparent about trading
on her behalf. They logged more than 500 transactions as direct requests from
Beverley in 2015 through 2018 that she didn't know about, her lawyers told
Finra. In all, the brothers’ unauthorized buying and selling added up to about
$400 million in transactions over the years. Beverley’s lawyers told Finra that
about two-thirds of the purchase transactions involved securities whose trading
would benefit JPMorgan, such as IPOs it was offering or securities for which it
was a market maker.
Others have leveled similar accusations against JPMorgan. An
Indiana church, among others, previously alleged that the bank put its own
interests ahead of those of clients or beneficiaries, while failing to disclose
how it profited from products it sold. (The bank reached an undisclosed
settlement with the church.) JPMorgan also admitted to the SEC and Commodity
Futures Trading Commission that it hadn’t been transparent enough with clients
about how the products it sold generated fees for it. Calling its disclosure
weaknesses unintentional, the bank paid more than $300 million to resolve the
matter in 2015.
Pushing bank products was only part of the problem,
Beverley’s attorneys, Scott Ilgenfritz and Guy Burns, told Finra. Requests for
wire transfers came from an email account created in 2014 that bore Beverley’s
name. But Beverley didn’t have a computer and didn’t know about the account,
she and her lawyers told Finra. Her monthly statements, the ones that stopped
arriving in the mail in early 2017, were sent to that email account. So were
mandatory trading disclosures, her lawyers told the panel. The Finra ruling
doesn’t specify who created the account.
The lawyers also told the panel that Beverley’s signature on
the paperwork approving the private equity transaction had been forged by Evan
or Avi—including on federal tax forms. Evan and Avi denied to the panel that
they’d forged her signature. Evan testified he took some “liberties” with the
account but only in ways that she’d blessed, he said.
‘Let It Go’
JPMorgan dismissed Evan and Avi shortly before the case was
filed, clawing back part of Evan’s signing money. It told Finra that Evan’s
termination was due to “concerns relating to trading activity for the account
of a family member, and the accuracy of the records.”
Afterward, Bobby wrote a note to his mother, asking her to
consider ending her case. His sons had been blackballed from the financial
industry, according to the handwritten letter, which was also filed with Finra.
He also apologized for “the loss of the jewelry” from her deposit box,
explaining he had gotten involved in bad business deals. “My sons are not
criminals,” he wrote.
Bobby and Caroline, in a statement sent through their sons’
attorney, said they are “saddened and disappointed by the lies being advanced
about us and our sons,” without addressing individual allegations. “This case was the result of certain family
members poisoning Beverley’s heart in an effort to obtain control over her
estate,” they said. “We sincerely hope that this family can now begin the
process of healing and, in time, can find peace and joy after all of this
bitterness and division.”
Schottenstein Pattap says her family’s troubles are the flip
side of the good fortune of being born into wealth built by a previous
generation. The “toxicity of inherited wealth,” she says, has divided cousins who
were children at the time of the 1990 settlement.
“We’re in our late 30s. My grandma is having to sue them.
I’m testifying against them. We’re all on this computer. My grandma is going to
be 95 soon,” Schottenstein Pattap said. “I get afraid to go on the elevator to
see my grandma because I’m afraid we’ll stop at their floor.”
Beverley vacillates between anger, regret and sadness. “I’m
all to blame, I should have let it go—this is what they told me,” she said of
her son’s family. Although her children are different, she added, she loves
them all.
The Finra panel issued its decision about a week after
closing arguments. In addition to finding the bankers and bank liable, the
arbitrators ordered JPMorgan to pay $4.7 million in damages, as well as refund
money invested in the Caymans fund. Avi was ordered to pay his grandmother
about $600,000. Evan was ordered to pay the biggest chunk in damages—$9
million.
Family members point out an irony in the entire episode.
Sure, Evan and Avi made a few million dollars in salaries, commissions and
bonuses over the years. But what would they have gained by doing … pretty much
nothing? After all, Beverley, and by extension the family, arguably would have
benefited more had she locked in anything near the $20 million that her lawyers
told the panel she would have gained through passive investing in blue-chip
stocks and indexes.
As it was, Beverley’s account made a bit more than $8
million over five years, a JPMorgan lawyer told arbitrators as part of the
bank’s argument that Beverley shouldn’t receive any damages.
Beverley said that though the monetary award was less than
she sought, it felt good that the arbitrators decided in her favor on all
allegations. It was worth the fight, she added.
“We were close. The entire family is close. They had no
right to steal from their grandmother. If they needed something—anything, god
forbid, that had to be done with money—I was right there. I would help them all
the way,” Beverley said in an interview before the award was announced. “If
they were aboveboard, they could’ve had the world from me.”
— With assistance by Matt Goldman, and Neil Weinberg
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