$4.3 Million Arbitration Award Against GenSpring Family Offices
NAPLES, Fla., Feb. 7, 2013 (GLOBE NEWSWIRE) -- The team of Dovin Malkin &
Ficken and Vernon Healy recently won a $4.3 million arbitration award against
GenSpring Family Offices, a money management firm owned by SunTrust Bank,
which offers investment advice and money management services to high and
ultra-high net worth clients.
At the arbitration hearing, the Claimant was able to show that GenSpring had
developed a strategic model whereby it advised the Claimant—a Florida
entrepreneur with a $30 million portfolio—that he should invest 30% of his
account in Multi-Strategy Hedge Funds instead of traditional bonds. According
to GenSpring, these hedge funds had a "risk profile similar to bonds" but with
a higher and better return.
In reality, the hedge funds that GenSpring was touting were "Funds of Funds,"
meaning that they invested in other hedge funds, each with its own managers,
many of whom were employing investment strategies that were far riskier than
even equity investments. Moreover, these hedge funds suffered from a severe
lack of transparency. In fact, GenSpring did not even know what type of
strategies all of the fund managers and sub-managers were following. As a
result, GenSpring had no reasonable basis for representing that the
multi-strategy hedge funds were a low-risk "substitute for bonds."
Consequently, in 2008 when the stock market plummeted, the hedge funds lost a
large portion of their value -- similar to the equity markets -- while
traditional bonds went up 5%. In the end, GenSpring's clients' accounts were
significantly overexposed to high risk investments during the worst financial
crisis in modem history, because they had no traditional low risk bond
investments to diversify their accounts. In March 2009, GenSpring internally
re-classified the multi-strategy hedge funds as "Growth" investments—like
equities—instead of "Defensive" investments—like traditional bonds—as they had
previously been classified.
"It is clear that GenSpring's statements were misleading and inaccurate," said
securities attorney Ed Dovin, whose firm previously won a $1.3 million
arbitration award for another GenSpring client. "Prior to the 2008 financial
crisis, GenSpring represented the hedge funds as a 'substitute for bonds,'
claiming that they had the same risk as bonds but with higher returns."
Moreover, "it appears that this was a systemic approach that GenSpring used
with virtually all of its clients as a means of attracting business and
distinguishing itself from the other investment firms, which used more
time-tested approaches to investing," added Allison Ficken, Mr. Dovin's
According to Co-counsel Chris Vernon—founding partner of Vernon
Healy—GenSpring's misrepresentations and questionable business practices were
evident in this case. "We were confident that this claim would end in a
significant win for another victim of GenSpring's breach of duty and lack of
due diligence. The strategies employed by the multi-strategy hedge funds that
GenSpring was funneling its clients' money into were cloaked in secrecy, and
GenSpring's clients were forced to rely on GenSpring because they had no
access to any other information regarding these funds."
The $4.3 million award is a positive sign for other investors who fell prey to
GenSpring's failed multi-strategy hedge fund strategy.
The securities attorneys at the Vernon Healy and Dovin Malkin & Ficken law
firms collectively have more than 65 years of experience representing
investors all across the United States who are victims of securities fraud and
all manner of financial fraud and negligence.
The Vernon Healy logo is available at
CONTACT: Chris Vernon
Vernon Healy, attorneys at law
Vernon Healy logo
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