Beverly Hills billionaire alleges Bear Stearns duped him
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Among the many lawsuits spawned by the Bear Stearns Cos. debacle is this interesting one that landed in L.A. court Thursday: One of Bear’s billionaire Beverly Hills clients is alleging that he and his wife were duped into buying shares in the brokerage immediately before its near-collapse March 16.
It gets juicier: The client, H. Roger Wang -- who operates high-end retail stores in China -- says Bear on March 18 illegally liquidated the account that held the stock after Wang and his wife refused to send in unpaid balances on their orders.
The suit says they had agreed to pay $6.56 million for 150,000 shares at prices between $71.96 and $33.44 a share.
The liquidation value of the stock, according to the suit: $947,324.
The case, filed in Los Angeles County Superior Court, alleges fraud and breach of fiduciary duty, and names as defendants Bear Stearns, broker Joey Zhou, and Garrett Bland, a senior managing director in Bear’s Century City office. None of the defendants could be reached for comment Thursday.
The 59-year-old Wang, who has a net worth of $1.3 billion by Forbes magazine’s reckoning, grew up in Taiwan and emigrated to the U.S. in 1971. In 1992, early in China’s boom, he founded a real estate development firm called Golden Eagle International in the city of Nanjing. The centerpiece of his empire now is department stores.
Wang, who has a home in Beverly Hills, says in the suit that he and his wife, Vivine, became customers of Bear in 1993, and that Zhou became their broker.
In February, the suit says, Roger Wang decided he wanted to buy shares of San Marino-based East West Bancorp. Vivine Wang called Zhou, according to the suit, and the broker set up an account in her name to use for the stock purchases. The suit doesn’t explain why a new account was needed.
Roger Wang bought 50,000 shares of East West from March 3 to March 6. And beginning March 6, the suit says, he also started buying shares in Bear, and continued to do so even as rumors began to hit Wall Street that the company was having funding problems.
On March 11, according to the suit, Wang went to a lunch meeting at Bear’s Century City office. The suit alleges that Bland told Wang that ‘Bear Stearns was financially sound, that its stock value should be at least $85 per share, and that now was a great time to invest in the stock.’
On Friday, March 14, while Bear stock was plummeting from $57 to $30 amid rumors that it might fail, Wang put in an order to buy an additional 200,000 shares, relying in part on Bland’s ‘favorable recommendations,’ the suit says. Amid the day’s wild trading, Wang got just 100,000 shares.
Two days later Bear agreed to an emergency buyout by JPMorgan Chase & Co. at $2 a share, a price later raised to about $10.
Wang says that when he learned of the ‘devastating news’ of the buyout price, he refused to pay for his final orders of Bear stock. The brokerage, he alleges, then liquidated the account on March 18 ‘without any authority, right or consent.’
The Wangs allege that Zhou, Bland and other unnamed defendants ‘concealed highly relevant information about Bear Stearns, including specifically its extremely poor and disastrous financial condition.’
They are suing for ‘not less than $10 million,’ according to the court filing.
Posted April 10, 2008