Widow Sues Paine Webber, Alleges Heavy Losses in Nest Egg

In November, 1983, Evelyn H. Anderson, an 81-year-old Laguna Niguel widow, took the $296,768 she had inherited from her late husband and opened an account with the Newport Beach office of Paine Webber . Her investment goal, Anderson reportedly told stockbroker Robert W. Martin, was to earn a comfortable, secure living allowance for the rest of her life.

But the goal proved elusive.

In a recent lawsuit Anderson charged that within 18 months her nest egg had dwindled to just $820 while Martin had earned more than $90,000 for handling at least 177 allegedly risky trades on behalf of the admittedly investment-ignorant widow. As a result, Anderson, who is seeking $50.3 million in actual and punitive damages, said she lost everything she owned except her house, which she now must mortgage to meet her living expenses.

“She’s a poor soul in more ways than one,” fumed Doyle Blaney, Anderson’s Los Angeles attorney.

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Neither Paine Webber executives in Newport Beach and New York nor Martin, who is still with the brokerage house, would comment on the suit and the allegations that Anderson’s account was “churned,” the practice of executing trades solely to earn commissions.

Blaney alleged in the lawsuit that Anderson initially was led to believe that her account was performing well through “misrepresentations . . . to conceal the enormous losses (that were caused by the) gross mismanagement” of the investments. Furthermore Blaney said Anderson believed the “glowing promises” that Martin kept making.

However, Blaney admitted that Paine Webber officials have produced a copy of a letter that Anderson signed acknowledging that her account was engaged in some apparently risky activity, including the trading of options, transactions usually reserved for the most sophisticated of investors.

The letter, signed by Rod Lindenberger, manager of the Newport Beach office of Paine Webber and Martin’s supervisor, was sent to Anderson in late June, 1984, following a routine review of accounts with significant trading activity. Blaney said Anderson returned a form letter indicating that she understood the nature of the trading in her account and wanted it to continue.

Blaney said that although Paine Webber is apparently counting on the letter to support its cause, he contended that it might not work. “I’d like to see them convince some jury that she knew what she was doing.”