PALM BEACH -- A lawyer in Palm Beach has sued Barclays, claiming
the bank forced her and her husband into an investment that allegedly cost them $6.5
Lesley Blackner and her husband, Richard Stone – who is also
an attorney – filed their complaint in U.S. District Court. They claim
that the bank failed to tell them about the risks of the investment, which
involved Yahoo and Chinese e-commerce company Alibaba.
When the Internal Revenue Service refused Yahoo’s plans to
sell $22 billion of its Alibaba stock in a no-tax deal, Blackner and Stone lost
Florida A&M University professor Joseph Grant said it
was this underlying issue that gave the case its complexity.
“One of the underlying drivers in this transaction was they were
trying to spin off their interest in Alibaba so that they wouldn’t have tax
liability,” Grant told the Florida Record.
He also said there were other
transactions like this that have been done before.
“I think it is something that the average person couldn’t have
anticipated that the IRS would basically make a change in regulatory direction
on a transaction like this," he said.
Curtis Carlson, acting as the couple’s lawyer, has filed a
53-page lawsuit that claims after the couple lost their money investment, advisors at the bank then admitted they did not fully understand the risks and
implications of the investment, which they had allegedly portrayed to the
couple as one with 99 percent certainty and a "no-brainer."
Grant said there were two main responsibilities of
investment advisors in these situations.
“No. 1, they have a duty of loyalty that just basically
means they can’t act with any sort of conflict of interest.," he said. "I think the second really important fiduciary duty that the
bank or the investment advisor has to a client is a duty of care. So, they have
to act under a prudent personal standard. So, the sorts of investment that a
prudent person would make for themselves the bank also has to make those for
their client as well.”
He said the question in this case was whether or not the duty of
care was violated.
“If you are paying an investment advisor, in most cases you are
going to deem them to be the professional in these cases. So, they are the ones
that really the onus falls on in most cases. If you are giving professional
advice or expertise to the client, the client should be able to fall back on
that and rely on it," Grant said.
In the filing, Carlson has accused the Barclays of violating the
Dodd-Frank Wall Street Reform and Consumer Act that was put in place in 2008.
The act requires financial institutions to give potential investors
comprehensive written disclosures about swap trading.
In addition to requesting the court award them their lost
funds, they have also sought punitive damages.
indicate that Yahoo has a 15 percent stake in Alibaba. They made their investment
in the company in 2005 and reports indicate if they sold their share it would
cost them more that $12 billion in taxes.