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At 90, Self-Made Millionaire from Inverness Fights Wall Street Firm in $2 Million Arbitration

Chicago Daily Herald, August 5, 2009 (Anna Marie Kukec)

Josephine DesParte of Inverness didn’t have a college degree. But that didn’t stop her from becoming a self-made multimillionaire. While working as an administrative assistant and other positions at local companies, she taught herself how to invest in stock. She and her salesman husband, Tom, eventually became worth millions of dollars.

But in late 2007 when she was 88, she handed over the management of her portfolio – including stock in three companies she held tightly for about 50 years – to her longtime broker and his boss at William Blair & Co. in Chicago.

Within months, according to an official complaint she filed, the widow lost more than $2 million – all before the stock market crashed last fall. She discovered through her tax accountant that William Blair quickly mounted thousands of dollars in fees and capital gains taxes. She also complains that William Blair sent her monthly statements to a Yahoo e-mail address established in her name, although she had never owned or used a computer in her life.

A spitfire, DesParte lost no more time. She stopped the churning of her portfolio, changed brokerage firms and hired an attorney. She filed a claim against William Blair and the two brokers and charged that they violated state securities law, consumer laws, breach of fiduciary duty, breach of contract and negligent supervision.

“I don’t want to see this happen to other people,” said DesParte. “They must have felt I was slipping. But that’s not the case.” DesParte is among a growing number of claims filed this year against Wall Street financial firms. The Financial Industry Regulatory Authority, which oversees brokers and brokerages, had 3,875 claims filed in June, compared to 2,129 in June 2008 – up 82 percent.

The dramatic increase is directly related to the volatility of the stock market, said FINRA spokesman Brendan Intindola.

“The more volatile the market, the more complaints we receive,” he said. Another factor that leads to claims involves new and different types of investment products. However, issues of churning, a process whereby stocks are violently traded as in DesParte’s case, are among the top complaints. “We are in the process of vigorously defending ourselves in this ongoing matter and, therefore, cannot comment,” said William Blair spokesman Tony Zimmer.

The two brokers, defendants in the claim, joined another firm in April. They did not return phone calls seeking comment.

Their monthly statements and confirmations would have been the only way DesParte would have known her account was being churned. But those statements were sitting in cyberspace, a place where she never went and didn’t know anything about, said her attorney, Andrew Stoltmann of Barrington Hills.

“I think the behavior in this case is extremely egregious,” said Stoltmann. “Preying on the elderly is unacceptable. This case is as bad as it gets.” Now 90, DesParte never expected to resort to hiring an attorney to fight for something she long held close to the vest. It also seems a world away from the days she took speed-typing classes after graduating Waller High School in Chicago in 1936. Those classes, along with other skills helped make her who she is.

Those skills also guided DesParte in her work, starting at National Candy for 13 years until it closed and then at another candy broker. In April 1950, she went to work for Thompson Publishing as the president’s assistant. Twenty years later, the company merged with Technical Publishing and she worked for the vice president of finance. In 1975, the company was acquired by Dun & Bradstreet.

During those years, she bought stock in Dun & Bradstreet, which later split off. She soon had holdings in Moody’s and IMS Healthcare.

DesParte, who never had any children, enjoyed using her investment gains for world travel with her husband and for gifts for their many nieces and nephews. She then paid for home-based medical assistance for her husband of nearly 64 years when he suffered from complications from diabetes. He died in 2004.

But in October 2007, two brokers from William Blair visited DesParte at her home and asked her to sign numerous documents. She said she told them to never touch her stocks. She had known one of the brokers for about 30 years and trusted him, she said, so she signed over the management of her portfolio.

That moved it into a discretionary, fee-based investment advisory account. It had previously been commission-based, non-discretionary with little or no activity.

After that day, DesParte said she spent the winter in Arizona and handled different family matters. During much of that same time, DesParte’s municipal bond funds were sold and more equities were purchased, including AT&T, Burlington Northern, Walt Disney, Boeing, Hewlett Packard, IBM and others. Then her positions with Dun & Bradstreet, Moody’s and IMS Healthcare were being sold. By September 2008, when DesParte learned of the churning, she quickly moved her account out of William Blair and to another firm.

Her attorney filed a claim with FINRA earlier this year. The matter will likely go before three arbitrators this fall, and they will provide a binding and final decision.

“That’s her last and only resort,” said Stoltmann.

DesParte said she just wants to have her say.

“I’m not a quitter,” DesParte said. “And I hope someone else doesn’t get involved in something like this either.”

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