JPMorgan client who lost $50 million fortune faces court setback

Simon Simard/Photographer: Simon Simard/Bloom

(Bloomberg) --The family of an elderly JPMorgan Chase & Co. client who lost tens of millions of dollars on investments as he slid into dementia faces a major setback in their years-long legal battle with the bank, after a magistrate judge recommended their case be thrown out.

Peter Doelger, 86, and his wife, Yoon, sued JPMorgan in federal court in Boston over investments that they allege never should have been allowed and ended up wiping out much of a fortune once pegged at more than $50 million. They claim Peter started exhibiting signs of dementia by the time he signed a document in 2015 absolving the bank of any liability for complex, risky bets in his portfolio.

The family's ensuing losses, chronicled by Bloomberg in December, are testing whether Wall Street firms can be held responsible for what happens if clients lose the ability to understand their investments.

Magistrate Judge Jennifer Boal, in a report made public late Tuesday, found the Doelgers failed to put forward "legally sound" claims that JPMorgan breached any duties by letting Peter keep most of his financial portfolio invested in securities tied to oil and gas. The recommendation set high bars for claiming the firm took advantage of his deteriorating cognitive state.

Peter was diagnosed with rapidly progressive dementia as early as 2014 and had complained that "people were using radio frequencies or radiation to attack him," the magistrate said. But by the time his fortune was gone in 2020, "none of the doctors who evaluated Mr. Doelger from August 2015 through March 2020 recorded in his medical files any concerns about his ability to manage his own finances."

Protections for vulnerable adults in Florida, where the Doelgers had a home, also don't apply to Peter, Boal found. The regulations cover people unable to perform activities of daily life — not someone with mere cognitive decline, she said.

"The record shows that Mr. Doelger traveled between 2015 and 2020," Boal wrote. "He swam and rowed. He engaged in lucid conversations about world politics."

The only claim that the magistrate said could go to trial is one filed by JPMorgan saying the Doelgers' accusations have no merit and pressing them to pay its burgeoning legal costs and other unspecified damages.

US District Court Judge Angel Kelley will decide whether to accept Boal's findings. Attorneys for the couple hope to head off such a ruling, arguing it would ignore the law as well as evidence of JPMorgan's misdeeds and their impact.

"We strongly believe that dismissing this case without a trial would not only be improper but would deprive the Doelgers of their right to be heard and could have a chilling effect on other victimized investors," James Serritella, a lawyer at New York's Kim & Serritella who is also Peter's son-in-law, wrote in an emailed statement. "We are confident that Judge Kelley will be fair and fully consider the entire record."

JPMorgan declined to comment on the magistrate judge's recommendation. Last year, the bank said that its employees didn't observe any signs of cognitive decline from Doelger, and that the firm repeatedly suggested he diversify his investments.

Watching for Dementia

The case stems from a growing issue, as baby boomers retire with a record stockpile of wealth. Many have saved enough to be deemed "accredited" or "sophisticated" under U.S. law – permitting them to participate in complex and risky investments. The industry lacks a formal system for detecting when clients can no longer manage their own finances, leaving it up to individual firms to establish internal policies.

At JPMorgan, employees are required to immediately report to their supervisor "any situation where they have a reasonable basis to believe that diminished capacity and/or the potential financial abuse, exploitation or neglect of an elder or vulnerable client has occurred," according to documents filed in the Doelgers' case.

Signs of diminished capacity, according to JPMorgan's policy, include memory loss, disorientation, difficulty performing simple tasks, poor judgment, unusual mood swings and difficulty with abstract thinking.

The Doelgers' main contact at JPMorgan told the court that he didn't know about Peter's declining mental health until the family moved to sue JPMorgan.

That conflicted with testimony from Yoon, who said there were multiple episodes of Peter becoming confused amid calls during the half-decade relationship. She said she told their contact at JPMorgan that Peter had memory problems. And an expert witness for the Doelgers wrote in a report to the court that by the latter half of 2019 Peter's declining mental condition would have been apparent to people at the bank.

Boal, however, pointed out that the family never disclosed to JPMorgan that Peter had dementia or depression, or that he had been diagnosed with a mental health condition or received treatment.

The magistrate also noted that Yoon and the family's lawyers certified to the court that Peter reviewed and understood the lawsuit before filing it in 2021. A court-ordered exam later declared him unable to testify in the litigation, and both sides have agreed not to contest it.

Disputing Numbers

More broadly, Boal said, the Doelgers couldn't show that there were significant facts in dispute that would warrant a trial.

One of those disputes involves the Doelgers' wealth at the time JPMorgan sought to handle their portfolio. In 2015, JPMorgan documents listed the family's net worth at $100 million when it was actually closer to $50 million – possibly less.

The bulk of the Doelgers' portfolio was made up of master limited partnerships — securities tied to oil and gas contracts. Under JPMorgan's suitability guidelines, such securities should be limited to just 5% of a client's assets.

In 2015, Peter had more than $30 million invested in MLPs. That raised concerns inside JPMorgan, which required him to sign a "Big Boy letter" attesting to his understanding of such complex products and noting that he had been encouraged to diversify his portfolio. By signing, he agreed not to hold JPMorgan liable for any losses.

The Doelgers allege that someone at JPMorgan knowingly overstated Peter's wealth in order to get the bank to approve the concentration of MLPs – and swapped out pages from an account application after Peter signed it.

Boal, in her recommendation, said the Doelgers didn't present any evidence of that and that whether the family had $100 million or $50 million of assets was moot because, either way, the MLP investments exceeded the 5% limit.