Securities regulators in New Hampshire are investigating claims by former Gov. Craig Benson that he lost $100 million because Merrill Lynch churned customer accounts to generate millions in excess commissions, CNBC reported.
The New Hampshire Bureau of Securities Regulation has launched a probe into the brokerage and at least one former top broker over alleged churning, sources told the network.
Churning is an illegal practice in which a broker engages in excessive trading in a client’s account to generate commissions. Benson served as New Hampshire governor from 2003 to 2005.
“My account was churned in large part for the benefit of generating commissions that benefited Charles Kenahan, Derm Cavanaugh, but mostly Merrill Lynch,” Benson told the network. “I certainly didn’t sign a document and say it’s OK to steal from me. This is a fight I never chose … Bob and I caught Merrill Lynch with our wallets in their hands.”
Bob is Robert Levine, a friend and business partner who has received a $40 million payout from Merrill Lynch after the firm settled allegations of unsuitable investment recommendations, excessive trading and misrepresentation brought by Levine through a Financial Industry Regulatory Authority (FINRA) complaint. Levine alleged he sustained damages of more than $100 million.
The brokerage fired the broker in charge of the accounts, the report said.
CNBC reported Benson has filed his own FINRA arbitration claim against Merrill Lynch, and two of the firm’s former brokers, Kenahan and Dermod Cavanaugh, alleging losses of more than $50 million and market-adjusted damages of over $100 million. The case is pending.
“We disagree with the claim that has been filed,” a spokesman for Merrill Lynch told CNBC in a statement. “This is a case that doesn’t add up: a sophisticated, high net worth investor who claims to have been unaware of activity in their account for 11 years.”
Merrill Lynch insists Benson’s case is similar to the one it initially took in Levine’s case, that the former governor is a sophisticated investor who approved every trade, which Benson denies.
“If I wanted to day-trade my own account, I would’ve done it myself. I didn’t need to pay $26 million to Merrill Lynch to do it,” Benson told the network.
Attorneys for Kenahan and Cavanaugh declined to comment.
Benson said his story is a cautionary tale for anyone who uses a financial advisor.
“If they can do it to me who has a big account and served as a governor of a state, who else can they do it to?” Benson told CNBC.