A financial advisor from Morgan Stanley, who is alleged to have churned the account of a client with cognitive impairments, is now facing a motion for financial discovery aimed at establishing the advisor’s threshold for potential punitive damages.
The Reif Law Group in Los Angeles, CA is representing plaintiffs in a lawsuit against John R. Privitelli, a 41-year veteran Morgan Stanley financial advisor. The plaintiffs have filed a motion to compel financial discovery in order to establish a punitive damages threshold in the case.
The lawsuit accuses Privitelli of churning the account of a cognitively impaired client, Maurice Voce. Privitelli, based in Beverly Hills, California, has worked his entire career at Morgan Stanley. The suit alleges that he engaged in an excessive number of trades within Voce’s account even after being informed of Voce’s cognitive decline and inability to provide informed consent.
The plaintiffs, three trustees of family trusts established by Voce in 1970, claim that more than 21,000 trades were executed in Voce’s account between 1993 and 1998, generating over $1.5 million in commissions with a cost-to-equity ratio of nearly 15%. They further allege that Privitelli concealed much of the trading expenses from Voce, who never received a report disclosing his accounts’ cumulative commissions.
According to the suit, Privitelli knew of Voce’s progressive cognitive decline since 2002 but continued to use an expensive, complex, high-risk options trading strategy in Voce’s accounts for another decade. He also failed to report Voce’s declining mental health to Morgan Stanley. The plaintiffs’ motion claims that Privitelli continued to solicit Voce’s approval for transactions despite knowing about his severely impaired cognition.
Brandon Reif, the plaintiffs’ attorney at Reif Law Group, said, “The financial advisor having real-time knowledge of his elderly customer’s impaired decision-making tree, but continuing to drive trades for the commissions is the hallmark of financial elder abuse.”
The motion filed by the plaintiffs seeks to compel financial discovery concerning Privitelli to establish his threshold for punitive damages. This motion would require the court to determine a “substantial probability” of success in establishing a basis for punitive damages. Reif Law Group’s Brandon Reif emphasizes the importance of transparency in revealing the financial advisor’s net worth to pay a large punitive damages award.
The lawsuit also names Morgan Stanley as a defendant, alleging the firm’s failure to supervise Privitelli’s management of Voce’s accounts. A separate claim involving the same allegations against the firm was dismissed by the Financial Industry Regulatory Authority in 2019, citing the statute of limitations. Morgan Stanley has issued a statement denying the allegations and asserting their intention to vigorously defend against them.