by Tom Schoenberg
Beverley Schottenstein was 93 years old when she decided to go to war with the biggest bank in the U.S.
It was a June day, and the Atlantic shimmered beyond the balcony of her Florida condominium. Beverley studied an independent review of her accounts as family and lawyers gathered around a table and listened in by phone. The document confirmed her worst fears: Her two financial advisers at JPMorgan Chase & Co., who oversaw more than $80 million for her, had run up big commissions putting her money in risky investments they weren’t telling her about. It was the latest red flag about the bankers. There had been missing account statements. Document shredding. Unexplained credit-card charges.
Although some relatives urged Beverley not to make waves, she was resolute. What the money managers did was wrong, she told the group. They needed to pay, she said. Even though they were her own grandsons.
And pay they did. With the help of her lawyers, Beverley dragged her grandsons and JPMorgan in front of arbitrators from the Financial Industry Regulatory Authority, or Finra. She sought as much as $69 million. After testimony that spread over months and ended in January, the panel issued a swift decision in Beverley’s favor.
Finra’s arbitration process is private by design, and even when settlements are announced few of the underlying allegations are made public. In a brief ruling on Feb. 5, the panel found the bank’s J.P. Morgan Securities LLC unit and the brothers who worked there, Evan Schottenstein and Avi Schottenstein, liable for abusing their fiduciary duty and making fraudulent misrepresentations. The arbitrators also found the bank and Evan Schottenstein liable for elder abuse. It ordered JPMorgan and the bankers to pay Beverley about $19 million between them, representing damages, legal fees and the return of money invested in a private equity fund.
What the panel’s announcement doesn’t reveal is the intergenerational financial struggle that culminated in Beverley taking on her grandsons and a deep-pocketed Wall Street bank. That battle emerges in financial documents, emails, correspondence and testimony from the Finra arbitration, as well as interviews with family members, securities industry records, real estate filings and other materials. Beverley and some of her relatives say they decided to discuss her situation to warn of the potential for elder abuse in every economic strata, and to draw attention to the major financial institution they say helped fuel it.
“They made a lot of money on me, those kids—a lot of money,” Beverley said in an interview before the ruling. “They had no right going that far with JPMorgan. JPMorgan had to stop them, but JPMorgan was doing pretty good also.”
The bank dismissed the brothers around the time Beverley filed her complaint and paid their legal fees in the Finra dispute. “These advisers are no longer with the firm, and their actions do not represent our values as a company,” said Veronica Navarro, a bank spokeswoman. Jon Brennan, an attorney for the brothers, said Evan and Avi believe the ruling wasn’t justified by the facts or the law.
The money tensions were decades in the making. Beverley’s late husband, Alvin Schottenstein, helped turn a family furniture chain in the Midwest into what’s now a multibillion-dollar empire that has included Value City, Big Lots Inc., Designer Brands Inc. and American Eagle Outfitters Inc. Beverley’s part of the family cashed out of the business long ago. Evan and Avi became financial advisers and offered her their services.
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Their arrangement wasn’t unusual. It’s common and legal for money managers to work for relatives. Family money, in fact, often provides the seed for advisers to break into the business. What Beverley’s story shows is just how far off the rails that kind of relationship can go.
Although Beverley blamed her grandsons for breaking the rules, she also faulted JPMorgan for missing multiple chances to stop them. In her filings with Finra, she alleged the bank reaped millions of dollars in commissions by moving her money in and out of investments inappropriate for a nonagenarian, while failing to supervise her grandsons and ignoring signs she was being financially exploited for almost five years. The tens of millions her lawyers sought largely represented investment gains they say she missed because her grandsons chose exotic investments over index funds and the Apple and Big Lots shares she once owned.
The panel’s ruling may not be the end of the matter.
Finra’s enforcement arm, which has the authority to ban financial advisers, is also looking into the allegations, according to people familiar with the matter who asked not to be identified discussing a nonpublic investigation. They said New York state investigators in Manhattan have requested information, too. In her Finra complaint, Beverley alleged that her signature was forged on investment documents, potentially a criminal offense. The arbitration panel didn’t directly address that allegation and its ruling didn’t specify how the bankers may have misrepresented themselves.
Representatives for Finra and the Manhattan District Attorney’s Office declined to comment.
JPMorgan, in Finra filings, said it “has no place in this family soap opera.” It added that trading on Beverley’s account made money, was reasonably supervised and was in line with her stated investment strategy. She wasn’t charged account management fees and received discounted trading commissions, it added.
Evan Schottenstein, 39, was his grandmother’s primary broker, which means he drew commissions investing her money. Evan said in filings that he acted in her interest. Avi, 33, was also a financial adviser. He told Finra he provided administrative support to his older brother and wasn’t involved in any alleged misconduct. Their lawyer, in the statement, said Beverley’s accounts gained under Evan’s management and were “invested in full accordance with her wishes.”
Beverley’s decision to go after her grandsons hit close to home. That’s because one of her four children lives on the floor below hers. He’s the father of Evan and Avi, who sometimes visit him.
Avi was at the condo complex with his young son on the day in June 2019 when his grandmother decided to pursue arbitration. Beverley was sitting on her patio several floors above, watching relatives swim in the kidney-shaped pool below.
Avi confronted one of his cousins, Cathy Schottenstein Pattap, who was poolside, she and Beverley said. He asked why Beverley wouldn’t see him anymore and why she’d moved her account to another bank.
Then he realized his grandmother was watching from above. He held his son out in front of him at arm’s length and then, according to Schottenstein Pattap, he yelled up to Beverley: Why are you letting lawyers rule your life? This is your blood.
Mementos from Beverley’s nine decades cover her condo’s walls and tabletops. There are photos of Beverley and her late husband Alvin with their kids. A snapshot of Beverley and Alvin, beaming, with five toddler-aged grandchildren. Family was always close at hand, and at some point that may have become part of the problem.
Now 94, Beverley moved to Florida from her longtime home in Columbus, Ohio, around 2009, settling into the condo in Bal Harbour, an affluent area just north of Miami Beach. A few years later, her son Bobby and his wife, Caroline, moved into the unit below.
It hadn’t been planned that way. Beverley’s brother had bought the downstairs unit but died childless before he could move in. Beverley said she was surprised to learn her brother had signed the place over to Bobby before his death.
It was yet another tie between Beverley and Bobby’s family. Years earlier, Caroline had suggested Beverley turn her financial portfolio over to Evan, then a young adviser at Citigroup Global Markets Inc. Beverley recalls her daughter-in-law telling her: “Let him go to work and you’ll make a fortune.”
Beverley already had a fortune, by most standards. Alvin, her late husband, was one of four sons of Ephraim Schottenstein, an immigrant from Lithuania who sold overstock goods from a buggy before opening his first shop in Columbus in 1917. The sons expanded Schottenstein Stores Corp., with Alvin as its president, until his death in 1984. A half-decade later Beverley and her children cashed out of the family business with a $90 million legal settlement—about $18 million each for Beverley and her four children.
Relatives of one of Alvin’s brothers kept expanding the Schottenstein retail business and wealth. They donated generously, putting the Schottenstein name on an Ohio State University arena, an edition of the Talmud and an honors program and residence hall at Manhattan’s Yeshiva University. Beverley’s brood became, relatively speaking, the poorer side of the clan.
Members of Bobby’s family told relatives that he’d drained their share of the settlement by the time Evan hit high school. They blamed bad investments, according to Finra testimony from Schottenstein Pattap. Bobby and Caroline declined to comment on the relatives’ specific assertions.
Evan and Avi graduated from Yeshiva, setting up in Manhattan apartments their grandmother had bought years earlier. Beverley—who had growing assets from her late husband, the settlement and other shares—said she was fine with that, as long as the grandsons paid the management fees.
And starting in 2006, Beverley waved off concerns from some members of her family and let Evan, then still in his 20s, manage some of her stocks. She entrusted more assets to him about three years later when his unit was taken over by Morgan Stanley. There, Evan was joined by Avi, who was part of the firm’s financial advisory training program.
Evan scored another big break in early 2014. He called his grandmother to say that he’d landed a job at JPMorgan. He explained he could take her account with him and wouldn’t charge commissions or fees, she recalled. Avi was moving over in a salaried role. Both would report to the same supervisory manager.
Evan’s job came with a $1.5 million signing bonus in the form of a forgivable loan. Beverley says she learned during arbitration just what made Evan and Avi so valuable. It was her money. At least 80% of the assets the brothers brought to JPMorgan to manage were hers, the arbitrators were told.
An Unusual Visit
The brothers’ approach raised concerns with people close to Beverley.
Schottenstein Pattap, a cousin of Evan and Avi, recalls a visit with her grandmother several years ago. The two walked across the street and shared a thin-crust cheese pizza at a local celebrity hangout. Beverley had barely paid her bill when her phone rang. It was Evan, scolding her for eating at a non-Kosher restaurant. “He was sitting in his office in New York with some kind of spending alert on her credit card,” Schottenstein Pattap surmised. “It was strange.”
Beverley’s caretaker also sounded an alarm. In 2018, Schottenstein Pattap was talking on the phone with her grandmother when the caretaker, Dawn Henry, told her about an unusual visit. Bobby and Evan, who had access to Beverley’s private elevator and a key to the door off her back stairwell, would often show up unannounced, sometimes scolding Beverley for watching television on Shabbat. On this occasion, the caretaker told the granddaughter, the downstairs neighbors arrived with a paper shredder.
They cleared out the drawers of papers, some with JPMorgan letterhead, and sat at the kitchen table, shredding, according to Henry. Beverley, in documents filed with Finra, said they’d shredded documents there several times. JPMorgan told the Finra panel that Beverley had complained the bank was sending “too much paper.” Evan told arbitrators that his grandmother had asked for his help clearing it out.
Beverley’s own worries grew, too. A check she wrote to the caretaker bounced. When she and Henry went to her local Chase bank, JPMorgan’s retail arm, to ask why, they said they were told there’d been too much activity on the credit card linked to her checking account. Puzzled, Beverley asked for printouts of several months of her statements, explaining that her own paper statements had stopped arriving in the mail more than a year earlier.
Looking at her statements, Beverley saw all sorts of charges she said she hadn’t made.
It was September 2018. Her frustration was building. “You’ve got to get rid of it,” she said in an interview. “You’ve got to—you’ve got to explode.”
Around that time she started a diary.
“I don’t wish to hurt anyone, but I must express my feelings on how I am being used,” she wrote in the first entry of the journal, which was filed with Finra. “Every month—2016-2018, thousands and thousands of dollars has been used from my account without my knowledge,” Beverley wrote a few weeks later, ultimately estimating the spending at more than $1 million.
That winter, a FedEx package arrived with materials about a venture capital fund the bank said Beverley had invested in. The materials described a Cayman Islands-based fund. Another granddaughter who was visiting, Alexis Schottenstein, was alarmed to discover that her nonagenarian grandmother had apparently committed $5 million to it, locked in for many years.
Through family friends, Beverley was put in touch with wealth managers at another big bank who reviewed her finances. They found excessive turnover, ad-hoc security selection, and lots of trades that Beverley said she hadn’t approved. The Caymans fund, it turned out, was only the beginning.
Beverley sprung into action in early 2019. She sent Evan and Avi a note, via the bank, to stop trading on her account. She left voice messages for their manager. Hearing nothing for more than a day, she dialed the bank’s headquarters in New York. She said she asked to speak with Jamie Dimon, JPMorgan’s CEO. Someone would get back to her, she said she was told.
Then she wrote an amendment to her will and trust. After trusting Evan with her life and estate, she wrote, she now intended to move her estate to an independent adviser. In the amendment, which was later filed with Finra, she documented the paper shredding and other suspicions.
Her will amendment also contained a curious accusation about a safety deposit box she kept at a different bank. She wrote that Evan or Bobby, who had a key to the box, had removed about $1 million in jewelry—gifts from her late husband, including her 7-carat diamond engagement ring. That was in 2016. The jewelry was still missing, she wrote.
The amendment was a placeholder until Beverley could draft a new will. But Alexis—“in an effort to help Mrs. Schottenstein,” Beverley’s lawyers told the Finra panel—sent her grandmother’s five-page amendment to JPMorgan. Alexis believed that raising a red flag to the bank would spur it to review the account and give it the attention it needed, she said in an interview in January. “I thought, as naïve as I was, ‘Let’s get the adults involved,’” she said.
It didn’t work out that way. Family relations, already tense, were about to explode.
‘Upset for No Reason’
The next day, Beverley was still waiting for bank managers to return her worried calls. She wasn’t aware Alexis had raised her allegations to the bank, she said.
Bobby rushed through her back door. He told her JPMorgan was investigating the claims she’d made in her will amendment. He pushed his mother into a kitchen chair and grabbed a pen and paper, Beverley and Henry said in interviews and in documents filed with Finra.
Bobby began dictating, they said. “The accusations are false,” read a note that was signed by Beverley, notarized and faxed to the bank. “I got upset for no reason.”
Alexis, who was visiting that day, snapped a picture. Beverley’s lawyers submitted the photograph, of Bobby standing over his mother, as evidence in the Finra case, along with the note they say her son “physically forced” her to write.
As Beverley began moving her money to another bank, she enlisted lawyers who commissioned the financial study she pored over at her dining room table in June 2019. The document was written in the dispassionate language of a financial analysis, but it confirmed her fears. “It appears that Ms. Schottenstein’s broker sold her these risky, illiquid products without regard for her financial wellbeing to generate extraordinary income for him and for his employer,” the accountant wrote.
“I wasn’t dealing with $25,” Beverley said of her decision to pursue her arbitration case. “It had to be done.”
The Finra hearings kicked off in October 2020, via video because of Covid-19 lockdowns. Beverley rented a computer and hired an IT specialist, who helped as opposing attorneys cross-examined her for 11 hours. She also watched her grandsons on screen during their testimony in front of the panel of three lawyers who served as arbitrators. The proceedings gave Beverley and her lawyers a behind-the-scenes look at how JPMorgan handled her accounts, including a concern raised inside the bank along the way.
Her paperwork with JPMorgan characterized her as an aggressive investor. That could explain trading in instruments the attorneys say were too complex and risky for someone of her age—like $72 million in so-called autocallable structured notes that were traded in her account in 2014 and 2015, leading to losses the lawyers put at $10 million.
Given Beverley’s age and the size of her account, alarms should have been ringing inside the bank, said Garrick Tsui, a former investigator for Finra and the U.S. Securities and Exchange Commission who isn’t involved in the case.
“If you’re 90 years old and you’re checking aggressive, that’s going to raise a flag,” Tsui said. “I would’ve interviewed her to assess whether she has the ability to make these decisions herself.”
Broadly, the bank and Evan argued, Beverley was market-savvy and in the loop. JPMorgan told the panel that in 2014, four months after Evan and Avi joined the bank, their manager called Beverley. He spoke with her about her investment objectives and confirmed her risk tolerance, JPMorgan said, citing the manager’s notes from the half-hour call. Beverley told him she had been in the markets for more than 10 years and that Evan was doing a great job with her account, according to the filing. The manager verified that she was receiving and reviewing bank statements.
But internally, it appears JPMorgan in 2015 recognized potential problems investing Beverley’s money in instruments such as the autocallable notes. It blocked Evan from purchasing certain securities for her, the bank told the panel. Evan’s manager testified that he talked with the bank’s legal and compliance departments about checking Beverley’s trades more frequently. The bank planned to have calls with her every six months, the manager testified. But Beverley’s lawyers told the panel that the bank didn’t check in with her after the initial call.
Beverley said Evan and Avi weren’t transparent about trading on her behalf. They logged more than 500 transactions as direct requests from Beverley in 2015 through 2018 that she didn’t know about, her lawyers told Finra. In all, the brothers’ unauthorized buying and selling added up to about $400 million in transactions over the years. Beverley’s lawyers told Finra that about two-thirds of the purchase transactions involved securities whose trading would benefit JPMorgan, such as IPOs it was offering or securities for which it was a market maker.
Others have leveled similar accusations against JPMorgan. An Indiana church, among others, previously alleged that the bank put its own interests ahead of those of clients or beneficiaries, while failing to disclose how it profited from products it sold. (The bank reached an undisclosed settlement with the church.) JPMorgan also admitted to the SEC and Commodity Futures Trading Commission that it hadn’t been transparent enough with clients about how the products it sold generated fees for it. Calling its disclosure weaknesses unintentional, the bank paid more than $300 million to resolve the matter in 2015.
Pushing bank products was only part of the problem, Beverley’s attorneys, Scott Ilgenfritz and Guy Burns, told Finra. Requests for wire transfers came from an email account created in 2014 that bore Beverley’s name. But Beverley didn’t have a computer and didn’t know about the account, she and her lawyers told Finra. Her monthly statements, the ones that stopped arriving in the mail in early 2017, were sent to that email account. So were mandatory trading disclosures, her lawyers told the panel. The Finra ruling doesn’t specify who created the account.
The lawyers also told the panel that Beverley’s signature on the paperwork approving the private equity transaction had been forged by Evan or Avi—including on federal tax forms. Evan and Avi denied to the panel that they’d forged her signature. Evan testified he took some “liberties” with the account but only in ways that she’d blessed, he said.
‘Let It Go’
JPMorgan dismissed Evan and Avi shortly before the case was filed, clawing back part of Evan’s signing money. It told Finra that Evan’s termination was due to “concerns relating to trading activity for the account of a family member, and the accuracy of the records.”
Afterward, Bobby wrote a note to his mother, asking her to consider ending her case. His sons had been blackballed from the financial industry, according to the handwritten letter, which was also filed with Finra. He also apologized for “the loss of the jewelry” from her deposit box, explaining he had gotten involved in bad business deals. “My sons are not criminals,” he wrote.
Bobby and Caroline, in a statement sent through their sons’ attorney, said they are “saddened and disappointed by the lies being advanced about us and our sons,” without addressing individual allegations. “This case was the result of certain family members poisoning Beverley’s heart in an effort to obtain control over her estate,” they said. “We sincerely hope that this family can now begin the process of healing and, in time, can find peace and joy after all of this bitterness and division.”
Schottenstein Pattap says her family’s troubles are the flip side of the good fortune of being born into wealth built by a previous generation. The “toxicity of inherited wealth,” she says, has divided cousins who were children at the time of the 1990 settlement…Continue Reading