Clients Sue Charles Schwab and Hightower Advisors Over $1 Million Fraud
From the desk of Jim Eccleston at Eccleston Law
Clients are suing Charles Schwab & Co. and Hightower Advisors after fraudsters allegedly stole nearly $1 million from their retirement accounts and turned off electronic notifications that could have alerted them. As reported by ThinkAdvisor, the clients accuse Hightower Advisors of breach of fiduciary duty and professional negligence, while alleging negligence, breach of contract, and breach of implied covenant of good faith and fair dealing against Schwab.
The lawsuit claims Schwab failed to honor its "Security Guarantee," which protects investors against unauthorized activity like the theft that depleted the accounts. Despite being paid to manage the Reeds' investments, Hightower Advisors failed to notice any suspicious transactions or the declining balances in the accounts. Schwab also did not flag unauthorized withdrawals because each transaction fell below the $8,000 threshold for heightened scrutiny.
According to the lawsuit, from July 2022 to March 2023, dozens of unauthorized withdrawals from their Schwab accounts went undetected. The perpetrators transferred the stolen funds from the retirement accounts to their family trust account, and then to an unknown Wells Fargo Bank account.
Before a three-month vacation in December 2022, the clients had notified Schwab that they would be away. During their absence, the fraudsters changed the account notification preference from electronic to paper notifications, ensuring the clients would not receive alerts about the transactions. Upon returning in March 2023, the clients discovered the unauthorized withdrawals through 42 paper account statements, revealing a total loss of about $982,000.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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