Oil Entrepreneur Sues Wells Fargo and LPL For Mismanaging Securities-Based Loan Strategy

Posted on March 10th, 2023 at 2:22 PM
Oil Entrepreneur Sues Wells Fargo and LPL For Mismanaging Securities-Based Loan Strategy

From the Desk of Jim Eccleston at Eccleston Law

An oil refinery entrepreneur has filed suit against Wells Fargo Advisors and LPL Financial alleging that his advisor overleveraged his account with a $5 million securities-based loan as part of a strategy that failed amidst the Covid-19 pandemic.

The complaint accuses the former advisor, John Dougherty, as well as LPL and Wells Fargo of breach of fiduciary duty and breach of contract. According to the complaint, Dougherty allegedly convinced the client in 2013 to obtain a $5 million loan to cover taxes and other obligations following the sale of his Alabama-based business, Warrior Asphalt, Inc., for a $9.5 million profit. Dougherty claimed that the loan would permit the client to generate income from the full proceeds to cover living costs and interest. However, the loan allowed Dougherty to charge management fees on the gross investment while also obtaining credit for interest payments on the loan, which exposed the client to greater market risk. Dougherty never recommended paying off the loan, even though the client’s account required at least a 3.5% return merely to pay the annual advisory fee and interest on the account.

The strategy ultimately failed in March 2020 at the outset of the pandemic as Dougherty began selling off most of the client’s equity securities to protect himself and Wells from losing their collateral on the loan, according to the complaint. Dougherty departed for LPL in January 2021. LPL failed to conduct due diligence on the advisor’s accounts and additionally ratified Dougherty’s problematic strategy in an effort to “continue recovering substantial fees”, according to the suit.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

Tags: Eccleston, Eccleston Law

Return to Archive

TESTIMONIALS

Previous
Next

If you find yourself in trouble with the regulators, call Eccleston Law, you won't regret it.

Rick R.

LATEST NEWS AND ARTICLES

September 17, 2025
FINRA Suspends Centaurus Dallas Broker Over Excessive Alternative Investment Sales

FINRA has suspended a Centaurus Financial broker, William Burks, for four months after finding he placed as much as 91 percent of a client’s net worth into illiquid alternative investments.

September 16, 2025
Former Morgan Stanley Advisors Win Partial Court Victory in Client Solicitation Dispute

Two former Morgan Stanley advisors in Hackensack, New Jersey have defeated Morgan Stanley’s initial effort to block them from soliciting clients, according to an August 15 order from New Jersey Superior Court.

September 15, 2025
California Young-Gun Investor Charged in Alleged $6 Million Ponzi Scheme

Federal prosecutors have accused Mihir Deepak Sukthankar, a California resident once celebrated as a teenage trading “prodigy,” of orchestrating a multi-million-dollar Ponzi scheme.