Wells ordered to pay $8.6 million

OfficeMax ex-CEO, a client of bank’s wealth unit, lost millions on unsuitable bonds.

Wells Fargo’s wealth management unit has been ordered to pay $8.6 million in damages and fees to a client — the former chief executive of retailer OfficeMax — who lost millions of dollars in risky Puerto Rico bonds recommended by his financial advisor.

Sam Duncan, the former CEO of both the office supplies chain and grocer SuperValu, sued Wells Fargo Advisors and broker Marc Rogers in 2016, saying the broker had improperly invested in the assets despite Duncan’s stated preference for conservative investments.

Duncan also alleged that Rogers ignored the bank’s own analysts, who concluded the bonds were not suitable for conservative investors. The bonds were held by a trust account Duncan set up for his children, his attorney, Gerard Fox, told The Times.

“Rogers knew this was a trust — knew this was money to be invested for future generations,” Fox said. “It didn’t take a rocket scientist to know these were risky investments.”

Arbitrators with the Financial Industry Regulatory Authority, an industry selfregulator known as Finra, said on Thursday that Rogers and Wells Fargo Advisors must pay Duncan $4.2 million to compensate for his investment losses, plus millions more in interest, attorneys’ fees, punitive damages and arbitration costs.

In all, the arbitrators ordered the bank to pay $8.6 million.

Wells Fargo Advisors spokeswoman Shea Leordeanu said, “We disagree with the award and we are researching our options.” An attorney for Wells Fargo and Rogers did not respond to a request for comment.

Rogers had been Duncan’s investment advisor for years, before he worked for Wells Fargo. Royal Bank of Canada, Rogers’ previous firm, was also named as a defendant in Duncan’s case, but the Toronto company settled in May for $25,000.

Scott Abeles, another of Duncan’s attorneys, said Rogers first bought Puerto Rico bonds on Duncan’s behalf when he was at RBC, but that the truly risky behavior took place while Rogers was at Wells Fargo.

In 2012 and 2013, Duncan’s investment accounts managed by Rogers held almost entirely Puerto Rico bonds, according to Finra filings. At one point, Duncan held about $12 million worth of the bonds, Abeles said.

Investor advisors are required to recommend only investments that are suitable given the risk and their clients’ investment approach. Duncan’s lawyers said Puerto Rico bonds should not have been held by a conservative investor, at least not in that quantity.

Puerto Rico municipal bonds were once prized assets: They promised higher yields than other municipal bonds, and the income from them is not taxable. But in 2013, the island territory’s slowing economy and ballooning obligations led to a debt crisis there.