Former Salomon Brothers Retiree Seeks $10M in Fraud Suit

A former Salomon Brothers employee filed a complaint this month in federal court in Manhattan alleging an investment adviser diverted $10 million from his retirement savings into shell companies and offshore accounts.

The complaint states the retiree moved assets out of traditional brokerage accounts into private arrangements recommended by the adviser and then placed funds under the adviser’s management. The lawsuit names the adviser and several affiliated entities and seeks compensatory damages, interest, disgorgement of ill-gotten gains and an order to freeze assets tied to the defendants.

According to the filing, the adviser provided monthly statements and verbal assurances that obscured the actual use and location of the money. Transfers to a network of shell companies and offshore accounts began after the retiree shifted assets, and when he sought withdrawals in recent months he was told funds were locked or otherwise unavailable.

The complaint alleges the adviser used investor funds for personal expenses and to prop up failing investments and created false records to reassure investors. The retiree’s lawyers cite bank records, investor statements and communications from the adviser as the basis for the fraud allegations.

The retiree’s attorney wrote in a statement that the legal team will pursue full recovery and cooperate with any regulatory or criminal inquiries, adding: “We are focused on recovering our client's savings and holding those responsible to account.”

Defense counsel responded in a statement that the defendant denies the allegations and disputes the characterization of the transactions, and intends to mount a vigorous defense. The statement did not address the specific transfers or the amount at issue.

Court filings show the retiree's lawyers have asked a judge for expedited discovery to trace transfers and locate assets that could be recovered. The court has not set a trial date and no defendant has been found liable.

The complaint notes the retiree previously worked at Salomon Brothers and used his industry experience when selecting the adviser. Federal and state regulators have increased scrutiny on advisers and private placement products used by older investors, including cases that may involve both civil and criminal violations depending on evidence of intent and conduct.