Seminole Tribe sues Prudential over funds
By JEFF TESTERMAN, Times Staff Writer
In the midst of a special audit in July 2001, the Seminole Tribe discovered that its investment portfolio, valued at $12.28-million, had been transferred to the Coral Gables branch office of Prudential Securities.
Seminole officials, claiming the transfer was made without authority, demanded that Prudential sell all stocks in the portfolio and return the proceeds. But by the time the funds were delivered five months later, the value of the liquidated portfolio had dwindled by almost half, to $6.37-million.
Those assertions form the basis of a lawsuit filed by the tribe against Prudential that alleges negligence and breach of fiduciary duty, a suit that has bounced from state court to federal court in Miami.
The lawsuit is a sequel to a Seminole suit filed against St. Petersburg-based Raymond James & Associates in September 2001. In that suit, the tribe accused the financial services firm, ousted tribal chairman James E. Billie, fired Seminole administrator Timothy W. Cox and Cox's former Army buddy, Peter T. Ripich, of a stock manipulation scheme that robbed the tribe of $20-million.
The Raymond James suit alleged that Billie and Cox illegally authorized Ripich to invest $30-million of tribal funds. Some of the money disappeared under Ripich's frenetic day trading of risky Internet stocks, the suit says, while $2.7-million was stolen and funneled to a company in Belize called Virtual Data.
A federal judge dismissed the Raymond James lawsuit on jurisdictional grounds, referring the dispute to arbitration. But in June, a federal grand jury indicted Cox and two business partners on charges of conspiracy to embezzle $2.7-million from the tribe and launder it through the Belize company in a scheme to purchase and renovate a hotel in Nicaragua and put a Hard Rock Live franchise in it.
With the criminal trial of Cox and his partners scheduled to begin Dec. 2, tribal efforts to recoup lost investment money continues in civil court.
The Prudential lawsuit says Ripich secretly "orchestrated" the transfer of the Seminole portfolio from Raymond James to Prudential at the same time he was changing his employment from one brokerage house to the other. At the time of transfer, no tribal agreement was completed to open the account at Prudential, to manage tribal funds or to facilitate the use of brokerage loans made on margin, according to the suit.
Yet when the portfolio was transferred, so were millions in margin loans used by Ripich in his day trading of the Seminole portfolio. And when Prudential finally liquidated the tribal portfolio, the firm made "substantial deductions" for margin loan payments, interest on margin loans and other fees, the suit says. The margin loans, interest and fees ate up more than $5-million in tribal funds, funds that the tribe says Prudential "improperly" kept for itself, according to the lawsuit.
Ripich resigned from Raymond James in April 2001. The Seminole portfolio was transferred to Prudential on May 9, 2001, just one day before the tribe fired Cox, Billie's handpicked administrator.
Tuesday, Prudential's attorney, Brian D. Elias, characterized the lawsuit as "ludicrous" and said his client had done nothing wrong. "The tribe transferred its account from Raymond James to Prudential," Elias said. "Prudential is required to accept the account, and it did so."
-- Jeff Testerman can be reached at (813) 226-3422 or by e-mail at firstname.lastname@example.org.
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