Anwar et al v. Fairfield Greenwich Limited et al

Filing 831

NOTICE of Motion For Leave to File First Amended Complaint. Document filed by Joaquina Teresa Barbachano Herrero. Filed In Associated Cases: 1:09-cv-00118-VM-THK, 1:11-cv-03553-VM(Lindsey, Harold)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

PASHA ANWAR, et al.,
Barbachano,
Master File No. 1:09-cv-00118-VM-THK
v.
FAIRFIELD GREENWICH LIMITED, et al.,
Defendants.
This document relates to:
Joaquina Teresa Barbachano Herrero v. Standard
Chartered Bank International (Americas) Limited and
Standard Chartered PLC, 1:11-cv-03553-VM
NOTICE OF MOTION FOR LEAVE TO FILE FIRST AMENDED COMPLAINT
Please take notice that on the following Motion, Plaintiff, JOAQUINA TERESA
BARBACHANO HERRERO (“Barbachano”), will move this Court, before the Honorable Theodore H.
Katz, at a time and place to be determined by the Court, at the United States Courthouse, 500 Pearl Street,
New York, New York 10007, for an order pursuant to Rule 15(a)(1)(B) of the Federal Rules of Civil
Procedure for leave to amend her Complaint (the “Motion”) and, for such further and other relief that the
Court may deem just and proper.
MOTION
1.

Barbachano respectfully requests leave of the Court to amend the Complaint to include

additional factual allegations.
2.

Barbachano filed the Complaint on December 9, 2010.

3.

As of the date of this Motion, Defendants STANDARD CHARTERED BANK

INTERNATIONAL (AMERICAS) LIMITED and STANDARD CHARTERED PLC (“Defendants”),
have not filed a responsive pleading or any motion to dismiss under Rule 12.
4.

When and if such responsive pleading or motion is filed, Rule 15(a)(1)(B), Federal Rules

of Civil Procedure, provides that a party may amend its pleading once “as a matter of course” if the

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
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“pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading
or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier.”
5.

Rule 15(a)(1)(B) has been described as an “absolute right to amend.” See e.g. Lee v.

Levino, 2011 WL 62104, *1 (E.D. Mich. 2011) (noting that under Rule 15(a)(1), a party may amend the
complaint once as a matter of course before being served with a responsive pleading, and that this Rule
has been described as “absolute right to amend”); Thomas v. Cumberland County Bd. of Educ., 2011 WL
3664891, *1 -2 (E.D. N.C. 2011) (holding that plaintiff had “an absolute right to amend [her] complaint ...
and need not [have sought] leave of court to do so,” where Plaintiff filed her motion for leave to amend
exactly twenty-one (21) days after Defendants filed their answer and motion to dismiss); Plunkett v. Dept.
of Justice, 2011 WL 6396632, *2 (D. D.C. 2011) (explaining that under Rule 15(a)(1)(B), a party has an
absolute right to amend its complaint at any time from the moment the complaint is filed until 21 days
after the earlier of the filing of a responsive pleading or a motion under Rule 12(b), (e), or (f)).
6.

The supposed futility of any proposed amendment pursuant to Rule 15(a)(1)(B) does not

impact this absolute right to amend. See Thomas, 2011 WL 364891 at *2 (court allowed plaintiff to file
amended complaint pursuant to Rule 15(a)(1)(B), despite the fact that the amended complaint suffered
from at least one of the same defects as her original pleading).
7.

Notwithstanding the above, undersigned counsel for Barbachano has conferred with

counsel for Defendants and has been informed that the Defendants do not consent to this Motion.
8.

Barbachano anticipates that granting the Motion will result in little to no additional

discovery and that it will not delay the trial in this case. Accordingly, no parties are prejudiced by such
amendment. Moreover, this motion is Barbachano’s first motion to amend and is made in good faith and
not for the purpose of delay.
9.

For the Court’s convenience, a copy of Barbachano’s proposed Amended Complaint is

attached hereto as Exhibit 1.
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WHEREFORE, Plaintiff, JOAQUINA TERESA BARBACHANO HERRERO, respectfully
requests that this Court enter an Order granting Barbachano leave to Amend the Complaint and for such
further relief as this Court deems just and proper.

KATZ BARRON SQUITERO FAUST
Attorneys for Plaintiff
2699 S. Bayshore Drive, 7th Floor
Miami, FL 33133
Telephone: [phone]
Facsimile: 305-285-9227

By: /s/ H. Eugene Lindsey III, Esq.
H. Eugene Lindsey III, Esq.

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CERTIFICATE OF SERVICE
WE HEREBY CERTIFY that a true and correct copy of the foregoing has been served this 7th
day of March, 2012, by PDF/email attachment, on:

SULLIVAN & CROMWELL LLP
New York, New York

THE BRODSKY LAW FIRM
Miami, Florida

Patrick B. Berarducci - [e-mail]

Richard Brodksy
[e-mail]

Attorneys for Standard Chartered Bank
International (Americas) Limited and Standard
Chartered PLC

Plaintiffs Steering Committee Liaison

CURRAN & ASSOCIATES
Miami, Florida

RIVERO MESTRE LLP
Miami, Florida

Laurence E. Curran, III [e-mail]

Jorge A. Mestre [e-mail]

Plaintiffs Steering Committee Member

Plaintiffs Steering Committee Member

AGUIRE, MORRIS & SEVERSON LLP
San Diego, California
Michael J. Aguire [e-mail]
Maria C. Severson [e-mail]
Plaintiffs Steering Committee Member

KATZ BARRON SQUITERO FAUST
Attorneys for Plaintiff
2699 S. Bayshore Drive, 7th Floor
Miami, FL 33133
Telephone: [phone]
Facsimile: 305-285-9227

By: /s/ H. Eugene Lindsey III, Esq.
H. Eugene Lindsey III, Esq.
h:\lib\docs\08991001\lit\l80234.docx

4

Exhibit 1

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

PASHA ANWAR, et al.,
Plaintiffs,
Master File No. 1:09-cv-00118-VM-THK
v.
FAIRFIELD GREENWICH LIMITED, et al.,
Defendants.
This document relates to:
Joaquina Teresa Barbachano Herrero v. Standard
Chartered Bank International (Americas) Limited and
Standard Chartered PLC, 1:11-cv-03553-VM
FIRST AMENDED COMPLAINT
Plaintiff, JOAQUINA TERESA BARBACHANO HERRERO (“Barbachano”), by and through
undersigned counsel and pursuant to the Federal Rules of Civil Procedure, hereby files this First
Amended Complaint for Damages against Defendants, STANDARD CHARTERED BANK
INTERNATIONAL (AMERICAS) LIMITED and STANDARD CHARTERED PLC (collectively, the
“Defendants”), and states as follows:
NATURE OF THE ACTION, THE PARTIES, JURISDICTION AND VENUE
1.

This is an action for violation of state securities laws, breach of fiduciary duty,

negligence and gross negligence. It arises from fraudulent and/or negligent investment advice and
recommendations rendered by the Defendants and/or their predecessors in interest to Barbachano, which
caused her assets to be invested in unsuitable securities that exposed those assets to substantial risk and,
ultimately, million dollar losses, and which further caused other of Barbachano’s assets to be invested
(and lost) in the massive Ponzi scheme perpetrated by Bernard Madoff.
2.

Barbachano is a resident and citizen of Mexico. In late 1996, she became a client of

American Express Bank, Ltd. and its subsidiary, American Express Bank International (collectively
“AEBI”), in Miami, Florida, the predecessors of the Defendants. AEBI provided financial and investment

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advice to Barbachano, assigning its employee, Jennifer Sierra, as Barbachano’s “Relationship Manager.”
As a result, and continuing thereafter, Barbachano reposed her trust and confidence in AEBI and Sierra,
which AEBI and Sierra accepted, entering in to a fiduciary relationship with Barbachano. Indeed, AEBI,
by and through Sierra, eventually managed all aspects of Barbachano’s personal finances and
investments.
3.

Defendant Standard Chartered PLC is organized and existing under the laws of the

United Kingdom, with a place of business at 1 Aldermanbury Square, London, EC2V 75B, United
Kingdom, and is the parent corporation of Defendant Standard Chartered Bank International (Americas)
Limited, by and through its wholly owned subsidiaries, Standard Chartered Holdings Ltd. and Standard
Chartered Americas.
4.

Defendant Standard Chartered Bank International (Americas) Limited is a corporation

organized under the laws of the United States and is authorized to do business in Florida with a place of
business at 1111 Brickell Avenue, Miami, Florida 33131.
5.

AEBI was an Edge Act corporation that offered traditional private banking services to

individuals outside of the United States and was headquartered in Miami at all relevant times.
6.

In or about February 2008, Defendant Standard Chartered Bank PLC acquired the

American Express Bank, Ltd. and all of its subsidiary companies and affiliated companies, including
AEBI, changing its name to Standard Chartered Bank International (Americas) Limited. For ease of
reference, Standard Chartered Bank PLC, AEBI, and Standard Charter Bank International (Americas)
Limited shall collectively be referred to as the “Bank.”
7.

This Court has jurisdiction pursuant to the Edge Act of 1913 (12 U.S.C. § 632).

8.

Venue is proper in the United States District Court for the Southern District of Florida

pursuant to 28 U.S.C. § 1391(b) because a substantial part of the events or omissions giving rise to the
claims alleged herein occurred in Miami, Florida.

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9.

This action was originally filed in the United States District Court for the Southern

District of Florida. By order of the United States Judicial Panel on Multidistrict Litigation entered on
May 20, 2011, this action was transferred to the United States District Court for the Southern District of
New York for inclusion in the coordinated and consolidated pretrial proceedings in In re Fairfield
Greenwich Group Securities Litigation.
FACTUAL ALLEGATIONS
10.

In 1994, Barbachano inherited approximately $6 million following the death of her

11.

In late 1996, Barbachano became a client of the Bank and Sierra was assigned as her

father.

Relationship Manager.
12.

In that regard, Barbachano advised Sierra at the time she became a client of the Bank in

1996 that she had no knowledge of finances and investments and that her goal was to preserve her
inheritance while making a modest return. In that regard, Barbachano advised Sierra that she (Sierra)
should treat Barbachano like an old widow when making investment recommendations and not to gamble
with her assets. Sierra advised Barbachano at that time that her investment risk factor was considered
“moderate conservative” and that her overall investment position would be conservative, but when the
market presented an opportunity Sierra would take some small risks.
13.

During late 1996, Sierra recommended that Barbachano place a substantial part of her

assets in a trust, which was subsequently created in the Cayman Islands, with AMEX International Trust
(Cayman) Ltd., an affiliate of AEBI, acting as “Trustee,” and, later, with Standard Chartered Trust
(Cayman) Ltd., an affiliate of the Defendants, acting as “Trustee.” The trust was initially named “Las
Trojes,” and, later, re-named “Los Camotes,” with the assets transferred into the trust by Barbachano

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being held by the Trustee through two companies, Fardoll Co. Ltd. and Vegadeo Co. Ltd. Barbachano
was the grantor and beneficiary of the assets held by the trust through the companies.1
14.

Throughout their relationship, the Bank, by and through Sierra, made all investment

decisions for Barbachano. In particular, Sierra would tout an investment to Barbachano, repeatedly
advising Barbachano that the investments she recommended were not risky and that the Bank reviewed in
detail all the investments that she (Sierra) recommended. Sierra would also show investment documents
to Barbachano but would not necessarily leave them for Barbachano to review because, as Sierra said, she
“would not understand them.” For example, in the Bank’s call report dated July 30, 2004, Sierra notes
that “[Barbachano] is still in the process of learning the investment management of the account.”
15.

In addition, Sierra became involved in all aspects of Barbachano’s finances.

She

managed withdrawals and deposits for Barbachano, caused the payment of bills for Barbachano’s Florida
residence and credit cards, and ensured the payment of taxes. Sierra also befriended Barbachano, often
meeting her for dinner and taking a vacation with her to Key West. When Barbachano decided to sell her
Florida residence, Sierra caused her (Sierra’s) husband to act as Barbachano’s broker, thus obtaining a
commission from the sale.
Fairfield Investments
16.

In or about January 2004, the Bank, by and through Sierra, began touting to Barbachano

investment in Fairfield Sentry Limited Fund (“Fairfield”), a feeder fund for Madoff’s Ponzi scheme.
Sierra touted the investment in Fairfield as a “risk reducer” for Barbachano’s investment portfolio. She
said that the Bank had investigated Fairfield, that Fairfield was not risky, and that Fairfield had “no
volatility,” provided a six to seven percent annual return, and was a safe, conservative investment.
17.

The Bank, by and through Sierra, only began touting investment in Fairfield after

Fairfield agreed to pay a “trailer fee” to the Bank in the amount of one-half of one percent of each
1

Because of the affiliated relationship between the Trustee and the Defendants, it would be futile
to demand that the Trustee bring suit against the Defendants.

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investment per year. The Bank did not disclose the payment of this “trailer fee” to Barbachano at any
time or the fact that the Bank only agreed to market Fairfield after Fairfield agreed to pay the “trailer fee.”
18.

In 2004, on the recommendation of Sierra, upon which Barbachano justifiably relied,

Barbachano invested approximately $300,000.00 in Fairfield.
19.

In 2005, Barbachano, through an investment account maintained with UBS, invested

approximately $100,000.00 in Fairfield. In late 2005/early 2006, Barbachano transferred her investments
maintained at UBS to AEBI. In March 2006, Sierra reviewed her investments and recommended that the
investment in Fairfield be kept in Barbachano’s portfolio as a “risk reducer,” a recommendation that
Barbachano justifiably relied on.
20.

Further, in July 2006, Sierra caused Barbachano to invest an approximately $400,000.00

in Fairfield. Sierra told Barbachano that an investment in Fairfield was an opportunity for only a select
number of investors.

Sierra, however, did not obtain Barbachano’s written authorization for this

additional investment.
21.

Throughout 2004, 2005, and 2006, Sierra continued to tout the investment in Fairfield as

a “risk reducer” for Barbachano’s investment portfolio. For example, in February 2006, Sierra presented
Barbachano with an “Investment Proposal” which touted Fairfield as a “risk reducer.” See “Investment
Proposal” dated February 2006, which is attached and incorporated herein as Exhibit A. Sierra also
repeatedly advised Barbachano that Fairfield had “no volatility,” provided a six (6) to seven (7) percent
annual return, and was a safe, conservative investment. Moreover, during their conversations, Sierra
repeatedly told Barbachano that the investments in her portfolio were safe and properly investigated by
the Bank.
22.

At the time the Bank recommended the investments in Fairfield, Sierra did not advise

Barbachano that Fairfield was a feeder fund for Bernard L. Madoff Investments Securities, LLC
(“BLMIS”) and that the sole function of Fairfield, other than raising money from investors and extracting

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healthy fees for its sponsor, Fairfield Greenwich Group (“FGG”), was to turn over those investments to
BLMIS.
23.

Furthermore, despite Sierra’s various representations described above, the Bank failed to

conduct adequate due diligence concerning the Fairfield investment in violation of both the Bank’s
internal due diligence standards and those prevalent in its sector of the financial industry. Specifically:
a. In violation of its own internal policies, the Bank recommended the Fairfield
investment without doing any initial or on-going due diligence on Fairfield’s subadvisor, BLMIS; and
b. The Bank ignored obvious red flags which should have put them on notice – and
which made it reasonably foreseeable – that Madoff was engaged in a fraud,
including but not limited to:
i. BLMIS’ invariable positive monthly return and low standard deviation;
ii. The lack of any comparable product with comparative returns;
iii. The fact that BLMIS performed both execution and custodial functions with
the invested funds;
iv. The fact that BLMIS failed to file required SEC Form 13-Fs prior to
February 2007, and, those that were filed after February 2007 evidenced
discrepancies between amounts reported and amounts the company was
supposedly managing;
v. The fact that financial institutions investing with BLMIS, including the
Bank, were not generally allowed to go visit BLMIS for due diligence
purposes;
vi. The fact that BLMIS’ financial audits were conducted by a two-man firm,
Friedhling & Horowitz;

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vii. The fact that BLMIS did not charge an administrative fee for its services or a
share of supposed profits;
viii. The fact that BLMIS did not allow any real-time electronic access to trading;
and
ix. The fact that BLMIS utilized outmoded technology, including paper trading
confirmations which were sent daily via U.S. mail to feeder funds such as
Fairfield.
24.

In addition, the Bank failed to disclose that Fairfield’s due diligence concerning BLMIS

was similarly inadequate (for example, Fairfield failed to prepare any independent accounting report
regarding the design or operational effectiveness of the internal controls at BLMIS).
25.

Barbachano reasonably relied on the Bank’s representations regarding Fairfield and had

Barbachano been aware that those representations were false, she would not have invested in Fairfield.
Likewise, had Barbachano been aware that the Bank failed to conduct adequate due diligence concerning
the Fairfield investment in violation of both the Bank’s internal due diligence standards and those
prevalent in its sector of the financial industry, that the Bank was receiving the “trailer fee” from
Fairfield, and that Fairfield had failed to conduct adequate due diligence regarding BLMIS, Barbachano
would not have invested in Fairfield.
Lack of Suitability
26.

On June 6, 2007, Sierra and John Dutkowski (“Dutkowski”), the Senior Investment

Specialist for the Americas, met with Barbachano and her husband, Hector Velasquez (“Velasquez”), in
Mexico City. Sierra and Dutkowski recommended that Barbachano reallocate her assets based on thenexisting market conditions, while maintaining her position with Fairfield. Dutkowski and Sierra advised
that they would diversify her portfolio to minimize any risk, using an investment risk factor of “moderate
conservative” for Barbachano’s assets, and that she should expect earnings of five (5) to seven (7) percent

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for 2008. When Barbachano asked what her losses could be, Sierra and Dutkowski advised that in the
worst of cases she could suffer losses of ten (10) to twelve (12) percent.
27.

During the June 6, 2007 meeting, Barbachano reiterated to Sierra and Dutkowski that she

did not understand anything about investments and that she wanted to be clear that she did not want to
risk her money in any way. This message was repeated to Sierra and Dutkowski during a subsequent
meeting with Sierra, Dutkowski and Velasquez on September 26, 2007 in Mexico City. Further, during a
February 28, 2008 meeting with Sierra, Carla Borelly (Sierra’s assistant), Dutkowski, and Velasquez,
Barbachano reminded the Bank “to be cautious in the event things turned worse instead of better,” as
reflected in the Bank’s March 5, 2008 call report, authored by Sierra.
28.

However, by 2008, Barbachano’s portfolio was heavily allocated in “equities” and had

very little fixed income allocation. For example, approximately forty-one (41) percent of Barbachano’s
portfolio was invested in Signature Global Equities – an investment which the Bank failed to advise
Barbachano was rated four out of five on the risk matrix used by the Bank (with five being the most risky
and one being the most conservative). Moreover, by 2008, nearly fifteen (15) percent of Barbachano’s
account was invested in Fairfield – an investment that was a fraud.
29.

Meanwhile, the Bank continued to assure Barbachano that her assets were not at risk.

Thus, during a June 2, 2008 meeting with Barbachano, Sierra, Velasquez, and Dutkowski in Mexico City,
Barbachano repeatedly asked Sierra if everything was under control with her accounts and Sierra
continuously assured Barbachano that everything was fine and that Barbachano had nothing to worry
about since Sierra was taking care of everything and her investments were not risky.
30.

During June 2008, Barbachano also advised Sierra that she wanted to withdraw

approximately $2 million from the investments managed by the Bank in order to purchase property in
Mexico. Sierra actively discouraged Barbachano from doing so and, instead, persuaded Barbachano to
obtain a multi-million dollar loan from the Bank. Specifically, Sierra convinced Barbachano that a loan

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from the Bank was a better option since Barbachano could make more money from investments than it
would cost to take out the loan from the Bank. Sierra also told Barbachano that she did not need to worry
about risking her money because Barbachano had a very secure portfolio. When Barbachano raised the
possibility of only taking a loan for half the amount, Sierra insisted that a full loan was a better option.
Barbachano was reluctant to go forward with the loan and sought further assurances from Sierra that her
investments were not at risk, which Sierra assured her they were not, again stating that the bank reviewed
all the investments that Sierra recommended. Sierra would benefit, in terms of compensation from the
Bank, if Barbachano were to obtain a loan from the Bank rather than reduce the amount of her portfolio,
and Sierra failed to so advise Barbachano when recommending that Barbachano obtain a loan rather than
liquidate part of her portfolio.
The Fallout
31.

In 2008-09, Barbachano suffered losses of approximately forty-three (43) percent in her

portfolio, including all $800,000 invested in Fairfield when Madoff’s Ponzi scheme was revealed on
December 11, 2008. Even excluding the investment in Fairfield, Barbachano lost approximately twentysix (26) percent of the value of her portfolio – losses that Barbachano would not have suffered if the Bank
had managed her portfolio consistent with Barbachano’s risk level and objectives.
32.

In late August 2009, Sierra left the employ of the Bank. On August 19, 2009, however,

and prior to her departure from the Bank, Sierra advised Barbachano (while at Barbachano’s home in
Mexico) that she should sue the Bank because her assets had been mismanaged – specifically, that there
were suitability issues related to investments in Barbachano’s accounts and that the Bank was a mess.
Sierra further stated that she did not obtain written authorization from Barbachano for many of the
investments made and sold by the Bank on her behalf, as she was required to obtain, and had failed to
make changes to the trust, as Barbachano had requested. Further, upon Sierra’s departure from the Bank,
she failed to give Barbachano documents that Barbachano had previously requested.

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33.

On or about September 9, 2009, the Bank, by and through its representative and

Barbachano’s new relationship manager, Jose del Vecchio (“Del Vecchio”), met with Barbachano in
Mexico City. Del Vecchio told Barbachano that her portfolio had been mismanaged and, rather than
having investments in the “moderate conservative” range, many of her assets had actually been placed in
high-risk investments and that Barbachano’s portfolio was aggressive, which was the reason Barbachano
lost so much money. Del Vecchio also criticized Sierra’s management of Barbachano’s account.
34.

In October 2009, Del Vecchio, along with Dutkowski, recommended a new allocation of

Barbachano’s remaining assets to align her portfolio with her investment objectives. The proposal
reduced Barbachano’s investment in equities and increased her position in fixed income assets, which
would change the composition of the portfolio to make it more conservative. Specifically, Barbachano’s
investment in Global Securities would be reduced by $1.2 million (reducing her equity assets from
approximately fifty-one (51) percent of her portfolio to approximately twenty-four (24) percent of her
portfolio) and Barbachano would invest $1.7 million in PIMCO Global Bonds (increasing her fixed
income assets from approximately twenty-three (23) percent of her portfolio to approximately sixty-one
(61) percent of her portfolio). A copy of the October 2009 “Investment Proposal” is attached hereto as
Exhibit B.
35.

Thereafter, Del Vecchio attempted to have Barbachano execute documents releasing the

Bank from liability for her losses. The Defendants also demanded that Barbachano repay in full the loan
before releasing her assets.
36.

In or about April 2010, Barbachano closed her accounts with the Bank.
COUNT I

INVESTMENT FRAUD – VIOLATION OF FLORIDA STAT. §§ 517.301 & 517.211(2)
(AGAINST ALL DEFENDANTS)
37.

Barbachano realleges paragraphs 1-36 as if fully set forth herein.

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38.

This is an action against the Defendants for violations of the anti-fraud provisions of

section 517.301 of the Florida Statutes, part of the Florida Securities and Investors Protection Act (the
“Act”), which seeks recovery pursuant to section 517.211(2) of the Florida Statutes, all part of the Act.
39.

Section 517.301 provides in relevant part that:

It is unlawful and a violation of the provisions of [Chapter 517] for a person:
(a) In connection with the rendering of any investment advice or in connection with the offer,
sale, or purchase of any investment . . ., directly or indirectly:
1. To employ any device, scheme, or artifice to defraud;
2. To obtain money or property by means of any untrue statement of a material fact or
any omission to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading; or
3. To engage in any transaction, practice, or course of business which operates or would
operate as a fraud or deceit upon a person.
40.

Section 517.211(2), Fla. Stat., also provides in relevant part:

Any person purchasing or selling a security in violation of s. 517.301, and every director,
officer, partner, or agent of or for the purchaser or seller, if the director, officer, partner,
or agent has personally participated or aided in making the sale or purchase, is jointly and
severally liable to the person selling the security or purchasing the security from such
person in an action for rescission, if the plaintiff still owns the security, or for damages, if
the plaintiff has sold the security.
41.

The shares of Fairfield were a “security” as that term is used in the Act.

42.

Defendants rendered investment advice to Barbachano and did so in connection with her

purchase of Fairfield securities. In addition, Defendants rendered investment advice to Barbachano in
connection with the other investment recommendations made to her.
43.

In so doing, Defendants employed a device, scheme, or artifice to defraud; Defendants

obtained money or property by means of untrue statements of a material fact and/or failure to state
material facts necessary in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; and/or Defendants engaged in a transaction, practice, or course of
business which operated or would operate as a fraud or deceit upon Barbachano.

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44.

In particular, Defendants, by and through Bank employees working from the Bank’s

Miami, Florida, location, recommended and caused Barbachano to make investments unsuited to her
investment objectives and risk allocation, recommended and caused Barbachano to obtain a multi-million
dollar loan from the Defendants rather than liquidating part of her investments, and often made
investment decisions without obtaining Barbachano’s written authorization. The Defendants knew or
should have known that the investments were unsuitable for Barbachano; the Defendants recommended
the investments to Barbachano notwithstanding the unsuitability thereof and her lack of investment
sophistication; and the Defendants, fraudulently and/or negligently, made material misrepresentations of
material facts and failed to disclose material information relating to the suitability of the investments that
they recommended.
45.

Moreover, Defendants failed to conduct adequate due diligence in connection with their

recommendation that Barbachano purchase Fairfield securities, while fraudulently and/or negligently
representing to Barbachano that they had reviewed in detail all the investments recommended to her, and
while fraudulently and/or negligently touting the investment in Fairfield as a “risk reducer” for
Barbachano’s investment portfolio and fraudulently and/or negligently representing that Fairfield had “no
volatility,” would provide a six (6) to seven (7) percent annual return, and was a safe, conservative
investment.
46.

The Defendants also failed to disclose to Barbachano that Fairfield paid the Defendants

the “trailer fee” for her investment in Fairfield. Defendants also fraudulently and/or negligently failed to
disclose to Barbachano that Fairfield paid Defendants such “trailer fee.”
47.

Barbachano justifiably relied upon Defendants’ misrepresentations and omissions,

following their investment recommendations and decisions.
48.

The Defendants, by and through Bank employees working from the Bank’s Miami,

Florida, location, solicited the purchases by Barbachano of Fairfield for their financial gain and are

12

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
Master File No. 1:09-cv-00118-VM-THK

therefore jointly and severally liable to Barbachano for her losses under section 517.211(2) on this basis.
Furthermore, the Defendants acted as Fairfield’s agent in soliciting these purchases, receiving the
undisclosed “trailer fee” from Fairfield for their efforts.

The Defendants are therefore jointly and

severally liable to Barbachano on this basis as well.
49.

Furthermore, Defendants were agents of Barbachano in connection with rendering

investment advice to her, as well in connection with the purchase and/or sale of securities and investments
in her accounts.
50.

Barbachano has suffered substantial damages as a result of Defendants’ material

omissions and false and negligent misrepresentations of material facts.
51.

Likewise, Barbachano has suffered substantial damages as a result of Defendants’ failure

to take reasonable steps to substantiate the investment recommendations made to her, which
recommendations caused and induced her investment losses.
WHEREFORE, Plaintiff, Joaquina Teresa Barbachano Herrero, demands judgment against
Defendants for damages, prejudgment interest, attorneys’ fees pursuant to Section 517.211(6) of the
Florida Statutes and costs, and for such other relief as the Court deems just and proper.
COUNT II
BREACH OF FIDUCIARY DUTY
(AGAINST ALL DEFENDANTS)
52.

Barbachano realleges paragraphs 1-36 as if fully set forth herein.

53.

This is an action against the Defendants for breach of fiduciary duty.

54.

Defendants entered into and had a fiduciary relationship with Barbachano, and

Defendants and Barbachano shared a relationship whereby Barbachano reposed her trust and confidence
in Defendants regarding their investment recommendations and decisions. In particular, Defendants
rendered investment advice to Barbachano and directed her investments. Moreover, Sierra became

13

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
Master File No. 1:09-cv-00118-VM-THK

involved in all aspects of Barbachano’s finances and befriended Barbachano, obtaining Barbachano’s
trust and confidence in Sierra’s recommendations.
55.

As such, Defendants owed Barbachano fiduciary duties of loyalty and care, including

duties to make suitable investment recommendations and decisions only after conducting reasonable due
diligence, researching potential investments, and disclosing all material facts, including the risks involved
in any investment.

Defendants further owed Barbachano a fiduciary duty not to make material

misrepresentations of fact or to omit material facts.
56.

Further, Defendants owed Barbachano a fiduciary duty to render investment advice

suitable to her, taking into consideration Barbachano’s investment objections, risk tolerance, and asset
allocation.
57.

Defendants breached the fiduciary duties that they owed to Barbachano by failing to

conduct reasonable due diligence, disclose material facts, and adequately research and/or disclose the
risks involved in Fairfield, which investment Defendants fraudulently and/or negligently touted as a “risk
reducer” for Barbachano’s investment portfolio and fraudulently and/or negligently represented as having
“no volatility,” as providing a six (6) to seven (7) percent annual return, and as a safe, conservative
investment.
58.

Furthermore, Defendants breached their fiduciary duties of care and loyalty that they

owed to Barbachano by accepting the “trailer fee” from Fairfield and by failing to disclose the same to
Barbachano.
59.

In addition, Defendants breached the fiduciary duties that they owed to Barbachano by

causing her to make investments unsuited to her investment objections and risk allocation, by causing
Barbachano to obtain a multi-million dollar loan from the Defendants rather than liquidating part of her
investments, and by often making investment decisions without obtaining Barbachano’s written
authorization.

The Defendants knew or should have known the investments were unsuitable for

14

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
Master File No. 1:09-cv-00118-VM-THK

Barbachano; the Defendants recommended investments to Barbachano notwithstanding the unsuitability
thereof and her lack of investment sophistication; and the Defendants fraudulently and/or negligently
made material misrepresentations and failed to disclose material information relating to the suitability of
the investments.
60.

As her fiduciaries, Barbachano justifiably relied upon Defendants’ investment advice,

expertise, and skill and she suffered substantial damages as a result.
61.

Likewise, Barbachano has suffered substantial damages as a result of Defendants’ failure

to take reasonable steps to substantiate the investment recommendations made to her, which
recommendations caused and induced her investment losses.
62.

Defendants’ breach of fiduciary duty constitutes intentional misconduct or gross

negligence, as those terms are defined in section 768.72, Fla. Stat. Accordingly, Barbachano reserves the
right to amend the Complaint to seek punitive damages.
WHEREFORE, Plaintiff, Joaquina Teresa Barbachano Herrero, demands judgment against
Defendants for damages, costs, prejudgment interest, and for such other relief as the Court deems just and
proper.
COUNT III
NEGLIGENCE
(AGAINST ALL DEFENDANTS)
63.

Barbachano realleges paragraphs 1-36 as if fully set forth herein.

64.

This is an action against the Defendants for negligence.

65.

Defendants acted as investment advisors for Barbachano and, accordingly, owed her

duties of care to make suitable investment recommendations and decisions only after conducting
reasonable due diligence, researching potential investments, and disclosing all material facts, including
the risks involved in any investment. Defendants further owed Barbachano a duty not to make material
misrepresentations of fact or to omit material facts.

15

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
Master File No. 1:09-cv-00118-VM-THK

66.

Defendants breached the duties that they owed Barbachano by negligently failing to

conduct reasonable due diligence, disclose material facts, and adequately research and/or disclose the
risks involved in Fairfield, which investment Defendants negligently touted as a “risk reducer” for
Barbachano’s investment portfolio and negligently represented as having “no volatility,” as providing a
six (6) to seven (7) percent annual return, and as a safe, conservative investment. Also, Defendants
breached the duties that they owed Barbachano by accepting the “trailer fee” from Fairfield and by
negligently failing to disclose the same to Barbachano.
67.

In addition, Defendants breached the duties that they owed to Barbachano by causing her

to make investments unsuited to her investment objections and risk allocation, by causing Barbachano to
obtain a multi-million dollar loan from the Defendants rather than liquidating part of her investments, and
by often making investment decisions without obtaining Barbachano’s written authorization.

The

Defendants knew or should have known the investments were unsuitable for Barbachano; the Defendants
recommended investments to Barbachano notwithstanding the unsuitability thereof and her lack of
investment sophistication; and the Defendants negligently made material misrepresentations and failed to
disclose material information relating to the suitability of the investments.
68.

Barbachano justifiably relied upon Defendants’ investment advice, expertise, and skill

and she suffered substantial damages as a result.
69.

Likewise, Barbachano has suffered substantial damages as a result of Defendants’ failure

to take reasonable steps to substantiate the investment recommendations made to her, which
recommendations caused and induced her investment losses.
70.

As a direct and proximate result of Defendants’ negligence, Barbachano has suffered

damages.
71.

Defendants’ conduct was so reckless or wanting in care that it constituted a conscious

disregard or indifference to the rights of Barbachano. Defendants’ conduct constitutes gross negligence,

16

Herrero v. Standard Chartered Bank International (Americas) Limited, et al., 1:11-cv-03553-VM
Master File No. 1:09-cv-00118-VM-THK

as defined in section 768.72, Fla. Stat.

Accordingly, Barbachano reserves the right to amend the

Complaint to seek punitive damages.
WHEREFORE, Plaintiff, Joaquina Teresa Barbachano Herrero, demands judgment against
Defendants for damages, costs, prejudgment interest, and for such other relief as the Court deems just and
proper.
PLAINTIFF’S DEMAND FOR JURY TRIAL
72.

Plaintiff demands a trial by jury on all issues so triable of right by a jury.

Dated: ___________________

Respectfully submitted,
____________________
H. Eugene Lindsey III
Florida Bar No. 130338
New York Bar No. 2421923
[e-mail]
KATZ BARRON SQUITERO FAUST
2699 S. Bayshore Drive, 7th Floor
Miami, Florida 33133-5408
Telephone: [phone]
Facsimile: [phone]
Attorneys for Plaintiff

h:\lib\docs\08991001\pldg\l7300205.docx

17

EXHIBIT A

EXHIBIT B

Investment Proposal for 4652
Relationship Manager: Jose Del Vecchio
Investment Specialist: John Dutkowski

October 2009

d~IBIT23

bullilQiI
Dal~213o II fRptr,·~ ("
Deponentl

www.DEPOBOOK.COM

Asset Allocation

CashorNearCash

$

510A80

11.4%

11.4%

~$J~~~YJt~~2~g~~~ ~~ni£g;'QX~~;);\;ti

~(¥~1~:;g~!~~iJ1!Mf.t:QXf3.1~~~~g§§I:t9~~!:;'i,0\'~··',-,

ii'$' ,,'\;Y"·',);N;.'JO'6"3-Y9"~O'-7~ 'f;o1,r2'3T7o~~I';W
:&. ,t:~{;·!}l~_~~~.~, ~
j~, .(~1 rAi.:"
.-.iIO,~J:~}

Equity

,0;4%-$

0.4%

Demand
"~"""",_·,j"":,,S",'I~g-'·.:;,,'~U"','S·4M,',,,'iU'''I'-t,'I'.·~,',',',S·b,'',c'.'''t'''o'''ir',·',f,F'','Ix·o,e"->,""·,'.I'n"','c"o·','m','e'"
"'.
"..C::
.~_ . _ '"~, _ U - J

$

2,295;652

51.2%

51.2%

Absolute Return
$
5,123
0.1%
0.1%
~~~!tj~~~'t~l!iitot-a :'f,.~;!?-i\~l.li:~~: ~$~~Sh!~{r4~'1.84~9391. ~~t:. 100:OW~;J) '!~:;62' 6%~~fa
I

16,132

2;i37{~%Ct~t i~~?('\f.~ F,OO;_09~)
1,;11',23'·.;7,O/OI;,'i,~', i,'$' -,N:,:,>",;,'''', i,O''6'3';:9''07
,d(~I.:." "'.-.;,.;,1, . . ,.

, ; . .

Sigh. GlobalEquitles

'24.3%

GBLEM Absolute,Return

0.,1%

24.3%$
;-0~1%

$

1,090,000'
,5;123

"";;"."~~1 OO;O%t~"id"ti(~100~O%t i$'~;;;;)s4 '484939

.

.

' .

.

Some of the securities products above may be offered tl1rough StanChart Securities International, Inc" a'registered broker~dealer,Member FINRASIPC.
Securities products are not FDIC insured, bank guaranteed and may loose value. This is not a solicitation: The information In thisddcument.ls being provided for
information purposes. The above asset allocation is being prepared based on the client's request and does notnecessarilyreflectthe views of Standard
Chartered Bank or its affiliates, This is not an invitation to subscribe to shares in any funcl or follow a particular investment strategy, Additlcinal'Ternis and
Conditions may apply, Please read the prospectus/offering documents/Terms & Conditions carefully prior to invesling;Please also referto Important'
Information on the last page of this document.
2

-

Important Information
Standard Chartered Bank International (Americas) Limited ("SCBI") and StanCha'rtSecurities International, Inc.,
("Stanchart") are wholly owned subsidiaries of The Standard Chartered Bank: The Stal1dardChadered Private Bank is the
private banking division of Standard Chartered Bank. Securities products offered through, Stanchaii'. Bank products and/or
services are offered through SCBI and other bank and non-bank affiliates, or strategic partners. 'Natali prodUcts and
services available to clients of SCBI or StanCh art.
Standard Chartered Signature and Dynamic Portfolios are discretionary asset mahagement services made available to you
by Standard Chartered Bank, together with its affiliates or subsidiaries and are advised by its affiliates and selected sub
advisers. SUbscriptions can only be made through the respective Fund's discretionary accouhtagreement,:which can be
obtained through your Relationship Manager. In relation to the products and services'detailed in this presentation,
addition,al Terms and Conditions may apply. You should obtain details of these Te'rmsand Conditions contained in the
subscription agreement, prospectus or offering documents, before proceeding.
In relation to the products and services detailed in this presentation, additional Terms and Conditions may apply. You
should obtain details of these Terms and Conditions contained in the prospectus 'or offering'documel1ts(before
proceeding. Mutual funds are offered through prospectus/offering documehts. Please consiaer'the'risl<sicharges,
expenses and investment objectives prior to investing in mutual funds.TlieprospectLis/offedng:'do'cuments Which contain
this and other important information can be obtained by contacting yourHelationshipManager<Pleflse read these
documents carefully, before investing.
Hedge funds are speculative investments and are not suitable for all invesf6rs, nor do they representa complete investment
program. Hedge funds ar~ not SUbject to the same regulatory requirements', as mutual funds'.:Ariinvestmel1t in a hedge fun
involves the risk inherent in an investment in securities, as well as specific risksassbCiated with Iirnited.liquidity, the lise of
leverage, short sales, options, futures, derivative instruments, "junk" bondsandiiIliquid iiwestments.There can be, no
assurances that a manager's strategy, hedging or otherwise, will be successful or-tliat a manager will use this strategy with
respect to al/ or a portion of the portfolio. Fora more complete description of the risks associated with any hedge fund·
.
investment, please read the Offering Document which can be obtained by contacting your'RelafibnshipManager.
,
.
".

3

.

.

.

'.

\\

, ,,,,...,-

,

Important Information (Continuation)

Investments in this presentation may concentrate on certain economic sectors, thereby increasing its vulnerability to
any single economic, political or regulatory development. This may result in.greater price volatility. Additionally,
investments may focus on certain geographical regions, thereby increasing its vulnerability to developments in that
region. This may result in greater price volatility. Investing in foreign securities presents certain risks not associated
with domestic investments, such as currency fluctuation, political and economic instability, and differentaccounting
standards. This may result in greater price volatility. Non-diversified investments involve greater risktlian diversified
investments, because a loss resulting from a partiCUlar security or sector's poor performance,wilrhave a greater impact
on the investments' overall return. Investments in fixed income securities will fluctuate in priceand:yield depending on
market conditions 'and funds invested may be worth more or less than their original cost.
With any investment the value may fall as well as rise and in some circumstances you may not get back the full arnount
invested. You are not certain to make a profit. and may lose money. Changes irrrates may causethevalue of
investments to go up or down. If your base currency is other than the,base·currency ofthE?underlyihgassets, changes
In rates of e~d~ange ma)' have an adverse effect on the value of your IIlvestments..Pastperform~mceshouldnot be
seen as an Jndlcatlon of future performance. The level, rates and bases 'of, and relief from, taxatlon'arefhosecurrently
available and may change in the future. This presentation does not purport.to elisclose all of the risks i:issociated with
investment products.
You should make your own legal and tax determination (including anyapplitableexcharigecontrol regLilations) on
investment products, and should consider carefully whether the .investinentproducts aresLiitable for'yoLi in Iight.of your
personal risk appetite, liquidity requirement and return objectives (including.thelegal atidtaxTegirnes in your countries
of citizenship, residence and/or domicile). We do not provide you with any legal, tax or accounting advice regarding the
suitability or profitability of a security or investment. This presentation does not constitute an offer, solicitation or. .
invita~ion to transact business !n any c9u~try where themarke~ing'or.sale oftheseprocl.ucts, al1dSelVicesw~.uldnotbe
permitted under local laws. ThiS matenalls not'approvedfor dlstnbutlon to anyperson'Jn the US or to US citizens or
. .
. '
residents.

4