Winner of $168 Million Lottery Awakens to Financial Nightmare
LOS ANGELES (CN) - A grocery store worker who won $168 million in the lottery sued his financial advisers, claiming they cost him millions of dollars in lousy investments while taking fat commissions and "encouraging him to assume tens of millions of dollars in debt."
Kevyn Ogawa sued Clinton Hodges and Kyle Dunphy in Superior Court. Both men are licensed attorneys and insurance agents, according to the complaint.
Ogawa was 32 and working at a Whole Foods store when he won $168 million in 2009, he says in the lawsuit. He took the lump-sum payout and had $70 million after taxes.
Ogawa says he met Hodges and Dunphy in 2008, when they opened a branch of the wealth management company EFG Capital. When they found out he had struck it big, Ogawa claims, they "undertook to gain [his] trust. By touting their own experience in financial advisement and the success of EFG Capital, they did gain the trust of Kevyn, who believed that the two men were acting in his best interest. Hodges and Dunphy thereby installed themselves as Kevyn's exclusive financial advisors. They persuaded Kevyn to place all his money in EFG accounts."
EFG Capital is not a party to the complaint.
Ogawa claims Hodges and Dunphy steered him into a series of bad purchases, starting with a $100 million life insurance policy. He claims they took big commissions for themselves while taking advantage of the fact that he "knew nothing about life insurance." They persuaded him to buy four policies from four companies, telling him the policies would "earn [him] $50 million by the time he was 50 years old," he says in the complaint.
"Kevyn, a young unmarried man with no children, no siblings and only one living parent, had no need for so much life insurance. Kevyn stood no chance to benefit from the insurance financially since he was not named as a beneficiary of the trust that owned the policies," the complaint adds.
It continues: "Hodges and Dunphy, on the other hand, made about $1 million in commission on the sale of the insurance.
"The duo additionally encouraged Kevin to open a line of credit and borrow the money necessary to purchase several expensive pieces of real estate, including a $10 million beachfront property in Malibu. This strategy saddled Kevyn with $27 million in debt, while earning Hodges and Dunphy further commissions."
Two years later, Ogawa says, the defendants tried to persuade him to surrender his existing life insurance policies and take out a single $600 million policy.
Suspicious, Ogawa says, he met with another financial adviser, who told him that Hodges and Dunphy were pushing the idea so they could make a "multi-million dollar commission on the deal."
After deciding that buying the $600 million policy would be a bad idea, Ogawa says, he learned that his existing policies were "highly unsuitable for him and [were] funded in a way that would provide him no potential benefit and would leave the trust liable for large amounts of gift tax."
"Having lost about $2 million to insurance premiums on the policies he had no reason to continue to fund, Kevyn surrendered most of his insurance to mitigate his losses. He concurrently filed this lawsuit against Hodges and Dunphy to recover his losses," the complaint states.
Ogawa damages for breach of fiduciary duty and professional negligence.
He is represented by William H. Shernoff with Shernoff, Bidart, Echeverria & Bently of Beverly Hills.
Emails seeking comment from Hodges and Dunphy were not returned by the end of business hours Monday.