SAN FRANCISCO (CN) - The son of an early investor sued Franklin Resources and its former CEO, billionaire Charles B. Johnson, claiming they owe him more than $100 million in shares and dividends.
Anthony P. Miele III sued Johnson and Franklin Resources on Wednesday in Federal Court, demanding reissuance of 2.5 million shares, which were "lost or stolen," $19 million in dividends, and damages for fraudulent concealment and five other counts.
Franklin Resources denied the allegations.
"We believe the suit is frivolous and without merit, and we intend to defend against it vigorously," the company said in a statement.
In the lawsuit, Miele describes San Mateo-based Franklin Resources as "one of the world's largest global investment management organizations," with offices in 35 nations. Its shares are traded on the New York Stock Exchange under the BEN symbol and the company is listed on the Standard & Poor's 500 Index.
Citing Forbes magazine, Miele says Johnson, 82, the company's former president, CEO and chairman of the board until June 2013, is the country's 72nd richest person, with $6.8 billion in assets.
Johnson formerly chaired the National Association of Securities Dealers, is the largest shareholder in the San Francisco Giants baseball team and recently donated $250 million to his alma mater, Yale University, according to Miele.
Miele claims that he and his father, through a joint trust, owned 4,000 shares of Franklin Resources that were valued at about $100,000 in 1973, and that Franklin Resources' records show the ownership until 1991.
Over time, those shares paid dividends and were split, and the trust in 1991 had $186,496.88 in uncashed dividend checks and 140,625 shares in Franklin Resources, according to Miele.
Since then, Miele claims, more stock splits resulted in the trust owning 2,531,250 shares in Franklin Resources. Dividends for them issued after March 4, 1991 totaled $19,637,578.13 by the end of 2014, Miele says, and the closing share price of $54 on Jan. 8 valued the shares at more than $136 million.
Those shares paid $2.5 million in dividends last year, but Miele says that "through a variety of acts" that include "breaches of fiduciary duty, forgery, theft, diversion and a cover up," he has not been paid $19.8 million in dividends or received the shares he owns as the surviving trust member.
Miele's father died in 1974. He says officials at the Bank of New York contacted him in 1991 about the outstanding dividend checks and shares in the trust account. He claims that the bank was about to escheat the funds back to the State of New Jersey, and that Johnson and Franklin Resources had his Social Security number on file but never tried to contact him.
Miele claims Johnson referred the matter to (nonparty) Eugene Walter Mulvihill, who "had been convicted of numerous crimes, including forgery and had been barred from the securities industry," according to the lawsuit.
Johnson asked Mulvihill to contact Miele to deliver the outstanding shares and dividends, according to the lawsuit, but instead, an application for a replacement share certificate was submitted to redirect them to FN Wolf, the successor of Mayflower Securities, which was formerly owned by Mulvihill.
Mayflower Securities underwrote Franklin Resources initial public offering in 1971, according to Miele.
He claims his shares in Franklin Resources were canceled on Jan. 16, 1992, and replaced. Miele said his name no longer appeared on Franklin Resources' shareholder list, and the dividends address was changed to the address for FN Wolf in New York City.
FN Wolf went out of business in 1994, according to Miele.
He says he did not know of the shares or dividends until 2012, when Johnson saw a photo of his sister in the book "A Life in Full Sail" and sent her a copy of a Bank of New York ledger listing the shares and afterward the phone number for Mulvihill.
Miele says he learned that another man, (nonparty) John Steinbach, had signed Miele's signature to a document for Mulvihill. When speaking with Mulvihill about it, Miele says, Mulvihill warned him that if Miele investigated the matter, Mulvihill would "'hire a Russian hit man to kill [Miele III] and your family.'" (Brackets in complaint.)
Mulvihill died 10 days later, Miele says. He says he didn't receive documents detailing the shares and dividends previously held by the Bank of New York until March 2014.
He wants Franklin Resources to reissue 2,531,250 shares or pay him the value of those shares, plus $19,823,250 in dividends, with interest, and damages for fraudulent concealment, breach of fiduciary duty, wrongful registration of a security and negligence.
He is represented by David M. Marek with Liddle & Robinson, of New York City.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.