Judge Tosses Investor’s Claims on $136M Loss

SAN FRANCISCO (CN) – The son of an early investor cannot proceed on claims against Franklin Resources and its former CEO, billionaire Charles B. Johnson, over losing $136 million in shares and dividends, a federal judge ruled.

Anthony P. Miele III sued Johnson and Franklin Resources in the Northern District of California in January 2015, demanding that he be reissued 2.5 million shares that he claimed were “lost or stolen” and $19 million in dividends. He also sought to recover damages for fraudulent concealment and five other counts.

Franklin, which operates the San Mateo, California-based Franklin and Templeton mutual funds, manages $900 billion in assets for clients in 150 countries and earned $8.5 billion in revenue in 2014.

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.

Johnson served as the company’s president, CEO and chairman of the board until 2013. This year, Forbes  estimated his net worth at $5.6 billion.

Miele claimed that he and his father, via a joint trust, owned 4,000 shares of Franklin Resources that were valued at about $100,000 in 1973, and that company records show they retained ownership until 1991.

Those shares paid dividends and were split over time, according to Miele, and the trust had $186,496.88 in uncashed dividend checks and 140,625 shares in Franklin Resources in 1991.

Since then, Miele said that more stock splits resulted in the trust owning more than 2.5 million shares in Franklin Resources. Dividends for shares issued after March 4, 1991, totaled more than $19.6 billion by the end of 2014, according to Miel, with the closing share price of $54 on Jan. 8, 2015, valuing the shares at more than $136 million.

The shares paid $2.5 million in dividends in 2014, but Miele claimed that “through a variety of acts,” including “breaches of fiduciary duty, forgery, theft, diversion and a cover up,” he was not paid $19.8 million in dividends, nor did he receive the shares he owns as the surviving trust member.

Miele’s father, Anthony P. Miele Jr., died in 1974.

Miele said officials at the Bank of New York contacted him in 1991 about the outstanding dividend checks and shares in the trust account. He added that the bank was about to revert 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 claimed that his shares in Franklin Resources were canceled on Jan. 16, 1992, and replaced. 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.

U.S. Magistrate Judge Laurel Beeler dismissed most of Miele’s claims against Franklin Resources and all claims against Johnson in August 2015.

“Mr. Miele III never alleges any factual support for his claim that Mr. Johnson or Franklin Resources knew that the shares had been transferred illegally (as opposed to legally),” Beeler wrote. “He also cites no authority showing that Mr. Johnson or Franklin Resources had a duty to disclose this information to him.”

Although she had initially allowed Miele’s claims that Franklin Resources had breached its fiduciary duty under Delaware law and violated Delaware securities laws, she dismissed those claims as well on Thursday.

“There is no genuine dispute of material fact that . . . Miele III had notice that his shares were wrongfully transferred (or otherwise missing) in 1992 but did not notify Franklin until more than twenty years later,” Beeler wrote. She recounted that family friend Gene Mulvihill paid the Mieles $3 million and sold an equivalent number of Franklin shares in 1991 and 1992.

Miele received an IRS notice regarding $41,250 in Franklin dividends that he did not receive during that span, Beeler added.

The then 20-year-old Miele, who operated an all-cash sports-gambling business from 1989-1991, was “kind of freaked out” by the 1992 tax notice and referred by his mother to Mulvihill, Beeler added, who steered him to an accountant.

Miele then paid $19,066 in taxes, interest and penalties, the 28-page ruling states.

In 2013, Miele and his siblings finally spoke with Johnson about the missing shares, according to Beeler, and Johnson told them to “get a lawyer and sue the Mulvihill estate.”

Miele sued Johnson and Franklin over a year and a half later.

“Miele III had inquiry notice that his shares were lost, destroyed, or stolen in 1992. Yet he did not speak with Mr. Johnson until 2013, and he did not sue until January 2015,” according to Beeler’s ruling. “Miele III thus waited over twenty years before notifying Franklin.”

Johnson formerly chaired the National Association of Securities Dealers. He is also the largest shareholder in the San Francisco Giants baseball team and recently donated $250 million to his alma mater, Yale University.

Exit mobile version