LOS ANGELES (CN) - Retired Kansas City Royals slugger Mike Sweeney claims UBS Financial Services lost $4.9 million of the $6.85 million he asked it to invest conservatively.
Sweeney, now 39 and living in San Diego, accuses UBS Financial Services and its agent Ralph A. Jackson III of fraud, negligent representation, breach of fiduciary duty and unfair business practices, in Superior court.
The Royals drafted Sweeney as a catcher out of an Ontario, Calif. high school in 1991. He made the Major Leagues in 1995 and by 1998 was earning $200,000 per year, which is when he hired Jackson to manage his money, he says in the complaint.
Sweeney claims Jackson moved from Smith Barney to UBS in 2002, and persuaded Sweeney to move with him. That year Sweeney played the best baseball of his career, batting .340 - second-best in the American League - and making his third appearance in the All-Star Game.
Sweeney says he was an unsophisticated investor, with only a high school education. He says he ordered Jackson and UBS to invest conservatively and trusted them to do so.
"Plaintiff's account consisted mainly of municipal bonds consistent with plaintiff's objective of making safe and conservative investments. Plaintiff did not want moderate risk even though defendants placed the designation on some of the account documents. Plaintiff opened additional accounts at UBS," Sweeney says in the complaint.
"Plaintiff expressed to Jackson that he wanted his savings to be invested conservatively in order to preserve what he had accumulated. Because of his lack of experience and sophistication, plaintiff relied upon and trusted defendants completely to solicit and purchase investments and create investment strategies that were suitable for him. The defendants had discretion to trade plaintiff's accounts which elevates the fiduciary duty they owed plaintiff."
Beginning in 2002, Jackson approached him with a number of investment opportunities that he represented as safe, secure, risk-free and approved by UBS, Sweeney says in the complaint. He claims they were all private equity investments.
"Having fully entrusted his financial affairs in the hands of defendants, plaintiff agreed to participate in these investment opportunities," the complaint states.
"From 2002 to 2007, defendant Jackson offered and solicited plaintiff to invest in 11 different private equity investments: a. Gilburd Company; b. Qcorps/WhiteFence; c. Seniors Ventilation Management Program Inc; d. Global VR/Virtual Technologies Inc; e. Raw Dawg Beverage/Dawg House Holdings LLC; Kayne Anderson; g. Real Estate: City Properties aka CP Builders; h. Wellstar International Inc; i. Lupo International LLC; j. T3K Inc; and k. Sync Dek.
"Prior to 2003, plaintiff had maintained at least six accounts consisting of investment, checking and retirement accounts at UBS. Plaintiff's accounts were invested in mainly municipal bonds and large market cap equities. Seventy-two percent of plaintiff's funds were invested in conservative municipal bonds.
"By March 2006, plaintiff had invested approximately $6.85 million in the private equity investments solicited by defendants, accounting for nearly half of plaintiff's entire account market value with defendants. Plaintiff has been unable to recover and has lost approximately $4.9 million of the $6.85 million."
Sweeney claims that between 2002 and 2007 he held annual meetings with Jackson during spring training in Arizona or during the first month of the baseball season in Kansas City. He says Jackson typically made his pitches for the private equity investments during these meetings.
"In inducing the plaintiff's participation in these transactions defendant Jackson, in the course and scope of his employment with UBS, made misrepresentations of material fact and concealed material facts which he was under a duty to disclose," the complaint states. "Those misrepresentations and concealments include the following: a. The investments were safe and suitable for plaintiff's needs and objectives; b. The investments were low-risk and producing profits; c. The investments were in promising and reliable companies; d. Defendant Jackson had invested his own money into these private investments; and e. Defendant UBS had authorized or approved the offering of these private investments.
"The truth was that these private investments were very risky and highly dependent on the success of small and unproven start-up companies. The investments were not safe or suitable for plaintiff's needs and objectives. Many of these private equity companies had no history of providing profits. Additionally, Jackson was making these offers and solicitations without the authorization or approval of defendant UBS. It is unknown at this time whether defendant Jackson invested any of his own money.
"Furthermore, during these meetings and telephone calls, defendants concealed important facts regarding: a. The risky nature of private equity investments; b. The financial statements or prospectuses of the companies; c. The nature of the relationship between UBS and Jackson in offering these private investments; d. The founder of City Properties was Craig Radden, a convicted felon for fraud; e. That defendants without plaintiff's knowledge or permission withdrew an additional $1.7 million from plaintiff's account and transferred it to City Properties; and f. That defendants without plaintiff's knowledge or permission withdrew $1 million from plaintiff's account and transferred it to E H Enterprises."
The only defendants in Sweeney's complaint are UBS and Jackson.
Sweeney claims they induced him to invest in the private equity schemes in exchange for thousands of dollars in referral fees and kickbacks.
"Plaintiff, who is unsophisticated and completely relied upon defendants for financial advice, reasonably relied on defendants' representations and omissions and invested his money in the private equity investments solicited by defendants. Had plaintiff known the truth about defendants' representations and concealments, plaintiff would not have invested any money in the private equity investments," Sweeney says in the complaint.
Sweeney claims he discovered the truth "within three years prior to the filing of this complaint," although he parted ways with Jackson and UBS in 2008.
He seeks at least $7.6 million in compensatory damages, disgorgement of fees and commissions paid to Jackson and UBS, plus "lost opportunity costs based upon a well-managed portfolio analysis" and punitive damages.
Sweeney had a career batting average of .297, with 909 runs batted in and 215 home runs. He was a five-time All Star. He also played for the Oakland A's, Seattle Mariners and Philadelphia Phillies. He signed a one-day contract with the Royals in 2011 so he could retire as a Royal.
He now works as a studio analyst for MLB Network.
He is represented by Marc Zussman of the Law Offices of Marc I. Zussman, as well as by Brian Panish of Panish, Shea and Boyle.
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