The brokerage and insurance units of Compass Bank were ordered to cough up money to compensate an elderly couple for duping them into buying one too many annuities.
Norma Jean Kresta, a financial advisor with BBVA Compass Investment Solutions in San Antonio, Texas, convinced John Wilkinson, a retired medical doctor, and his wife, Regina Wilkinson, to liquidate 108,195 shares of their inherited shares of Flower Foods Inc., and reinvest the money into two annuities they should not have purchased, according to an award posted on FINRA's arbitration database last month.
The ailing couple both had dementia and were in their 80s.
Kresta "took it upon herself to convert their sizable financial portfolio into annuities," William H. Oliver, the attorney for the guardian of the elderly couple, charged in a petition filed in the 73rd judicial district court in Bexar County, Texas.
The couple's shares in Flower Foods were Regina Wilkinson's legacy in Richter's Bakery, which her family started in downtown San Antonio in 1882. The bakery was ultimately sold to Flower Foods.
Their shares in the company were "legacy securities that had been in Regina Wilkinson's family for over a century and were intended by her to be held and passed along to future generations of her family to pass on this unique and valuable legacy," Oliver wrote in the petition.
The stock was sold for sold for $2,632,859. When family members and the accountant found out about the sale and the possibility that Regina Wilkinson's capital gains tax bill would exceed $500,000, they immediately looked to find ways to reverse the transaction. The family repurchased the stock for $2,675,306, incurring a loss of $42,446, according to the petition. They bought back the stock in the hope that the IRS would treat the transaction as a wash sale and avoid capital gains taxation.
In addition, Kresta manipulated and coerced the couple into other inappropriate financial transactions, "inducing the Wilkinsons to funnel all of their liquidity into annuity investments, the income of which the Wilkinsons would not likely see in their lifetime," Oliver charged.
Kresta, who had only an insurance license, was not able to sell investment products other than annuities, according to the petition.
The guardian of the estate of Regina Wilkinson and the executor of the estate of John Wilkinson brought the action against BBVA Compass Investment Solutions, BBVA Compass Insurance Agency, Compass Bank and Kresta.
The FINRA hearing panel ordered BBVA Compass Investment Solutions and BBVA Compass Insurance Agency to pay the elderly couple $42,446 in compensatory damages, plus 6% interest annually from Aug. 12, 2009 until the award is paid in full. In addition, they were ordered to pay $75,000 in attorneys' fees, $19,200 in hearing fees, and $5,500 in costs.
Ralph Evans, a spokesperson for Kresta, BBVA Compass Investment Solutions, Compass Bank and BBVA Compass Insurance Agency, declined to comment, as did their attorney, Sarah Santos of The Davis Group in San Antonio.
Oliver was also unable to comment because his clients denied him permission to speak to reporters.
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