By Suzanne Barlyn
(Reuters) - A South Carolina jury on Monday awarded $8.1 million to a former adviser who sold his wealth management business to BB&T Corp and later alleged that the company mismanaged his retirement nest egg with a risky strategy, according to a person familiar with the matter.
The verdict, reached on Monday by a jury at the Court of Common Pleas for the Thirteenth Judicial Circuit in Greenville, South Carolina, included $3.1 million in actual damages and $5 million in punitive damages, the person said.
A spokeswoman for BB&T Corp and a lawyer for the plaintiff declined to comment.
The plaintiff, Francis Maybank, filed the case against BB&T Corp and two of its units in 2011. Maybank, of Charleston County, South Carolina, founded a trust and asset management company that BB&T acquired in 2001, according to the complaint.
BB&T bought Maybank's firm, which managed $700 million in client assets, with 246,000 shares of BB&T company stock, according to the complaint. Maybank hired BB&T's wealth management division in 2006, when nearing age 74, to advise him on investing his retirement portfolio.
The BB&T advisers were required to act in Mayfield's best interests because they were so-called "fiduciaries," but instead put the company's interests first by not recommending that Mayfield sell off the company shares and diversify his investments across multiple asset classes to minimize his market risks, according to the complaint.
BB&T recommended a complex investment strategy involving a type of derivative, a security whose value was linked to the performance of underlying BB&T stock, which BB&T advisers said would help him to reduce his concentration in the company's shares while raising cash which he could invest in a diversified portfolio, Maybank alleged.
They did not disclose to Maybank that the strategy would force him into an expensive cycle of rolling over one derivatives transactions into another, which locked him into paying more fees and incurring greater tax liabilities while depleting the amount available to him for investments, according to the complaint.
"They were really leveraging up investments and making it riskier, under the guise of diversifying and lowering the risk," said Craig McCann, an economist in Fairfax, Virginia, who testified on behalf of Maybank.
The firm and its advisers also violated their fiduciary duties by not explaining the speculative nature of the strategy or fees he would have to pay, which included a $1.3 million upfront charge, Maybank alleged.
(Reporting by Suzanne Barlyn; Editing by Chris Reese)