X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Financial planner Linda Ryan lost her job, her income and her reputation after a retired Boca Raton, Fla., dermatologist and his wife accused her of coaxing them to invest $100,000 in a Ponzi scheme. But Ryan was vindicated earlier this month when a Palm Beach Circuit Court jury returned a $750,000 verdict against Dr. Edwin Ruskin and his wife, Clarice, in her lawsuit against the couple. The jury concluded that the Ruskins maliciously made false claims against Ryan, and that they were liable for punitive damages. The couple promptly settled the punitive damages part of the suit for $150,000, bringing their total payout to $900,000. The Ruskins’ former lawyer and co-defendant, Charles Franken, paid an $80,600 settlement in the case last year. Ryan can’t savor the triumphs, however. She died in November 1998 at 58, 13 months after filing the suit. Her husband, Charles Ryan, had continued the suit on behalf of her estate. The case is a twist on the common scenario of disgruntled investors accusing their financial advisers of leading them to financial ruin. That’s how this case started out, with the Ruskins filing a securities complaint against Ryan in 1993 alleging breach of contract and breach of fiduciary duty. But in return, Ryan sued the wealthy couple and their lawyer, contending that they used a securities complaint to pressure her into offering perjured testimony about their true target, her former employer, Prudential Securities Inc., so they could go after that deep-pocketed firm in court. John Quaranta, the attorney for Ryan’s husband and a partner at Tew Cardenas Rebak Kellogg Lehman DeMaria Tague Raymond & Levine in Miami, says Ryan stubbornly refused to cave to the pressure and lie. “This is called payback,” he said. Franken saw it differently. “I’m flabbergasted with such a result,” said the Plantation solo practitioner of this month’s verdict against his former clients. “I maintain that my clients and I did nothing wrong.” The dispute began in the early 1990s with a massive fraud that bilked at least 300 investors in limited partnerships in Boca Raton-based Omni Capital Group Ltd. The Securities and Exchange Commission shut down Omni in April 1992. Its president and founder, Thomas Mullens, pleaded guilty to 48 counts of mail fraud and wire fraud and was sentenced to 33 years in prison and ordered to repay $27 million. Mullens had promised investors big returns for investing in limited partnerships in Omni, which he claimed would buy distressed businesses cheap, turn them around, then sell them for large profits. The Ruskins said in their complaint to the National Association of Securities Dealers that they were persuaded to invest in Omni by Robert Sterling, a Prudential Securities Inc. account representative in Boca Raton who was their financial adviser. Linda Ryan, also a Prudential employee, worked with Sterling on the Ruskins’ account, and they blamed her, too. A mother of six, Ryan had been a financial adviser for more than a decade and was never the subject of any client complaints prior to the Ruskins, says Barton Sacher, a partner at Sacher Zelman Van Sant Paul Beiley Hartman & Waldman in Miami who formerly represented Ryan. Sacher is a former chief of investigations and enforcement for the SEC in Atlanta. After the Omni fraud was exposed, Edwin Ruskin retained Charles Franken to try and recoup his losses. The Ruskins and Franken contacted other defrauded investors and urged them to sue Prudential and Ryan, Sacher says. This was at a time when Prudential was under fire nationwide for selling money-losing limited partnerships to customers. In the 1990s, Prudential Securities paid $1.5 billion in fines and restitution stemming from its fraudulent sale of $8 billion in limited partnerships to as many as 400,000 investors in deals dating back to 1980. More than a dozen investors filed complaints against Ryan, either in lawsuits or with the National Association of Securities Dealers. All but one complaint was quickly withdrawn after Sacher spoke to the investors’ attorneys. Only the Ruskins went forward with a complaint. They filed a claim with the NASD in April 1993 against Ryan and Prudential. They alleged that Ryan, along with Sterling, had recommended that they invest in Omni while she was a Prudential employee. If the Ruskins could have proved that Sterling and Ruskin had advised them on Omni while they were employed by Prudential, the couple potentially could have recovered their loss from Prudential itself. The Ruskins needed both Sterling and Ryan to swear that they offered their advice in their capacity as Prudential employees. The Ruskins’ problem was that the truth was more complicated. While it was not disputed that Sterling had recommended the first $50,000 investment while he was employed at Prudential, the Omni partnership agreement wasn’t signed until after Sterling quit Prudential and formed his own financial services company, according to court records. Ryan continued to work at Prudential. And the Ruskins’ second $50,000 investment in Omni was neither discussed nor consummated with Sterling until he had set up his own shop. So, to put Prudential on the hook for their entire $100,000 loss on Omni, the Ruskins needed Ryan to say that she, as a Prudential employee, had advised them on the second $50,000 investment, said Ryan’s lawyers. Sterling provided the Ruskins and Franken with an affidavit implicating Prudential, and he was not named in their NASD complaint. Ryan also was one of many defendants in a class-action lawsuit filed over the Omni fraud. She settled for $1,500. The SEC also sued Ryan, but that suit died with her. Due to the allegations against Ryan, Prudential asked her to resign. She did so in May 1992, a month after the Omni fraud was exposed. She was earning about $200,000 at the time, Quaranta says. Between losing her job and periodic ill health, her income plummeted. Sacher eventually represented her without pay, racking up $330,000 in fees and costs. He says he stuck with her because he was outraged over the Ruskins’ complaint against her. What particularly angered Sacher, is that between 1993 and 1995, Franken tried five times to get Ryan to sign “false and perjurious affidavits,” according to her subsequent lawsuit against the Ruskins and Franken. If she signed the affidavits, Ryan was told, she, like Sterling, would be dismissed as a defendant in their claim against Prudential. Ryan refused. “She was a strong individual who was not going to compromise her beliefs and principles,” Sacher said. Quaranta said the Ruskins and Franken “punished her by going forward with the complaint. She was devastated.” In a 1999 affidavit, Sacher described a 1993 encounter with the Ruskins which confirmed his view that the Ruskins knew they were asking Ryan to lie. “I looked Dr. Ruskin in the eye and told him emphatically that he knew Ms. Ryan had nothing to do with his investment in Omni” and that lies by him and his wife had cost Ryan her job and her income, Sacher testified. “Tears then came to his eyes; he lowered his gaze to the floor, and refused to respond or even look at me. Mrs. Ruskin then pulled him out of the conference room.” Sacher also warned Franken that if he persisted in going after Ryan, she would sue for malicious prosecution and that they would have to pay her more than the losses they had suffered from the Omni investment. Franken and his clients forged ahead anyway. Franken defends the strategy, noting that the SEC, former clients of Ryan, and Sterling also made accusations about her role in the Omni investment. “Under the same set of facts, I would do the same thing again,” Franken said. For six days in the fall of 1995, Franken and the Ruskins presented their case against Ryan and Prudential before a three-member NASD arbitration panel in Fort Lauderdale. Sacher represented Ryan at the hearing. Sterling testified at the hearing that he, not Ryan, recommended that the Ruskins invest in Omni. The panel dismissed the complaint without even hearing any of Ryan’s witnesses. Sacher says the Ruskins may well have recovered their initial $50,000 investment at the NASD arbitration if they had made a claim only against Sterling and Prudential, but they reached for the whole $100,000. “They got greedy,” he says. But Franken still insists that Ryan was involved in advising the Ruskins on the second $50,000 investment. In October 1997, Ryan sued the Ruskins and Franken in Palm Beach Circuit Court, saying they knew she had nothing to do with the Ruskins’ investment in Omni, but maliciously prosecuted her anyway. Thirteen months later, Ryan died unexpectedly from a long-standing intestinal disorder. Her husband, Charles, as executor of her estate, succeeded her as plaintiff. In April of last year, Franken was dismissed as a defendant after his insurer agreed to pay Charles Ryan $80,600. The settlement came after Judge Jorge LaBarga denied Franken’s motion for summary judgment. Franken says he settled rather than risk paying more in a jury award. “I didn’t think I owed her a penny,” he said. Ryan’s case against the Ruskins then proceeded to trial earlier this month, with the couple defended by Peter A. Sachs, a partner at Jones Foster Johnson & Stubbs in West Palm Beach. On April 1, the jury took less than two hours to find that both of the Ruskins had “maliciously and without probable cause” filed the petition for arbitration against Linda Ryan. The jury also concluded that the conduct of each of the Ruskins showed “an entire lack of care” as to have been “consciously indifferent to the consequences” of their actions. Charles Ryan wept as the verdict was read. Part of the $900,000 payout will go to pay Sacher. But Ryan’s former attorney says he’s happy with the trial outcome for another reason as well. “The legal system is perverted when people use it to extort money,” Sacher says. “I thought it was important for the system to work and right this wrong. And it did.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.