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Abuse victims sue stock firm

Men say they were defrauded of funds gained in settlement.

June 21, 2008|Victoria Kim | Times Staff Writer

They thought the years of painful legal battles were over.

Instead, three men who received a combined $11.5 million as part of last year's historic settlement of clergy sex abuse cases involving the Los Angeles Archdiocese find themselves preparing to go to court once again.

This time, Salvador Tenerelli and brothers Stephen and Michael Trerotola have filed a lawsuit alleging that they were defrauded by the financial brokers who invested their settlement money.

The suit names as defendants the Swiss financial services firm UBS and several individual brokers who worked for the firm.

Tenerelli and the Trerotola brothers, who are all in their 60s and all in poor health, thought they could comfortably spend the rest of their years living off the interest from the settlement, according to the suit.

But one of their brokers, Richard Frankel, poured their entire settlement into a complex financial product known as auction rate securities, which he said were "as good as cash," according to the suit.

That promise fell through when the market for those securities collapsed earlier this year along with the credit crunch, the suit contends.

Frankel, who now works for a different financial firm, said that at the time he recommended the product he had no idea the auction market would fail and leave the funds stranded.

"I did not know. Should I have known? Maybe I should have, maybe my company should have. But if you talk to enough brokers, none of them knew," Frankel said.

The three men's investments are now frozen, and it is unclear when or how much, if any, of the money they could get back, according to the lawsuit.

Tenerelli, a former engineer who is dying of cancer, recently had his left arm amputated at the shoulder and is struggling with medical bills as he goes through radiation therapy.

The Trerotola brothers, who are diabetics and have suffered strokes and heart attacks, are also having trouble supporting their 84-year-old mother, who had to move out of their Glendale apartment because they could no longer afford to pay the rent, according to attorney Joseph Cotchett.

All three are currently surviving off their disability checks, Cotchett said.

"After being horrifically victimized by trusted 'men of the cloth,' the three clergy-abuse plaintiffs and their lawyer were cheated by a billion-dollar financial institution and a trusted group of 'financial advisors,' " the suit alleges.

The three men are among thousands of people whose investments were locked in auction rate securities after an unprecedented market failure led to the freezing of those securities this February.

Class action suits have been filed against major Wall Street firms on behalf of those investors, and various state regulators and the Securities and Exchange Commission are looking into the collapse of the $380 billion market.

The lawsuit alleges that Frankel and his colleagues knew the failure was coming and made the investment choice for a higher commission. Frankel denied the allegation.

UBS spokeswoman Karina Byrne said that the firm would not comment on specific cases, and that the firm is working with all clients in similar situations on a case-by-case basis.

"UBS is committed to addressing our clients' concerns about the market events that caused the breakdown of liquidity for auction rate securities," Byrne said.

Tenerelli and the Trerotola brothers filed a lawsuit against the Archdiocese in 2003, alleging that church authorities knew they were being sexually molested from 1957 to 1962 by Father Celestine Quinlan, who had an "unquenchable thirst for minor-children-targets for his . . . sexual obsessions and cravings," according to that complaint.

Because of the severity of their cases, the three men received among the largest sums when the church paid out a record settlement of $660 million to 508 victims of abuse, Cotchett said.


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