Frederick
V. Martin, a veteran
money manager known for
his outgoing personality
and involvement in civic
endeavors, built a large
clientele among affluent
families in the region.
Then he defrauded
them, BB&T Asset
Management Inc. says in
a lawsuit that seeks
more than $13 million
from Martin, a former
portfolio manager at the
investment firm. The
suit alleges that Martin
diverted those funds
from client accounts to
a Virginia Beach candy
distributor where he was
the majority owner.
Martin, it said,
transferred the money to
Sweet City Inc. between
1998 and mid-2006 from
the accounts of 14
individuals and one
“entity.” However, the
candy company was never
profitable, and the
funds that moved to
Sweet City “were LAWSUIT
| BB&T says it paid
millions to settle
claims
a total loss,” BB&T said
in the suit, filed two
weeks ago in Norfolk
Circuit Court.
These clients
“trusted Martin
completely,” said BB&T,
which didn’t identify
them. Because of their
advanced age or lack of
financial
sophistication, the
clients weren’t likely
to scrutinize Martin’s
handling of their
accounts, the suit said.
Those whose assets
were transferred to
Sweet City were informed
of their losses last
year, BB&T said. All
hired attorneys and
threatened to sue. BB&T
said it settled these
clients’ claims and paid
them $13.63 million.
The suit against
Martin seeks to recover
what BB&T paid his
clients as well as
expenses.
On Friday, the
Norfolk resident
declined to comment on
the suit, referring
questions to his
attorney, Douglas Kahle
of Virginia Beach.
“There is very
little truth or
accuracy” in the
allegations, Kahle said.
“BB&T has thousands of
pages documenting each
and every dollar that
Fred invested on behalf
of his clients.” Kahle said Martin
will file a response to
BB&T’s complaint next
week.
Martin, 70, helped
start the Norfolk money
management firm Virginia
Investment Counselors
that became part of BB&T
Asset Management in
2002. He left in
September 2006.
Over the years,
Martin served on several
boards, including those
of Virginia Wesleyan
University, the WHRO
Foundation and the
Eastern Virginia Medical
School Foundation, where
he was involved in
investment decisions. He
also served as chairman
of the United Way of
South Hampton Roads
Foundation and has been
on the board of trustees
of Norfolk’s Employees
Retirement System. Martin is a past
president of the Norfolk
Forum, an organization
that brings prominent
public speakers to the
city.
It’s not clear from
the suit what attracted
Martin to Sweet City,
which distributed bulk
candy to college
bookstores and other
retailers before it
closed last year.
Over
the years, the Norfolk
office of BB&T Asset
Management developed a
reputation for
conservative investment
practices that relied on
using more conventional
assets, including
high-quality corporate
bonds and blue-chip
stocks.
However, Martin
occasionally invested
some of his clients’
funds in less-liquid
assets, including
apartment deals and
energy investments, Kahle said. “The huge majority
of these investments
paid off handsomely.
This one didn’t,” Kahle
said. In the 1990s,
Martin “believed it had
great potential” and
made his ownership stake
in Sweet City clear,
Kahle said. Martin’s
clients, he added, were
routinely informed of
the investments that
Martin made on their
behalf in Sweet City.
But BB&T contends
that Martin engaged in
several maneuvers to
conceal his diversion of
clients’ funds. “Days prior to one
client’s death and
learning that death was
imminent, Martin removed
all mention of Sweet
City from client asset
summaries to be
furnished to the
decedent’s attorney
executors,” the suit
said. Martin, it added,
never disclosed the
existence of this
substantial Sweet City
investment in the
client’s account.
When questioned by
one client about the
precipitous drop in an
account’s value, Martin
said the funds in
question had been loaned
to Sweet City “even
though no evidence of an
indebtedness or promise
to repay existed,” BB&T
said.
In its suit, the
banking company said it
was unaware of Martin’s
ties to Sweet City until
June 2006, when it
discovered
irregularities in the
way he handled client
funds in connection with
the candy company.
Martin, it said, was one
of two directors of
Sweet City and had
invested more than $1
million of his own money
in the company.
In the suit, BB&T
contended that it wasn’t
negligent and didn’t
participate in the
wrongdoing that it
alleges. “BB&T Asset
Management,” it said,
“never profited from the
Sweet City transfers.”
Martin characterized
his shift of clients’
funds as investments,
but these transfers were
never accompanied by a
prospectus, a private
placement memorandum or
other documentation
required for an
investment, BB&T said.
Sweet City, it said,
never transferred or
issued any stock, and
its ledger accounted for
the funds “as money from
Fred.”
Staff writer Phil Walzer
contributed to this
report.
Tom Shean, (757)
446-2379,
tom.shean@pilotonline.com
|
