Whether a Florida investment firm took on Michael J. Park as an affiliate broker with full knowledge of his checkered past or not, it was “extraordinarily reckless,” say two investors who filed suit against 1st Discount Brokerage yesterday in Nashville’s federal court.
Brea and Bill Faeth of Brentwood claim that the West Palm Beach-based brokerage had ample opportunity to learn of Park’s numerous run-ins with other securities firms, clients and regulators during the decade before his investment business collapsed last month, leaving Nashville-area customers with losses that may reach $20 million.
In their lawsuit, the Faeths say they invested their newborn daughter’s $100,000 college savings fund with Park in 2006. Bill Faeth had gotten to know Park as a golfing buddy. Both Park and some of his clients had told Faeth that Park was generating returns of more than 25 percent through his investment strategies.
The Faeths claim that a check of Park’s record as a broker ought to have thrown up “red flags” for anyone in the securities business. Since 1998, regulators in both Ohio and Virginia had taken action against Park, and two major securities firms had fired him for misconduct.
“Park’s fraudulent activity was pervasive throughout his entire investment business,” the lawsuit asserts. “With even a minimal level of proper supervision, 1DB should have discovered very early on Park’s fraudulent activities, his commingling of clients’ assets with his own and those of PCMG, his misappropriation of clients’ assets for his own use and benefit, and the creation of fictitious trade sheets and account statements for his clients.”
The Faeths seek both compensatory and punitive damages. Bob Patterson and Chris Thorsen of Boult, Cummings, Conners & Berry brought the case on their behalf.
Representatives of 1st Discount Brokerage could not be reached Tuesday.