On January 12, 2010, Bressler, Amery & Ross, PC successfully obtained dismissal of a Ponzi scheme action filed against Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch") in the United States District Court for the District of New Jersey. In Ralph Tedeschi, et al. v. Maxwell Baldwin Smith, et al., plaintiffs alleged that Maxwell Smith induced them to invest $360,000 over a 6 month period into a limited partnership that turned out to be a non-existent investment. Mr. Smith was not an associated person, registered representative of, or otherwise employed by Merrill Lynch, and the plaintiffs were not customers of Merrill Lynch. Mr. Smith was a registered representative for another brokerage firm during this period where the plaintiffs were his customers. Plaintiffs allege that Mr. Smith instructed them to make their checks for investment in the limited partnership payable to Merrill Lynch. Mr. Smith deposited these checks in his personal account with Merrill Lynch and thereafter converted those funds. Plaintiffs sought to hold Merrill Lynch liable for the amounts they invested in the limited partnership, alleging that Merrill Lynch violated the federal and New Jersey Racketeering Influenced and Corrupt Organizations Acts ("RICO") and failed to adequately supervise and monitor Mr. Smith’s account. In obtaining dismissal of plaintiffs’ complaint, Merrill Lynch successfully argued that because the plaintiffs were not customers of Merrill Lynch, it did not owe them any duty to supervise and monitor Mr. Smith’s account and that as a result the plaintiffs could not state a claim against Merrill Lynch for negligent supervision and monitoring of that account. Merrill Lynch also successfully argued that the plaintiffs had failed to satisfy the requirements for stating claims against Merrill Lynch for violation of the federal and New Jersey RICO statutes.
The Tedeschi action was the fifth of a series of Ponzi scheme actions that were filed against Merrill Lynch arising out of the actions of Mr. Smith. The other four actions were filed in New Jersey Superior Court under the caption Leonard Frederick, et al. v. Maxwell Baldwin Smith, et al. The plaintiffs in the Frederick action similarly alleged that Mr. Smith induced them to invest $8,000,000 over a 16 year period into the same limited partnership and that he deposited their checks for investment in the limited partnership into his Merrill Lynch account and thereafter converted those funds. On October 23, 2009, Bressler, Amery & Ross, PC successfully obtained dismissal of those four consolidated actions on behalf of Merrill Lynch.