Investors File Claim Against Brokerage Principal for $4.1 Million in Losses
Last week, 16 investors filed a lawsuit against Stephen D. Pizzuti and Merrimac Corporate Securities, Inc. that alleged gross negligence on the part of Pizzuti and Merrimac in relation to a $4.1 million investment scheme allegedly perpetrated by Pizzuti's brother and other brokers ("Investors say brokerage's principal liable for investment-scheme losses," Orlando Sentinel, April 12, 2011).
The complaint further claimed that Stephen Pizzuti and Merrimac were responsible for "providing an open platform for rogue brokers to perpetrate one of the most brazen and egregious investment scams in Central Florida history." For a period of five years, the complaint alleged, "Merrimac brokers sold millions of dollars of unregistered securities and unsuitable investments to elderly and unsophisticated investors, most of whom live in Central Florida" and "used the Merrimac name and offices to portray these side businesses as legitimate investment opportunities that were endorsed by Merrimac."
As reported in the article, many of the scheme's victims were elderly investors, such as 73-year-old Janet Forsythe, who were promised safe investments with solid returns if they would roll their retirement savings accounts into accounts managed by Merrimac brokers. Once the transfer was complete, the brokers invested the funds into risky real estate ventures. Many of the investors, including Ms. Forsythe, said they lost their entire life savings in the scheme.
Richard Pizzuti, Stephen's brother, was accused of misusing investor funds and expelled from the brokerage industry in 2009 after he refused to cooperate with authorities. He later filed for bankruptcy. At filing, he owed $7.5 million to investors and creditors, according to the article.
While Stephen Pizzuti has explicitly denied allegations that he was responsible for his brother's actions, investors feel otherwise. Investors in the suit are seeking both compensatory and punitive damages.