Beneficiaries of Puerto Rico Trust File Securities Fraud Lawsuit Seeking Over $4.5M From UBS Financial Services

Plaintiffs in Puerto Rico who say they are the beneficiaries of a trust have filed a securities lawsuit against UBS Financial Services (UBS). The beneficiaries’ complaint asserts that UBS in Puerto Rico breached its duty to properly manage funds linked to UBS’s proprietary closed-end Puerto Rico bond funds.

The beneficiaries of Nellie Sánchez Carmona’s estate claim that the brokerage firm acted against their best interests when it opted to keep the trust invested in the proprietary funds-a move that earned UBS underwriting and management fees, along with commissions, and interest. The beneficiaries contend that UBS and its subsidiaries purposely prevented Sánchez Carmona from collecting benefits she was owed so that the firm could keep investing her money in the closed-end funds, which were issued by the firm, and continue to collect fees.

Also, according to the plaintiffs, for 10 years UBS prevented Sánchez Carmona from finding out that she was a beneficiary of the trust, which was set up by her husband Robert Hargen. Even though he passed away several years ago, UBS, in federal filings up to at least 2010, represented that Hargen was still alive and in possession of the trust.

During this time, plaintiffs say, UBS reinvested about $664,000 of what the trust made, placing the money in the closed-end funds and making a profit on the initial principal rather than paying out the earnings to take care of Sánchez Carmona’s medical bills, which the trust was supposed to cover. UBS also is accused of making it appear as if Hargen was a Puerto Rico resident even though he had been living in Florida since 2001. UBS allegedly did this to comply with regulations, which stipulate that investors of proprietary Puerto Rican closed-end bond have to be residents of the U.S. Commonwealth (or liquidate their holdings upon changing residencies). The plaintiffs want UBS to pay them about $3.5 million in damages and $1 million for lost income and fees.

In the last year and a half, hundreds of claimants have come forward filing claims against UBS over its Puerto Rico bond funds, which quickly lost value in August 2013 as the territory’s debt imploded after years of warnings to UBS and other market participants that the Commonwealth might not be able to meet its excessive debt obligations. Many of the investors on the island contend that the bond funds were recommended to them even though they were not suitable for their goals and came with risks beyond what their portfolios could handle.

UBS is already facing around $1 billion in Puerto Rico muni bond fraud claims from investors on the island and in the mainland.

UBS Puerto Rico Bond Fraud Attorneys
Our UBS Puerto Rico bond fraud lawyers have been working hard to help investors get their money back. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your initial case consultation with us is free.



Puerto Rico investors sue UBS for $4.5 million, InvestmentNews, December 31, 2014

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Puerto Rico’s Prepa Sees 219% Rise in Overdue Accounts With At Least $1.75 Billion Owed, Stockbroker Fraud Blog, November 18, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013