Mike Sweeney, a five-time major league baseball all-star, recently filed a suit against his former advisor accusing him of making risky investments without his knowledge and consent. Before Sweeney signed a big contract with the Kansas City Royals in 2002, he was making close to the major league minimum and had told his advisor to invest conservatively, with 73% of assets in muni bonds and other money in large cap stocks when the advisor took over. Over the next five years, Sweeney lost $4.9 million of the $7.6 million invested in private equity investments that Sweeney claims the advisor said was safe; the advisor invested the other $2.7 million in two investments without Sweeney’s knowledge.
So why is NAPA Net writing about this individual investor suit? Because EBSA’s Phyllis Borzi used the Sweeney case as an example of why investors should be careful when selecting an advisor — which is interesting in light of her department’s proposal to redefine what it means to be a fiduciary. On her blog, Borzi opines:
At the Labor Department’s Employee Benefits Security Administration, we believe America’s workers should be able to rely on the experts they hire for investment advice, and never discover that they’ve been misled or that their trust has been misplaced. The official term for this is “breach of fiduciary duty,” but most people simply recognize it as a raw deal.
