Wells Fargo Father-Son Team Accused of Concealing Assets in Divorce
A lawsuit against Wells Fargo Advisors alleges two of its brokers—a father and son based in Irvine, California—used their position as financial advisors overseeing the family’s assets to conceal funds from the son’s ex-wife during their divorce.
Wells Fargo Advisors and its independent Financial Network broker-dealer failed to stop the wrongful transfers despite a court-ordered freeze and also did not ensure that Marisa received a clear accounting of holdings in the accounts, according to the complaint.
“Due to the secretive nature of the Wells Fargo Entities and the incredible zeal and sophistication elicited by Derek and his father spiriting away her money, Marisa does not know, and cannot know, the full extent of her losses prior to discovery,” the lawsuit, which did not specify the size of the accounts, states.
A spokeswoman for Wells Fargo, which is scheduled by the end of April to respond to the ex-wife’s complaint, declined to comment.
John Draper, who is named as a defendant, along with his son Derek, and the Wells entities said in an interview that the allegations are “without merit” and “a fabrication.” The elder Draper, who has 43 years in the industry, according to his BrokerCheck record, said he will likely file a counterclaim.
“It’s a really crazy situation,” John Draper said. “Nobody likes to be involved in something like this, particularly when grandchildren are involved.”
Derek Draper, who like his father has been registered with Wells Fargo Advisors Financial Network, the bank’s independent channel, since 2018 and previously worked for Wells Fargo Advisors private client group, did not return a call for comment.
(John Draper has another son, John, Jr., who is a complex manager for Wells Fargo Advisors’ private client group in Newport Beach, but was not involved in or named in the lawsuit.)
The lawsuit represents a cautionary, but not entirely unusual tale for advisors and their employers when brokers confront their own divorce cases, according to David Meyer, founder of the Columbus, Ohio-based law firm Meyer Wilson, who regularly represents investors. He has no client role in this legal fight.
“Unfortunately, I’ve seen quite a bit of these cases over the years where one spouse takes advantage of the other spouse by using his position as the broker of record on the family’s accounts and then takes inappropriate action in those accounts,” Meyer added.
Brokerages should mandate that the couple’s accounts are transferred to a third, unrelated party during a divorce, and some firms have already put those requirements in place, Meyer said. He doesn’t know of any brokerage that has such a written policy but he regards it as a best practice, Meyer said.
A Wells spokeswoman did not provide a comment on its policies about the accounts of advisors engaged in divorce proceedings. Meyer predicted that Wells will likely respond by seeking to compel Marisa Draper to arbitration where hearings are private.
Andrew Stoltmann, a Chicago plaintiffs’ lawyer, said that it is too soon to tell whether the ex-wife has a strong case but that it could raise compliance issues for Wells if the allegations are true.
“It raises extremely serious issues for the advisers, the brokerage firms and all other broker-dealers out there,” said Stoltmann, who also is not involved in the case. “The temptation to cheat relatives is unfortunately extraordinarily high.”
In her lawsuit, Marisa alleges that as she and Derek, who are parents of five children, finalized their divorce in 2016, Derek “quickly began to drain family accounts in his name, including shared retirement accounts, ostensibly in order to pay community debts and expenses.”
That same year, a state family court ordered a freeze on all marital assets, including a 401k account, custodied by Wells Fargo, but Wells Fargo did not abide by that freeze and allowed Derek to continue to transfer funds, according to Marisa’s complaint.
Marisa’s attorneys also sent subpoenas to various Wells Fargo entities seeking records of accounts holding the couple’s marital assets, but they did not provide sufficient information for her to even begin to understand what was happening to her assets until 2019, the lawsuit alleges.
In the meantime, Derek paid off “loans” extended by his father with assets from the jointly held accounts–all part of “yet another scheme for Derek to avoid paying to support his ex-wife and children,” the lawsuit alleges.
The father and son used their 2018 shift from Wells Fargo’s employee channel to FiNet to further their scheme because they had more control over running their own practice, according to the lawsuit.
“Operating his own business within the Wells Fargo umbrella provided Derek more flexibility to mask his true income and assets,” the lawsuit states.
Marisa Draper, whose attorney did not return a request for comment for this story, filed her lawsuit initially on Feb. 15. But Wells Fargo was not served with the complaint until late March.