A Reisterstown surgeon, his wife and daughter filed a lawsuit yesterday against Allfirst Brokerage Corp. and Allfirst Bank alleging that two brokers with the firm guaranteed that stocks would appreciate in value, "coerced" them into signing financial documents and churned their account.
The lawsuit, filed in Baltimore Circuit Court by Dr. Siva Rama Prasad Sompalli, his wife, Nirmala, and daughter, Naveena, seeks $20 million in compensatory and punitive damages.
Joanne L. Suder, the attorney representing the Sompallis, said the family lost more than $1 million. "It was all of their everything," she said. "It is complete financial devastation."
Philip Hosmer, a spokesman for Allfirst Financial Inc., the parent of Allfirst Bank and Allfirst Brokerage, said yesterday that the company had not been served with a complaint.
"We have no idea what it's about," Hosmer said. "We cannot provide any further comment on it at this time."
The Sompallis claim that they were customers of Allfirst Bank, which previously was called First National Bank of Maryland. In November 1996, broker Christopher King, who is named as a defendant in the lawsuit, approached them about establishing a "safe stock portfolio," according to the lawsuit, which was filed yesterday afternoon.
The lawsuit alleges that King and Mike Cohee, another Allfirst broker named as a defendant, "coerced" the Sompallis into signing incomplete account documents. In one instance, the brokers opened an "option account," and indicated that the Sompallis were seeking "capital appreciation and speculation" even though their knowledge of investing was limited, the plaintiffs allege.
Cohee said last night that he could not comment on the suit. King could not be reached.
The brokers also allegedly "falsified" a margin account application, bumping up the Sompallis' liquid asset figure of $100,000 to $1 million. This allowed the brokers to make more trades in the account, the lawsuit states.
The Sompallis allege that King and Cohee "blatantly churned" one Sompalli account, executing 1,284 trades in 1997 that resulted in $377,200 in losses.
Churning is making multiple and continuous trades to increase brokers' commissions.
"The defendants did not have the authorization from the plaintiffs to trade in the frequency and reckless manner that the defendants exercised," the lawsuit says.