Brooks, et al. v. Wachovia Bank, N.A., et al.

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COMPLAINT

Plaintiff, through his counsel, hereby alleges the following upon personal knowledge as to his own acts and upon information and belief based, among other things, upon the investigation made by plaintiff by and through such counsel as to the acts of the defendants as described herein. The majority of evidence in support of plaintiff's claims is in defendants' exclusive possession, custody, or control. Plaintiff's claims are likely to have additional evidentiary support after a reasonable opportunity for discovery.

BACKGROUND FACTS

1. This Class Action is brought by plaintiff Ralph Brooks on his own behalf and on behalf of all those similarly situated (i.e. beneficiaries of Wachovia fiduciary accounts including trusts, estates, employee benefit plans, etc.) against the defendants arising out of, inter alia, breaches of fiduciary duty and contractual duties owed to them by defendants. The defendants are: Wachovia Bank, N.A., its parent, Wachovia Corporation (collectively, with their respective corporate predecessors, the "Bank" or "Wachovia"), Evergreen Investment Services, Inc. and Evergreen Investment Management Company, LLC (collectively "Evergreen"), Evergreen Funds and Michael S. Scofield, who has been, at relevant times since 1984, Chairman of the Board and of the Executive, Board Pricing and Litigation Oversight Committees of the Board of Trustees of Evergreen Funds, a Massachusetts business trust (the "Business Trust") that, on behalf of Wachovia, directly and indirectly operates the Evergreen Funds, a so-called family of mutual funds offered for sale by the Bank and its subsidiaries. Plaintiff seeks damages from all defendants in connection with the investments of the assets of his own Wachovia fiduciary account and those of the members of the Class defined below in shares of Evergreen Funds for the reasons set forth below. Plaintiff also seeks damages from defendant the Bank for fees charged to his and all other Wachovia fiduciary accounts for computerized "sweeping" of such accounts of idle cash ("sweep fees") as well as injunctive relief to, inter alia, deter the defendants from continuing to commit the wrongful acts as more fully described below.
   
   
2. The actions of Wachovia as described in this Complaint have been consistent with the statements and advice provided by one legal commentator, Gregory B. Jordan, whose firm is also counsel to the Bank, in a June 1, 1996 article (the "Jordan Article"): "It has been increasingly important to go beyond mere fee income in the trust area-profitable fee income is now key."
   
   Jordan goes on to advise, most tellingly:
   
   "We must price our products and services profitably and not be concerned about charging fairly for the services we provide." [emphasis added]
   
   
3. In 1988, when plaintiff was six years old, he was shot and crippled for life. In the wake of such shooting, The Philadelphia Daily News and Power 99 radio station ("WUSL-FM") publicized plaintiff's plight and began to raise funds for his benefit. Ultimately, funds were raised and deposited with a corporate predecessor of the Bank, CoreStates Bank, N.A. ("CoreStates"). A trust account was established on December 12, 1990 at CoreStates entitled "Ralph Brooks Educational Fund," ("Brooks Trust") the stated purpose of which was " to provide for the education of Ralph Brooks, Jr.". The Brooks Trust was terminated on or about February 27, 2006.
   
   
4. From time to time following the establishment of the Brooks Trust, CoreStates and its corporate successors, including First Union Bank ("FUB") and defendant Wachovia Bank, N.A., made distributions from the Brooks Trust account, which had been invested in, among other investments, Common Trust Funds ("CTFs"), a form of fee and expense-free pooled investment vehicle, until the CoreStates and other CTFs were closed and converted into investments in FUB's proprietary mutual funds, the Evergreen Funds f/k/a the Evergreen Keystone Funds as well as through substantively identical transactions at Wachovia and its Acquired Banks as defined below (the "Conversions"). The CTFs were commonly used by banks as a form of in-house mutual fund managed, for investment purposes, by the banks' personnel. With respect to CoreStates' CTFs, it made no independent charges for the investment-related expenses of the CTFs, which were subsumed by the fees that CoreStates and its successors charged to the Brooks Trust and other fiduciary accounts similarly situated.
   
   
5. Upon the occurrence of the Conversions, which were carried out in order to, among other reasons, support FUB's family of proprietary mutual funds, the Evergreen Funds , the investment-related expenses of the Brooks Trust account and all other similarly affected fiduciary accounts at FUB increased significantly, even after so-called credits to minimize some of the negative effects of FUB's "double dipping," i.e., charging fees for serving as a corporate fiduciary (which included all investment-related services) and the separate fees and other benefits Wachovia received and receives indirectly through Evergreen and the Evergreen Funds.
   
   
6. The Evergreen Funds are referred to as the Bank's "proprietary" mutual funds because, among other reasons, the Bank sponsors and controls the funds through the Business Trust, which is nominally independent of the Bank but, in fact, is not; the funds are "advised" by Evergreen subsidiaries of Wachovia; other subsidiaries of the Bank and/or Wachovia provide other "services" to the funds for which they are paid by the Evergreen Funds. Indeed, in 2001, in setting forth its corporate history, Wachovia referred to the completion of the merger between Wachovia and the "Evergreen Fund's [sic] umbrella company, First Union Corporation," the corporate parent of FUB."to create the new Wachovia Corporation, of which Evergreen remains a subsidiary."
   
   
7. The Business Trust is nominally under the control of a Board of Trustees which includes and has included defendant Michael S. Scofield. A majority of the Board is nominally "dis-interested; " in fact, all owe their positions and the substantial benefits that come with them to Wachovia and always act in Wachovia's best interests, rather than in the interests of the shareholders of the Evergreen Funds and those who had or have beneficial interests in them, such as plaintiff and the members of the Class herein. At all relevant times, defendant Scofield and the other Trustees of the Business Trust, in selecting the advisors and other contractors which provided services to the Evergreen Funds selected Evergreen and other subsidiaries of Wachovia on a no-bid basis, with the exception of Sub-Advisors to certain of the Evergreen Funds, which added to the total expenses borne by plaintiff and the members of the Class. Although they nominally went through the motions of a negotiation process with respect to the advisory and other services provided to the Evergreen Funds, at no time did defendant Scofield, his fellow Trustees or the Business Trust itself, despite their fiduciary duties to act in the best interests of plaintiff and the members of the Class, fulfill such duties. In virtually all instances known to plaintiff, they acted in Wachovia's primary interests and aided and abetted the Bank's own breaches of fiduciary duties as described herein.

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