WEATHERCedar Fair CEO Kinzel sues Merrill Lynch, Bank of America
Oct 16
2010
Cedar Fair CEO Dick Kinzel and his wife, Judy Kinzel, have filed a $30 million federal lawsuit against Merrill Lynch and the brokerage company’s new owner, Bank of America, accusing the companies of ripping them off.
The Kinzels say the companies were failing financially and were desperate to raise cash in any possible way.
The lawsuit, filed in recent weeks in U.S. District Court Northern District, alleges Merrill Lynch in March 2009 sold 167,900 Cedar Fair units the Kinzels owned in their private account.
The sale disregarded explicit instructions the Kinzels gave not to sell the units.
The suit also names Lynch subsidiary BlackRock Inc. and several individuals.
The Kinzels are seeking $10 million in compensatory damages and $20 million in punitive damages, as well as an undetermined amount for attorney fees.
Brett Kinzel, the couple’s son, was a Merrill Lynch broker who handled his parents’ account at the firm.
He is suing for $120,000, alleging the company robbed him of a $20,000 brokerage fee.
Merrill Lynch said everything it did was authorized by its contract with the Kinzels.
“We believe the complaint is without merit and intend to vigorously defend ourselves,” spokesman Bill Halldin said. “Merrill Lynch acted completely within its legal rights and consistent with the terms of the contract.”
The lawsuit sheds new light on a curious incident in 2009, when Kinzel sold many Cedar Fair units and then had to explain publicly that he hadn’t lost confidence in his company’s future prospects.
The lawsuit alludes to the fact that the sale of the units made local and national news.
“The actions of the defendants caused the plaintiffs significant mental anguish and embarrassment,” the suit says. “The news media throughout the country reported the transaction as a margin call. This falsely suggested that the Kinzels could not pay for units which they had purchased.”
The lawsuit explains that on April 18, 2008, Richard Kinzel exercised a stock option to buy more than 650,000 units of Cedar Fair stock at a strike price of $6.03 per unit. At the time, a Cedar Fair unit was trading at $22.90, which means the 650,000 units had a market value of $14,885,000.
The Kinzels borrowed $8,874,601 from Merrill Lynch.
Over the next 10 months, the Kinzels paid back $4 million on the loan.
In March 2009, Merrill Lynch notified the Kinzels and, without any explanation, said it wanted to call on the loan.
The Kinzels paid off much of the remaining loan in about three weeks, leaving a balance of about $1.5 million.
Despite the fact that Merrill Lynch knew the loan would be paid off soon, the company dumped the units for only $6.50 apiece, a historical low price for a Cedar Fair unit sale, the lawsuit said.
The net effect: The company handed the Kinzels a $2.75 million loss on units that traded for $9.17 per unit 15 days later.
After the units were sold to BlackRock, a Merrill Lynch subsidiary, BlackRock sold them only weeks later at an enormous profit, the suit says.
Merrill Lynch fell apart at the end of 2008 and was purchased by Bank of America, a move that allowed it to avoid bankruptcy.
The lawsuit lists the various reasons for Merrill Lynch’s woes, including “relatively worthless” investments in mortgages and “accounting deception.”
The suit says that John Thain — Merrill Lynch’s then-CEO — and other Merrill Lynch executives received large bonuses despite “bankrupting the company.”
“No one told Brett Kinzel or Richard and Judith Kinzel that Merrill Lynch was desperate for cash and under pressure by Bank of America to raise as much capital as possible,” the lawsuit says.
Merrill Lynch sold the units without the Kinzels’ permission, even though the company knew the Kinzels could pay off the loan, the suit says.
“Merrill Lynch was fully aware of Richard and Judith Kinzel’s net worth which was well in excess of $16,000,000,” the suit says.
“It was also aware of the fact that Richard and Judith Kinzel had a multiple seven-figure income which was fully protected in the event Richard Kinzel left the company voluntarily or involuntarily by a contract which provided for payment in excess of $15,000,000 at the time of his departure,” the suit says. “Defendants were fully aware that the Kinzels had a top rated credit score and that they were ranked by the Merrill Lynch system as A+ credit risks.”
The lawsuit has been assigned to U.S. District Judge James G. Carr at the federal court in Toledo.
Carr is chief judge for the Northern District of the federal court system. Patrick Murray, an attorney in the Murray and Murray law firm of Sandusky, filed the lawsuit for the Kinzels.
Murray said the next step will be a response from the defendants.
Merrill Lynch, BlackRock Inc. and Bank of America — which took over Merrill Lynch after the brokerage firm’s collapse — are the companies named as defendants.
The individual defendants include John Thain, the former Merrill Lynch CEO; Kenneth Lewis, CEO of Bank of America until he, too, lost his job; Merrill Lynch employees Heidi Harms and Jonathon Sargent, and Douglas Rosen, a former Merrill Lynch employee now with Goldman Sachs.
Cedar Fair issued a statement declaring the matter a family issue for Kinzel.
“This is a personal, family matter and in no way has any bearing on — or relationship to — Cedar Fair,” spokeswoman Stacy Frole said in a statement. “As a result, the company will not have any further comment on this matter going forward.”
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09:25 PM
cheap nfl jerseys says
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11:03 AM
Cowboy says
So basically he should be suing his son, not Merrill!
09:56 AM
Team Q says
Smith W is correct. The following came off of Merrill's website. Enough said.
WHAT ELSE SHOULD YOU KNOW ABOUT MARGIN?
Consider the risks associated with margin
Margin is not appropriate for all investors. Borrowing on margin and using securities as collateral involve certain risks. When considering a margin loan, you should take into account your individual requirements, portfolio composition and risk tolerance, as well as capital gains taxes, portfolio performance expectations and investment time horizon.
The risks you should be aware of include:
You should read your account agreement carefully to be sure that you understand your risks and obligations.
07:52 AM
6079 Smith W says
02:51 AM
yayaye22 says
Moderators have removed this comment because it contained personal information. Discussion Guidelines12:31 AM
Mr. D says
As far as Kinzel's lawsuit....In so doing Kinzel has exposed another misuse of bailout money by the financial institutes...the unfathomable bonuses paid to Merril Lynch top dogs is another example of the failure to monitor the bank bailouts by BUSH. (yes BUSH...bailouts and bonuses for his buddies) This did occur in 2008.....READ the last section of the article....
I say..."GO KINZEL GO" expose em!!!!
12:07 AM
Mr. D says
How many of you own Cedar Fair Stock either directly of indirectly thru mutual funds, 401Ks or thru local investment advisors????
If you do, then you must like how Kinzel and the Cedar Fair officials are running the company??? Otherwise you wouldn't own the stock....you want to make money on your investment, and if Kinzel makes you money, then, you are overjoyed. But please don't play stupid, and deny knowledge of how and when the company "screws" employees over by cancelling or altering their season bonus's or termination or however they turn a profit...You condone this by owning stock...
If you are not a stockholder, and just don't like Cedar Point for whatever reason, please disregard this post....its not directed at you.....
10:33 AM
Sam says
This reminds me of an alligator being eaten by a shark, no professional courtesy. The public doesn't care when they eat own type.
08:44 AM
William Jeffers... says
If he can't manage his own financial affairs, why would you think he could manage Cedar Fair's?
07:55 AM
Raoul Duke says
Dick.
01:05 AM
DEEPsix says
Cedar Fair has actually contributed to the DECLINE OF THIS REGION... Just because there are a few associated business within the area, do you actually think CP wants you to spend your $$$$ any other place then at their park??? think again! The 80% they pay in city tax, actually is about 65% less than WHAT WOULD BE PAID IF THEIR WERE MORE CORPORATIONS WITHIN THE COUNTY... NO ONE WANTS TO LOACTE IN THIS AREA BECAUSE OF THE GOOD OL'BOY NETWORK AND CEDAR POINTS CONTROL OF THE LOCAL ECONOMIC SCENE... If the CP people don't want you in the area, you're history, and if you can't get the Blessings of their "FLUNKIES" in local government, forget about locating here! NO ONE WANTS TO LOCATE AT THE NASA STATION because "Pat & Bill" gang is trying to shake them down... One way or the other, its scam-land
12:15 AM
HarleyHDdeuce says
http://www.sanduskyregister.com/files/www2.sanduskyregister.com/file_attach/2010/October/Kinzel.Suit_.pdf
I have read the attached lawsuit accusations of the attached PDF associated with this artical.
Facts:
-I am not a lawyer
-I am drunk
-I am a retard
However, since I am not a laywer, am drunk, and could possibly be classified as a retard, the letter has the following charicteristics:
-Brett is at fault of his fathers inabilites to invest with care.
-Brett is not a suitable investment manager who was placed in the position, with the help of his fathers money.
-Also, I have noticed that the letter was written by a lawyer (crook) who does not know how to use spell check
11:01 PM
Cowboy says
Ha ha ha ha ha... this is way too funny. Dick trusted his son Brett to operate his account and he failed. Ha ha ha... sounds like karma to me.
09:38 PM
Julie R. says
Wow! The super rich Kinzel sure does have it good compared to the average citizen in Erie County. If the average citizen gets ripped off by attorneys and financial institutions these corrupt Erie County Courts actually PROHIBIT lawsuits from being filed.
08:11 PM
starryeyes83 says
Personally, I could care less if CP falls into Lake Erie, the park is just sucky now. And too expensive.
Oh well.
07:52 PM
old dog says
WELL, WHAT GOES AROUND, COMES AROUND, 10 TIMES FOLD.
06:24 PM
VENERABLE VETERAN says
WOW! This is less than what has been extracted from the City of Sandusky for expanded Sewer and water systems, Highway expansions, Overpasses, widening overpasses, replacing traffic controls, replacinfg water lines with larger ones for increased capacity for Cedar Point, and repaving the paths to Cedar Point while the town crumbles. At least somebody got some benefet from these greedy ??????
05:52 PM
brownbear says
I had to deal with Brett one season at Cedar Point, I personally wouldn't trust him to take care of my dog, let alone my money. Sorry about your luck, but you have given enough people the shaft for the love of money, this time it came back on you!!!!!!!!!!
05:51 PM
brownbear says
Moderators have removed this comment because it contained libelous or defamatory statements. Discussion Guidelines04:24 PM
kURT says
Said it before I'll say it again.....this is stinky stock.
Plus the attitude of those on charge. Bye bye.
03:42 PM
Louie says
Kinsel and this so called cedar fair/cedar point are all greedy morons and cedar fair /cedar point rips people off everyday as part of their so called admission to these worn out run down theme parks.I cant believe people have nothing better to do with their money but give it to these greedy losers to go to these run down amusement dumps and this includes cedar dump point this place is a 100% ripoff yet all you see are these thrill seeking young morons going here to get a so called thrill at ripoff prices.When will people grow up and get a life.
03:09 PM
Dude i Roc says
By the way, some of the business loans that are "called in" are in good standing both in credit payment and capital risk.
02:39 PM
Dude i Roc says
Hey everybody, slow down!!!! Remember that Kinzel IS a victim of greed just like smaller businesses in the area who deal with their hometown friendly BANK FINANCIERS! Everyone in the BIG business and FISCAL world wants the math to look good! So hey, "Let's call this loan" on a small to med business person near you! It happens right here where you eat, drink and breathe. Kinzel's world is absolutely on a very large scale but his "whistle blowing" could be loud enough to give someone's DREAM of Enterprise a chance. I go to sleep and awaken with ideas to create and sell my "wonderful ideas". I am just too chicken-sh#t to try to make a "go of it" and perhaps create a job and a great life for a co-worker/employee. Sad....
01:10 PM
Falling Down says
Does anyone think Dick Kinzel will actually care or read these posts, if he does it is for a laugh.
Anyone that can borrow millions and pay back $4 million in ten months does not care about you, me, his workers or anyone else; his only concern is keeping the company profitable at any expense so his assests look good.
His legal fees will be enough to payoff my house and buy a new car. Do I feel bad for him; not in the least, if he was wronged then he will be laughing all the way to retirement.
He is just another suit earning a pretty penny off the back of his full-time workers, seasonal employees and the people who visit the park.
12:55 PM
small towns bur... says
@ Smith
Yes I do agree that is not prudent, having said that, a new Chairman/CEO could increase revenue and profit, increasing stock prices, benefiting not only Q Investing, but also all shareholders. Chasing peformance is tough in nowadays, but when investing for the long run, this current economic situation is rather favorable.
12:52 PM
chongo says
Dick Kinzel and his wife, Judy Kinzel, have filed a $30 million federal lawsuit against Merrill Lynch and the brokerage company’s new owner, Bank of America, accusing the companies of ripping them off.
Now you know how the rest of your employees feel everyday!
12:42 PM
fluffy says
So how is this any different than the bank reposessing my car if I don't make my payments. Minzel borrowed money to by stock from Merril lynch. Isn't called buying on margin? He repaid part of the loan. Merril Lynch said the rest of loan was due. Isn't that a margin call? He didn't pay on time. Meril Lynch repossessed the loan collateral. Much the same way was what happens if you don't make your car payment. TARF not TARP aside.
TARF - Toxic Asset Rescue Fund
12:37 PM
6079 Smith W says
Q Funding is not your friend; they’re in the business of helping to make money for their investors who like most are undoubtedly chasing performance in this lousy investment environment.
12:05 PM
small towns bur... says
Am I the only one that agrees with Q funding in the sense that maybe it is time for Cedar Fair to have a new Chairman?
10:39 AM
outsider says
Wow Dick, someone more dishonest than you. You reap what you sow.
10:11 AM
6079 Smith W says
It reads like Mr. Kinzel bought (FUN) in a margin brokerage account.
If the market value of the shares falls below the amount borrowed, Merrill Lynch was within their rights to call for additional capital from Mr. Kinzel or sell the shares if he was not forthcoming with the money.
http://www.investopedia.com/terms/m/marginaccount.asp
Shouldn't this be a case for arbitration and not the courts?
Those were dark days for Cedar Fair; its survivability was in doubt. Six Flags had recently declared bankruptcy.
I wouldn't touch this dog of a stock.
09:58 AM
brutus smith says
Yeah, they are the only ones with money. They done took ours already.
09:27 AM
looking around says
I love it, the rich and powerful are now feeding on their own.
09:02 AM
Sam says
This from a guy who made millions on the backs of teenagers and screwed them out of their summer bonus. Boo hoo!
09:01 AM
Salvatore says
Am I reading this story correctly? Cedar Fair CEO Dick Kinzel and his wife, Judy Kinzel, have filed a $30 million federal lawsuit against Merrill Lynch? The sale disregarded explicit instructions the Kinzels gave not to sell the units? Brett Kinzel, the couple’s son, was a Merrill Lynch broker who handled his parents’ account at the firm? The Kinzels borrowed $8,874,601 from Merrill Lynch? Patrick Murray, an attorney in the Murray and Murray law firm of Sandusky, filed the lawsuit for the Kinzels?
How is that Conseco lawsuit coming along? Has Dennis E. Murray Sr. paid back those millions in loans? Wasn't it about $200 million?
08:55 AM
outsider says
How come when an average joe has similar problems the Sandusky Register doesn't splash it all over the front page? Sensationalism?
08:33 AM
Raoul Duke says
Wow, and I'm just wondering how to come up with my rent for next month...