A former retail broker and bank analyst is accusing Wells Fargo & Co. of stealing his idea for mutual funds that become more conservative as an investor ages.
John C. "Jack" Boyle, 54, filed a copyright infringement lawsuit against the bank on Feb. 26 in U.S. District Court for the Southern District of New York. Also named as defendants were the bank's mutual fund distributor, Stephens Inc.; and a subadviser, Barclays Global Advisors, formerly Wells Fargo Nikko Investment Advisors.
In his filing, Mr. Boyle claims that Wells and the other defendants copied his "theme, concept, and medium of expression" without permission in March 1994, when they introduced a family of Wells' proprietary mutual funds dubbed LifePath.
Mr. Boyle wants to be listed in the funds' prospectus as their creator. He is also seeking an annual licensing fee, retroactive to the funds' formation, of 50 basis points of their net asset value.
Fifty basis points of the current assets, $590 million, works out to about $3 million.
"They just really did take it from me," Mr. Boyle said.
Spokesmen for Wells and Stephens said Mr. Boyle's charges are without merit.
The LifePath Funds are "life-cycle funds"-portfolios designed and named to serve specific investment needs, such as accumulating money for retirement or for a child's education. Typically, the investment allocations of life-cycle funds become more conservative as an investor ages.
In an interview in his attorney's office last week, Mr. Boyle, a former bank analyst for Ryan, Beck & Co. of West Orange, N.J., said he had copyrighted materials on a series of life cycle funds, which called Moneyfor Funds, on May 8, 1989.
Mr. Boyle, once a bond broker for Butcher & Singer Inc. of Westfield, N.J., said he wanted to provide investors with a mutual fund that, like bonds, had a planned maturity date. The eight Moneyfor Funds he designed had calendar years in their names to reflect when their investors wanted to retire.
Mr. Boyle said he first brought a plan for the funds to an investment firm-Brundage, Story & Rose in New York. He said that firm expressed interest in managing the funds but said Mr. Boyle would need to find another to distribute them.
That led Mr. Boyle to Stephens Inc., which is based in Little Rock. Mr. Boyle said he sent Stephens-and hundreds of other companies-his materials, which included the Moneyfor Funds proposal and its detailed, copyrighted brochure.
In 1990, Mr. Boyle said, he received a call from R. Greg Feltus, a Stephens senior vice president. According to Mr. Boyle, Mr. Feltus told him he liked the idea but would need to check whether Stephens' relationship with Wells would cause some "conflict" that would prevent the distributor from working with Mr. Boyle.
Mr. Boyle said Mr. Feltus called back later to say Stephens' ties with Wells would prevent it from going forward with him.
When San Francisco-based Wells launched its LifePath Funds in 1994, a filing it made with the Securities Exchange Commission listed Mr. Feltus as their chairman and president, as well as a trustee.
Like Mr. Boyle's proposed Moneyfor Funds, the LifePath Funds are named for the years that customers would like to retire, as in LifePath 2010 and LifePath 2020. The funds represent a fraction of the $20.2 billion in proprietary mutual funds managed by Wells.
In its LifePath marketing literature, the bank has enclosed a June 29, 1994 Investor's Business Daily article that cites former Wells managing director Donald Luskin as the fund's creator.
Mr. Luskin now works for Barclays Global Advisors, San Francisco, which bought Wells Fargo Nikko Investment Advisors in June of 1995 and is the current subadviser of the LifePath Funds.
Barclays declined to comment.
Mr. Boyle's attorney, Raymond J. Dowd, said the next step will be to seek a cease-and-desist order on the distribution of the LifePath Funds.
Mr. Boyle lives in Edison, N.J., and is working on developing a fund for the private pension market.