Almost $10 million worth of Burroughs & Chapin stock were stolen from late George Rogers Burroughs Jr., forcing him to sell his Murrells Inlet home, a lawsuit alleges.
The suit, originally filed Nov. 16, 2017, claims Burroughs’ stepkids George McEwen and Laura Fogarty stole 24,370 shares of Burroughs & Chapin stock from the Burroughs Trust, which was formed in May 2005.
In February 2015, Burroughs & Chapin was converted to a real estate investment trust, giving shareholders — McEwen and Fogarty — an option to exchange their existing shares for cash, new shares or a combination of both.
This option led the siblings to own 27,814 shares of Burroughs & Chapin stock.
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The suit claims Burroughs & Chapin was negligent toward Burroughs because they did not follow procedures while the shares were allegedly stolen from Burroughs.
“We do not comment on legal matters,” Burroughs & Chapin representatives said when asked about the lawsuit.
According to an amended complaint, which was filed Oct. 10 by Burroughs’ second wife, Kee Burroughs, the family is asking for the highest fair market value of 12,823 shares of stock allegedly taken by Fogarty and the highest fair market value of 14,991 shares of stock allegedly taken by McEwen.
Burroughs & Chapin, a Myrtle Beach-based real estate investment trust, owns popular properties including Broadway at the Beach, Barefoot Landing and Coastal Grand Mall.
The company has 235 stockholders, according to the lawsuit, formerly including the Burroughs Trust.
On July 3, 2008, Burroughs’ first wife, Lanita Burroughs, died, causing George Burroughs’ relationship with his stepchildren to “fade,” the lawsuit reads.
Due to George Burroughs’ poor health, he was unable to attend shareholder meetings of Burroughs & Chapin since May 2010. To be represented at the meetings, he wanted to transfer some stock owned by the Burroughs Trust to McEwen and Fogarty, allowing them to attend the meetings and use funds to help pay for their kids’ college tuition, according to the suit.
In April 2013, George Burroughs met with a financial adviser with the intention to transfer 1,000 shares of stock to McEwen and 1,000 shares of stock to Fogarty, so they could represent him at board meetings.
In December 2013, George Burroughs endorsed the back of his stock certificate that showed his ownership of 24,370 shares, the suit reads. At the time he endorsed the stock certificate, it was blank, and did not contain the amount of shares to be transferred, the lawsuit states.
The suit alleges McEwen filled in the spot to transfer 6,000 shares to the McEwen Trust, and 6,000 shares to be transferred to Fogarty.
In early 2014, Burroughs & Chapin transferred 12,000 shares from the Burroughs Trust to the siblings and began to pay them dividends.
The suit says the company did not follow its own requirements to confirm with George Burroughs the transfer was legitimate, despite the Burroughs Trust being the sixth largest shareholder of the company.
When Burroughs & Chapin prepared a new stock certificate to reflect the amount of stock now owned by the Burroughs Trust, they allegedly sent it to McEwen rather than George Burroughs.
“This was apparently done at McEwen’s instruction,” the suit reads.
In July 2014, George Burroughs endorsed the back of his stock certificate — which McEwen had allegedly kept up to that point — not realizing half of his shares had “already been unlawfully converted by McEwen and Fogarty,” the suit reads.
According to the suit, when McEwen gave George Burroughs the certificate, the part showing that Burroughs Trust owned 12,370 shares was concealed.
When George Burroughs endorsed the certificate, it was again blank and did not show the amount of shares to be transferred, the suit reads.
On July 16, 2014, McEwen allegedly endorsed the certificate as a witness.
The suit alleges McEwen took the certificate and transferred the remaining 12,370 shares from the Burroughs Trust to the McEwen Irrevocable Trust and to Fogarty.
In December 2013, the 12,370 shares amounted to about $2,532,510, according to the suit.
Again, Burroughs & Chapin did not contact George Burroughs regarding the transfer, and they did not notify him that the Burroughs Trust no longer owned Burroughs & Chapin stock and would not be receiving any more dividends, the suit states.
In October 2015, Judy Chandler, who handled George Burroughs’ account, became suspicious after she saw the Burroughs Trust was no longer receiving dividends.
Chandler discovered McEwen and Fogarty now owned all the stock previously owned by the Burroughs Trust and informed George Burroughs, according to the lawsuit.
On March 17, 2016, George Burroughs amended the Burroughs Trust, excluding McEwen and Fogarty from receiving any money left in the account. Rather, half of the remaining money would go to St. Jude Children’s Hospital, one-fourth to the Waccamaw Community Foundation and one-fourth to Kee Burroughs, George Burroughs’ second wife, at the time of his death.
George Burroughs died Jan. 19 at the age of 74.
The suit alleges the transfer of stocks “significantly affected the financial wellbeing of Mr. Burroughs and the Burroughs Trust.” According to the suit, the transfer caused George Burroughs significant anxiety and consternation.
George Burroughs was forced to cut his spending, according to the suit, forcing him to withdraw funds from a Wells Fargo Advisors investment account owned by the Burroughs Trust at a rate that was not recommended by his advisors.
The suit alleges Burroughs was forced to sell his Murrells Inlet home and move to Winnabow, North Carolina, with Kee Burroughs.
The suit claims McEwen and Fogarty acted under conversion to take personal property not belonging to them, civil conspiracy and money had and received, meaning money taken without the consent of the owner.
“The suit is seeking to have the court ensure that the Burroughs & Chapin stock that was taken from Mr. Burroughs is returned, and for the recovery of all dividends that Burroughs & Chapin wrongfully paid out to Mr. Burroughs’ stepchildren,” Kee Burrough’s lawyer Taylor Powell said in an email.