Edward Scissorhands slices into business manager with fiduciary lawsuit

In a lawsuit that has ramifications for financial advisers grappling with the fiduciary standard, actor Johnny Depp has sued his former business managers, The Management Group in Beverly Hills, Calif., claiming that the firm engaged in “in years of gross mismanagement, self-dealing, and at times, actual fraud.”

As The New York Times reports, Mr. Depp admits that he often signed whatever his managers put before him, claiming that he assumed his advisers were “behaving as a loyal fiduciary and prudent steward of his funds and finances.”

In its countersuit, The Management Group claims that Mr. Depp’s financial distress was a result of his tendency to overspend — including paying $3 million to blast the ashes of Hunter S. Thompson from a custom-made cannon. The managers claim in their countersuit that when they counseled Mr. Depp to “take it easy” on spending, he “always went back to his uncontrolled” ways.

Charles Duhigg, who wrote the piece for the Times, observes that if The Management Group were held to the fiduciary standard, it probably would have had more of an obligation to stop Mr. Depp from doing foolish things with his money. And, if Mr. Depp disregarded that advice, it might have had an obligation to cut ties with the actor, or at the very least, stop paying itself millions of dollars from his accounts.

At the same time, he writes, Mr. Depp should have paid at least “a little attention” to what was going on.

Mr. Duhigg said he believes the fiduciary standard is good public policy that should not be delayed or overturned, yet he also believes that advisers shouldn’t be held accountable for their clients’ irresponsible behavior.