Securities fraud attorney Scott Starr helps his clients believe again.
One of Scott Starr’s favorite former clients still emails at least once per month to see how he’s doing. She’s in her 80s, a retired librarian from Michigan. It isn’t unusual in Starr’s line of work—he’s a well-known investment fraud lawyer at Starr Austen & Miller, LLP, Logansport, Indiana and he helps put people’s lives back together after they’ve been shattered by scam artists and shady brokers.
“These clients become like family members,” Starr says. “I would never have dreamt of having a practice so satisfying as what I do.”
Years ago, the librarian—let’s call her Jean—had befriended someone who suggested she make an investment in a very small startup company he was working for as a researcher. And she did, several times.
That small startup developed the patent for a nifty little drug called . . . Claritin®. The company sold its patent to Schering-Plough, and Jean became a millionaire ten times over.
But that, unfortunately, wasn’t the end of her story.
Jean had grown an enormous portfolio by trusting in the advice of a friend, but the next time she did that, she paid dearly. “An unscrupulous broker in New York City got hold of her and convinced her to turn the money over to him so he could trade it for her,” Starr says. “She ended up losing almost everything she had.”
Even worse, she was facing huge capital gains taxes from the broker’s sale of her shares in Schering-Plough. “She went from being a multimillionaire to literally being ready to lose her home,” Starr says. “And the company that cheated her was not a wealthy company. It was threatening to take bankruptcy.”
Jean’s plight was moving, but unfortunately not uncommon, Starr says. “My typical securities fraud client is someone in his or her 70s, sometimes 80s, of the generation where their word is their bond. They’re very trusting. And they’ve trusted someone who has taken advantage of them, and they’re sick about it, and embarrassed. They didn’t inherit their money—they worked for the money they’ve lost, and frankly, they aren’t all that excited about suing somebody to get it back. They often blame themselves. We have to explain to them that the only mistake they made was trusting someone who was untrustworthy.”
In Jean’s case, Starr made a successful claim against the brokerage firm even though it was not on solid financial footing, forcing it to make regular payments to Jean that restored some of what she lost. “We were able to establish a decent standard of living for her so she wouldn’t have to lose her house,” he says.
“She was able to carry on. And she’s become one of my best friends.”
That’s how the story goes when Starr tells how his career got started, but to him, it’s no joke. It’s just the truth.
“I stumbled across my career as an investment fraud lawyer by happenstance,” he says. “In 1982, I was a struggling young lawyer here in Logansport, Indiana, and I had a couple of fellows come to me who had made a bad investment with a broker and lost a couple hundred thousand dollars.” A local broker had taken not just their money, but the life savings of about 300 others, and lost it all on risky investments—to the tune of $5 million.
As it happened, Starr was no stranger to the spreadsheet: he’d actually earned an accounting degree at Ball State. But he had zero experience in securities fraud. “I did not know what I was doing,” he says. “But it seemed to me they had a case.”
He took that case on contingency and, even as he was settling it, picked up another. “The second case had to be tried. On the second securities case I ever handled in my life, I received a verdict of $3.6 million. That got some publicity, and from that point forward, we had attorneys from all over the country asking us to work with them. The practice just grew from there.”
He still tries cases all over the country, despite remaining in Logansport, a town of 18,000. “Most of the lawyers here make their living doing criminal work, domestic relations work,” he says. “They never see me. Even though my office is across the street from the local courthouse, I’ve only been inside two or three times in the last 10 years.”
He’s been practicing with partner Jim Austen since 1982. “In August of 1978, the first person I met when I arrived for my first day at IU Indianapolis Law School was Scott,” Austen says. “He gave me advice about school and has been my friend and advisor ever since. I have never known anyone who could better prepare a client or a case for trial than Scott.”
Back in the early 1990s, a young lawyer named David Meyer in Columbus, Ohio, came to Starr for help with a potentially enormous fraud lawsuit that had come across the transom: a Prudential broker outside the nearby town of Marion had lost $20 million of his clients’ money. The broker, acting on a gut feeling that the markets were going to crash, sold every single investment in every single client’s retirement portfolio without permission.
“Forty million dollars’ worth of trade in 12 hours,” Starr says. “The markets didn’t crash—they went straight up. My clients were out of the markets for a year and a half. And as we got deeper and deeper into the case, we found that Prudential was basically trying to hide the ball. They knew they should have reversed the trades and they didn’t do it.”
Taking on the case on contingency was a risk for Starr’s firm because of its sheer size. “We’d handled large cases before, but nothing that big,” Starr says. “We moved to Marion, Ohio and set up an office there. We ended up spending $1 million of our own money: we had expert witness fees, and we were working in a small county seat courtroom with no televisions, no computers, so we hired a firm out of California to computerize everything so we could scan all our exhibits and flash them up on screens.”
It took eight years just to get the case to trial. “Years and years of discovery and depositions, fighting motions, things like that,” Starr says. “That’s the drudge work. But then it comes time to go to the courtroom and be on stage. And there’s nothing more fun, more exciting, than presenting a complex case to a jury.”
He still remembers walking down the hallway to the courtroom with co-counsel Meyer and the late Tom Hargett (of Maddox Hargett & Caruso), who had never tried a case in front of a jury before.
“I said, ‘Gentlemen, let’s go put on a show,’” Starr says.
So they did. The jury handed down what was, at that time, the biggest class action verdict ever against a brokerage firm: $265 million, which included $250 million in punitive damages.
“It’s so firmly etched in my mind, it’s as if it happened yesterday,” Starr says. “The jury settled into the box and I watched the foreman hand the verdict to the bailiff, and the bailiff hand it to the judge, who slowly put on his reading glasses and then took a full three minutes—it seemed like 30—to read and reread it to himself. He then called a recess without ever mentioning the result, calling all the lawyers into his chambers and telling the defense lawyers they’d want to poll this jury. The jury had to be brought back in, and all of us were waiting the entire time with our hearts beating out of our chests.”
When the verdict was finally read, the crowd of a few hundred victims and their families mobbed Starr and the other plaintiffs’ attorneys—with hugs. “We sort of expected a nine-figure verdict, but not a quarter of a billion dollars,” he says. “That punitive damage award got lots of attention.”
Married for 37 years to wife Phyllis, whom he’s known since second grade, Starr is a devoted husband and father. The Starrs have three grown sons, one of whom joined his father’s firm as a lawyer three years ago.
Starr’s current workload includes a large suit against New York Life and AXA involving a Ponzi scheme that divested 37 people of the bulk of their life savings. He still gets fired up about new cases coming in—both because he wants to restore justice for his clients and because he’s usually the underdog. “Typically when we’re litigating, we’re up against lawyers in New York or Los Angeles or San Diego or Chicago—the largest law firms with unlimited resources,” he says. “What gets my juices going is working against such odds and ultimately being successful.”
Every new client he adds becomes part of the extended family. Jean isn’t the only one who stays in touch; there’s the man in North Carolina who reaches out several times a year, the class action group who became so close they organized an annual reunion . . . and the two guys who started it all by walking into his office in 1982. “They still stop in and visit and joke about how they were the first,” Starr says. “I owe most of my career to them.
“A huge part of what excites me about my job is helping people who are truly helpless when they come to me,” Starr says. “They don’t know where to turn. They don’t even know if they can afford a lawyer. Being able to help them is so satisfying—it’s a very rewarding line of work.”
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