(CN) - The head coach for the Philadelphia Flyers says in court that Bank of America convinced him to mortgage his properties and invest the proceeds in high-risk funds that "utterly collapsed."
Peter Laviolette says he had just led the Carolina Hurricanes to a Stanley Cup championship in 2006 when BofA approached him and his wife with an investment proposal.
At the time, and still today, the couple owned a home in Raleigh, N.C., and two homes in Florida.
Peter Laviolette and his wife, Kristen Laviolette, say the bank advised them "to leverage all of the available equity in the properties, including their primary residence, through several high-interest loans and then to invest these loan proceeds in other purportedly sound, but ultimately high-risk, investments."
According to the lawsuit in Palm Beach County Circuit Court, Bank of America laid out the scheme in a 12-page brochure that included projections of real estate values and investment values to substantiate the its return on investment claims.
"One such document projected that by leveraging the properties, the Laviolettes would increase their net worth resulting from these assets from $8,108,494.00 after 30 years to $22,093,833.00 - a gain of nearly $14 million," the complaint states.
Banc of America Securities, a then affiliate and now division of Bank of America, allegedly managed the investments.
The bank's projections included additional monthly fund injections as well as exaggerated property values "to convince them that taking these high-interest loans was a financially wise decision, supported by the underlying properties," according to the complaint.
Though the bank told the couple that the "investment strategy would build great wealth with minimum risk," the Laviolettes say they later learned that the projections relied on "artificially inflated values for their properties and an unreasonable rate of return on the investments."
Mismanagement of the proceeds by Banc of America allegedly compounded their losses.
The high-risk funds and other investments "not only failed to produce the projected high rate of return needed to cover the loan interest, they utterly collapsed, resulting in a loss of the principal investment as well," according to the complaint.
The couple seeks at least $3 million in damages for the fraud, plus rescission of the three loans.
They are represented by Eric Horbey of Lazer, Aptheker, Rosella and Yedid in West Palm Beach, Fla.