Lloyd Schwed, Schwed Kahle & Kress

Ex-Major League Baseball outfielder Angel Pagan and his wife were awarded more than $2 million after their Merrill Lynch adviser invested the couple's money in unsuitable Puerto Rico municipal bonds and closed-end bond funds before its debt crisis.

A three-member panel decided Merrill was liable for $1.7 million in compensatory damages, 4.5% interest since June 20, 2017, $88,758 in costs and $750 for the the nonrefundable portion of the filing fee.

The Pagans were "thrilled with the decision — the largest award against Merrill Lynch Puerto Rico to date — because the arbitrators awarded virtually all of their losses," their attorney, Schwed Kahle & Kress partner Lloyd R. Schwed, said by email Wednesday. "They trusted Merrill Lynch and their close financial adviser, so this award has restored their trust in the system."

Merrill provided a brief statement Wednesday, saying only it was "disappointed with the panel's decision."

The Pagans asked the Financial Industry Regulatory Authority panel in San Juan for $6 million in punitive damages, but the request was rejected.

"FINRA arbitrators award punitive damages in less than 5% of the cases that go to final award, so the absence of punitive damages did not surprise us," Schwed said. "But the arbitrators clearly wanted to send a message to Merrill Lynch by awarding virtually all of the Pagans' net losses."

Schwed said he reduced the amount of money in punitive damages being sought to $500,000 in his closing before the panel.

The full award will end up totaling $2.1 million after combining damages, an estimated 201,231 in interest plus costs and fee. He noted the Pagans' net loss was $2.05 million.

Pagan, 38, spent five seasons with the San Francisco Giants, four with the New York Mets and two with the Chicago Cubs before retiring in 2016. His final year salary was $10 million.

Pagan and his wife Windy accused Merrill of breach of fiduciary duty; gross negligence and breach of the duty of due care; breach of contract and the covenant of good faith and fair dealing; violations of Puerto Rico and state securities laws; common law fraud and deceit; failure to supervise; control person liability; respondeat superior; and violation of FINRA and securities industry rules and standards of conduct, according to the FINRA panel award statement released Tuesday.

The Pagans requested compensatory damages in excess of $2 million plus the income that would have been generated "if the money had been properly invested," according to the award statement.

The Merrill representative who served as the Pagans adviser, Alex Gierbolini, was not a party in the dispute but was named in the award statement.

In addition to requesting the claim be denied with prejudice and costs be assessed against the Pagans, the firm asked that all references to the arbitration be expunged from Gierbolini's records. All those requests were denied.

Gierbolini has worked at Merrill since 2012, according to his profile at FINRA's BrokerCheck website. The profile lists 24 disclosures, all of them customer disputes. The first one was closed with no action, there were 17 settlements, and the remaining six were still pending.

Schwed claimed Gierbolini continued investing in large amounts of Puerto Rican bonds on behalf of the Pagans knowing they were "junk," according to a transcript of Schwed's closing statements.

Merrill is hardly the first firm to run into trouble with the collapse of Puerto Rico bonds.

A regulatory panel last year said Morgan Stanley must pay Puerto Rican bond investors $3.3 million. Also last year, UBS, Gierbolini's previous employer, was ordered to pay $5 million to investors over issues tied to Puerto Rican Bonds and closed-end funds. A nearly $8 million arbitration award was ordered in May.

Last March,  Jose Ramirez, an ex-UBS adviser was sentenced to a year in prison for taking $1 million from investors in Puerto Rico through a fraudulent scheme involving the use of credit lines to buy closed-end bond funds.

Read the decision: