Tuesday December 4 7:15 PM ET

''Pearl Harbor'' director sues former stockbroker

By Sue Zeidler

LOS ANGELES (Reuters) - ``Pearl Harbor'' director Michael Bay sued his former stockbroker Tuesday, saying the man made a sneak attack on his portfolio, defrauding the disaster filmmaker of $5 million.

The suit, filed in U.S. District Court in Los Angeles, alleges Win H. Troung, a former employee of Merrill Lynch brokerage firm in Beverly Hills, engaged in excessive trading and defrauded Bay by buying and selling more than $1 billion worth of stock over a 15-month period.

``We're alleging that Michael Bay is out $5 million,'' said his lawyer, Brian O'Neill, who said the 36-year-old director was seeking that amount in punitive and compensatory damages.

``The defendant was day trading millions of dollars a day. The volume of trading is not even appropriate for a large pension fund, much less for an individual,'' he said.

A separate arbitration proceeding is pending with Merrill Lynch, which has denied liability. ``Mr. Bay was a sophisticated and aggressive investor who was aware of the activities in his account, and we believe his claims are meritless,'' said Merrill Lynch spokesman Joe Cohen.

Troung could not be reached for comment, but O'Neill said he believed he was now working at another brokerage house.

According to the complaint, the 28-year-old Troung was an inexperienced stockbroker who had assumed responsibility over Bay's portfolio which included stocks, bonds and cash worth about $2.8 million. The suit said that from October 1999 through January 2001, Troung conducted more than 8,000 transactions in Bay's account or roughly 25 trades every single day, effectively liquidating and rebuilding Bay's portfolio every other day.

The massive day trading, the suit claims, involved more than $1 billion worth of transactions in just over a year.

``We've been on the case for a year,'' said O'Neill, speculating that Troung likely generated a commission of close to $1 million by engaging in the activities.

Bay initially met Troung when he worked under another Merrill Lynch employee who was dealing with his account.

``When that guy left, he effectively took over the account and that's when all the shenanigans began,'' O'Neill said.

He said Troung allegedly violated Bay's instructions to not trade on margin and to always maintain at least $1 million in cash.

The suit further alleged that Troung covered up his gross misconduct by sending the plaintiff written summaries that were fraudulent. The complaint alleges the defendant committed securities fraud, breached his fiduciary duties, and was negligent.

Bay started out working on advertisements and music videos before entering feature films in 1995 with ``Bad Boys'', starring Will Smith and Martin Lawrence. He went on to make three more action adventures, including ``The Rock,'' ``Pearl Harbor,'' and ''Armageddon,'' which have grossed more than $500 million at the box office.

Reuters/Variety REUTERS