WealthManagement Magazine

Merrill Ordered to Pay Two Former Brokers $172,000, Amend U-5s

An arbitration panel in March ordered Merrill Lynch to pay two brokers $86,000 each in compensatory damages after firing them in a dispute involving either an employment verification form or a lucrative book of business--depending on whom you believe.The former Merrill brokers, James Hall and Mark Hume, worked in the firm's Bloomfield Hills, Mich., office under branch manager David McWilliams. Hall

An arbitration panel in March ordered Merrill Lynch to pay two brokers $86,000 each in compensatory damages after firing them in a dispute involving either an employment verification form or a lucrative book of business--depending on whom you believe.

The former Merrill brokers, James Hall and Mark Hume, worked in the firm's Bloomfield Hills, Mich., office under branch manager David McWilliams. Hall and Hume claim they were fired by McWilliams in August 1996 because McWilliams could benefit financially from stock-option plan business the two had organized at General Motors and Delta Air Lines.

"I think it was a convenient means to an end for David [McWilliams]," Hall now says.

But in the arbitration, Merrill and McWilliams denied wrongdoing. Merrill said it fired Hume and Hall for lying, cheating and violating the firm's policies after Hume signed an employment verification form for Hall, who was seeking to refinance his house. Merrill alleged Hume overstated Hall's income.

"The decision to terminate was strictly limited to an internal issue between Merrill Lynch and its former employees about their violation of Merrill Lynch policy," says Bill Halldin, a firm spokesperson in New York. "We disagree with this ruling, which is contrary to the facts presented in the arbitration."

David Black, the lawyer who represented Hall and Hume, says Hume admits filling out the employment verification forms but claims they were accurate. "There wasn't anything false or fraudulent about filling out the form," he says.

Merrill claimed Hume falsely represented himself as Hall's employer. The firm also maintained that the option-exercise business came to Merrill due to the firm's reputation and resources. That business remains at Merrill Lynch.

In addition to awarding each broker $86,000 in damages, the NASD panel also ordered Merrill to amend the brokers' U-5s. The firm had indicated on Hall's and Hume's U-5s that they were under internal review for fraud, theft or breaking securities laws, rules or standards. The arbitration panel ordered Merrill to amend the brokers' U-5s to show they were fired because of an internal policy dispute. Merrill also was ordered to pay $6,000 in forum fees.

The damage awards, however, were far less than the $1 million-plus sought by both Hume and Hall.Claims that McWilliams fired Hall and Hume for McWilliam's own economic gain echo a similar complaint made by former Merrill broker Alex Lambros Jr., whose claim was the subject of a front-page Wall Street Journal article in February. McWilliams was the complex manager of several offices in Southwestern Florida when he fired Lambros in early 1995. Lambros was the licensed manager of the Cape Coral office, and alleged that one reason for his termination was his low turnover on his $88 million in client assets. Some of Lambros' accounts ended up with a new manager appointed by McWilliams.

In the Lambros case, a New York Stock Exchange arbitration panel ordered Merrill to remove negative comments from Lambros' U-5 but didn't award him any monetary damages. Lambros has appealed the panel's decision in federal court (see "Judge Denies BOM's Appeal in Letter-Opening Case," below).

McWilliams, who testified via telephone from Australia in the Hume-Hall case, could not be reached for comment. McWilliams now is a district director at Merrill's Martin Place complex in downtown Sydney.

Merrill spokesperson Halldin adamantly denies McWilliams did anything wrong in either the Hume-Hall or Lambros cases. McWilliams did not, nor could he have, fired Hume and Hall without discussing the situation with the firm's human resources, compliance and legal departments, Halldin says.

Hume and Hall now work at First of Michigan in Bloomfield Hills.

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