A.G. Edwards has gotten hit with two exceptionally large arbitration awards for wrongful termination and defamation of managers in a little more than three months.
A $1.25 million award was won by former producing branch manager Timothy Finneran, who operated the firms Seminole, Fla., satellite branch between 1991 and 1993. That award, issued Aug. 28, 1998, had not been paid as of early February. The firm has filed a court motion to vacate the award.
A second case ended in an award of $840,000 to Jimmie Ross, who was sent to Johnson City, Tenn., in 1991 to assume the management of a troubled former Prudential-Bache office. The award, issued in early December 1998, has been paid.
The Ross arbitration panel also ordered Merrill Lynch to pay Ross another $77,831, which Merrill has paid. Ross was fired from a new job at Merrill when Edwards claimed on his U-5 that I was under investigation by the NASDR and would be charged with failure to supervise, Ross says (see When Is a Rep Under Investigation? Page 30). The claim against Merrill was for failing to honor his employment contract.
There doesnt seem to be a direct relationship between the Ross and Finneran cases, although both involve strange goings-on at the branch level and run-ins with more senior managers.
Ross says that when he was transferred to Johnson City, he found a set of bizarre circumstances, including drugs being sold in the office. One of the brokers committed suicide shortly after he arrived.
Out of the 13 brokers in the office, three were problems, Ross claims. One had been taking cash from clients and pocketing the money, he says. He fired the broker and says the firm backed him up on the incident.
But Ross says he encountered problems when he tried to fire two other brokers who were relatively large producers in a branch with mostly trainees. Ross says that when he tried to terminate the brokers, the regional vi ce president had me on the phone the same day each time ... and reinstated both of them. The firm later terminated one of the brokers, he says.
Ross resigned as branch manager in the spring of 1993 and returned to production while still at Edwards. He later resigned from Edwards to work for Merrill. After being fired from Merrill, Ross eventually ended up at Raymond James Financial Services in Gatlinburg, Tenn.
Meanwhile, Finneran claimed that he had conflicts with his superior in St. Petersburg, Fla., resulting in unproven allegations of sexual harassment. In his statement of claim, Finneran says that in July 1993, he was also charged with misallocating a $1,200 marketing-support payment from a mutual fund company and told he could leave or get dismissed with cause.
Finneran claims he was forced to resign from Edwards and says his reputation was sullied over rumors about misallocating the money. Finneran got another job with Chase Manhattan Investment Services, but he just flat out lost his ability to produce, claims his attorney, Allan Fedor of Largo, Fla.
If Edwards is not successful in having the Finneran award vacated, under Florida law it will have to pay him an extra 10% in annual interest from the date of the award.
Edwards, for its part, says, We strongly disagree with the arbitration panel decisions made in both the Tim Finneran and Jimmie Ross cases. The firm says it will consider each case from both a legal and business context and take action as required.
In his case against A.G. Edwards, Jimmie Ross claimed that the firm was in error when it wrote on his U-5 that he was under investigation, although he says there were ongoing investigations of alleged problems in the office.
Edwards, in a prepared statement, says that: The U-5 requires that a firm disclose whether an employee is involved in an investigation at the time of termination. Because A.G. Edwards was notified by the NASD that there was an investigation under way involving Mr. Ross, we--in accordance with NASD regulation--noted that fact on his U-5 when he left the firm.
But Jonathan Kord Lagemann, a New York attorney who served as Ross expert witness, testified that the NASD last fall formalized what had always been the usual practice in the industry--that a matter isnt considered under investigation until a broker gets a letter (Wells notice) from a regulator informing him that theyre proceeding to a complaint, Kord Lagemann says. You dont report something as an investigation [on the U-5] until its Wells notice time.