The day he was fired from then-Prudential Securities—July 25, 2001—is a day Bob Ostrowski says he will never forget. But he says he's ready to start tryingready to start trying: Ostrowski was awarded $2 million from Prudential for wrongful termination in a New York Stock Exchange arbitration proceeding Wednesday.
Prudential, which declined to comment, can appeal. But certainly this is an odd case: Ostrowski was, on the face of it, a strong employee: He was a member of the exclusive Chairman’s Council at Prudential for 25 years in a row, and a broker with the firm for 41 years. Yet, Ostrowski was fired from the firm for allegedly conducting an unauthorized trade in the summer of 2001, and for some 40 complaints the firm said customers had filed against him. His termination came just days before his 65th birthday, and just weeks after he was recognized—in Paris—for his 25 years on the Chairman’s Council, a distinction only ten other brokers at the firm held at that time. Because the firm said he was fired for “cause,” Prudential (now a part of Wachovia Securities) refused to pay him more than $1.3 million in Master Share deferred compensation benefits he had accumulated while at the firm.
“The panel decided that whatever the mistakes Prudential thought [Ostrowski] made, or the issues they had with the way he handled that trade, did not constitute cause for termination,” says his lawyer Jim Batson, an attorney with New York law firm, Liddle & Robinson.
The NYSE arbitrators also ruled that Ostrowski’s U-5, or uniform termination notice, be amended to state that Ostrowski was “terminated without cause on July 25, 2001.” Ostrowski, now 69, is not working.
“Let me say that the money really wasn’t that important to me,” says Ostrowski. “It was a matter of being vindicated.”
Ostrowski, who worked out of the company’s Wilkes-Barre office in Pennsylvania, says he was made a scapegoat for the firm’s trouble with the SEC over inappropriate B-share mutual fund sales. In 2003, Prudential agreed to pay a $382,000 in a settlement with the SEC over the B-share mutual fund sales. The company neither admitted nor denied the SEC’s findings that the company had inadequate systems in place to monitor and enforce its policies relating to the mutual fund sales.
The SEC still has a related case pending against Ostrowski for alleged violations of the anti-fraud provisions of federal securities laws. But Ostrowski insists that he sold B-shares because they were either the best option or because the client wanted to avoid an upfront sales charge. He also notes that in February of this year, an ING broker/dealer called IFG Network Securities won a case against the SEC, which claimed the firm had failed to adequately monitor its sales of B-share mutual funds. The SEC has said that if it loses an appeal on that decision, it will drop its case against him, according to Ostrowski.
Ostrowski says another potential reason for his being pushed out, was that the office’s new branch manager David Capin was hungry for Ostrowski’s clients. Capin became the branch manager of the Wilkes-Barre office in October of 2000 and even prior to assuming responsibility for that office he began soliciting Ostrowski’s clients, in violation of Prudential policy, Ostrowski says. Ostrowski had a client base of around 2,000 households, and $350 million in assets under management—a huge book for a small town. “He was an institution unto himself there,” says Batson, Ostrowski’s lawyer.
The NYSE panel awarded Ostrowski $1.65 million in compensatory damages, which includes his deferred compensation plus interest. In addition, the panel ordered Prudential to pay $290,000 in attorneys fees, $15,000 in hearing costs and Ostrowski’s $1,000 filing fee. Prudential can appeal the decision, but Batson says its unlikely.