A broker who suffered retaliation by his firm won nearly $28 million in an arbitration decision. Of that amount, $25 million was punitive damages — a record punitive award.
In August, an NASD arbitration panel found that Waddell & Reed, an Overland Park, Kan.-based mutual fund firm, “orchestrated a campaign of deception” against broker Stephen Sawtelle to discredit him among clients. A front-page article in The Wall Street Journal reported details of the firm's efforts to frighten clients.
The firm also trashed Sawtelle's CRD by reporting 13 customer complaints and other incidents, beginning in April 1997 when he was fired.
Sawtelle claimed the firm retaliated against him after he testified to the SEC about the firm's failure to supervise a broker who later embezzled client funds. Sawtelle supervised the rep at one point, and asserted he twice told the firm the producer should be fired.
Waddell & Reed did not return RR's calls, but told the WSJ it planned to appeal the award.
Although Sawtelle's U-5 shows he was discharged for “personality differences,” the termination form also claims Sawtelle was under internal review and involved in an SEC investigation at the time of termination. The two “yes” answers on U-5s are key red flags for regulators.
Also on Sawtelle's record are 11 boilerplate client complaints reported by the firm — all of them disclosed after he was terminated. The complaints allege Sawtelle misrepresented mutual fund fees. The firm then “settled” the cases by waiving CDSCs on customer liquidations, reporting the waived amount as a settlement.
Sawtelle now works at another broker/dealer, Hackett Associates, in North Haven, Conn.
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