Phil Spartis, one of two former Salomon Smith Barney brokers currently suing their old firm, has been dismissed from two cases in which he was named in a suit by former WorldCom shareholders, according to documents obtained by Registered Rep.
Between 2000 and early 2002, several multi-million dollar complaints were brought against Spartis and former colleague Amy Elias, brokers in Smith Barney’s Atlanta office, where they supervised exercise of WorldCom employee stock options. The complainants sued these two and other brokers, along with Smith Barney for damages, charging negligence and improper handling of accounts, among other allegations.
After months of wrangling, Spartis and Elias were ultimately fired from Smith Barney, as Registered Rep. reported in March. Their attorney, Jeffrey Liddle of Liddle & Robinson in New York, ended up filing suit against Smith Barney and telecom analyst Jack Grubman for his lauding of WorldCom as the stock price dropped.
The two cases in which Spartis has been dismissed without prejudice were brought by the law firm of Liner, Yankelevitz, Sunshine, and Regenstreif for former WorldCom employees. In both cases, Spartis (without Elias) was named as a respondent. Then-supervisor Michael Grace, along with the firm, was named in those complaints as well. The attorney handling those cases, David Markun, could not be reached for comment.
Other Dismissals Sought
Meanwhile, Liddle is seeking the dismissal of his clients in several cases involving WorldCom shareholder/employees. One is a $6.73 million suit brought against Spartis, Elias, broker David Hobby and Smith Barney by Gary Brandt, WorldCom’s former head of investor relations. Another is a $5 million suit filed by John Grimley against Spartis and Smith Barney; Grimley is represented by Mark Raymond of Miami.
Grubman’s bullishness on WorldCom, Liddle has argued, compromised Spartis’ and Elias’ ability to provide advice to their clients. Other attorneys involved in the litigation believe the greater fault lies with the brokers.
During the discovery phase, Smith Barney has produced taped conversations to Liddle, which he has submitted as evidence, Liddle said. In his motion to dismiss, filed with the NASD’s dispute resolution, Liddle includes quotes from taped conversations that show Brandt acknowledges Grubman’s role in supporting the stock.
In a Sept. 28, 2000, in a conversation with Elias, Brandt says it’s "tough" for the brokers "because, first of all, you know, you represent WorldCom, and you are trying to rep the people that are your clients, and then you’ve got Jack Grubman, who, you know, is so tight with management, so it is very easy not to be completely balanced in your advice…the cards are stacked against you whether you come across that way as being balanced or not," according to the letter.
Brandt, in his complaint, charges the firm, Spartis, Elias and Hobby, with misrepresentation, gross negligence and mismanagement in exercising and holding WorldCom stock options—accusing them of failing to provide a strategy that would have protected his options rather than exposing Brandt to margin calls. Ultimately, Brandt fell into negative equity. In a November 2000 conversation, heard by Registered Rep. on June 5, Brandt, after losing several million dollars in stock value, blasts Spartis, telling him he is "disappointed" in how the account was managed, and says he questions whether he’ll ever use Salomon Smith Barney ever again.
Harry Miller of Perkins Smith Cohen in Boston, who represents Brandt, was unavailable for comment.
An earlier case, brought by Robert and Melanie Goss against Smith Barney, Spartis, and Elias, was settled, attorneys familiar with the matter confirmed last week, for an undisclosed amount. However, Liddle is still seeking to have Spartis and Elias exonerated—that is, not have the terms of the settlement appear on their U-5 records—as well as recover legal fees from Smith Barney. "It’s not resolved as far as we’re concerned," Liddle said.