On February 14, 2011, the Financial Industry Regulatory Authority's ("FINRA's") Department of Enforcement ("DOE") filed a Complaint charging Thomas Thanh Doan with submission of fraudulent invoices to an affiliate of his member firm in violation of FINRA Conduct Rule 2010. FINRA Department of Enforcement, Complainant, v. Thomas Thanh Doan, Respondent (Decision Granting Summary Disposition/2009019637001, September 19, 2011).
FINRA asserted that Respondent Doan was employed by Woodmen of the World Life Insurance Society ("Woodmen Life"), the parent company of Woodmen Financial Services, Inc. ("Woodmen Financial") from August 1991 until August 13, 2009, when Woodmen Financial permitted Respondent to resign for submitting false invoices. Accordingly, Doan was also registered as an investment company and variable contracts products representative of FINRA member firm Woodmen Financial from approximately October 2002 until August 2009, when he was permitted to resign.
In his Answer filed on March 11, 2011, and as amended on March 29th, Respondent Doan (proceeding pro se) requested a hearing. Doan asserted that his employer had treated him unfairly; and that he had made a mistake about the invoices he had submitted. He explained that the allegedly converted funds were intended to serve as a legitimate reimbursement to him for unreimbursed business expenses that he had incurred for the benefit of his firm.
In the parlance of regulatory no-no's, Doan argued that he had engaged in self help by essentially submitting false invoices in order to extract disputed payments from his employer - regulators typically admonish against resorting to two wrongs to achieve one right.
As alleged and set forth in the FINRA Decision, between February 2009 and July 2009, Respondent submitted six separate requests to Woodmen Life for reimbursement of expenses to rent a conference room in a condominium complex named Hawaiki Tower, in Honolulu, Hawaii. In support of these reimbursement requests, Doan presented invoices, which appeared to have been issued according to the letterhead by "Hawaiiki Tower," although the correct name should have been "Hawaiki Tower.
The invoices stated that Doan had reserved a conference room at a cost of $450 per date at the Hawaiiki Tower for a meeting on one of six different dates from specified hours typically starting at 8 or 9 a.m. and ending at 12 noon or 1p.m. Each invoice was stamped "Paid" in a section designated for use by the manager of the conference facility.
FINRA alleged that Doan did not reserve and did not use the conference room on any of the dates submitted for reimbursement (or for any dates in 2009), and was never charged a fee. Moreover, FINRA alleged that Doan fabricated the invoices, including the "Paid" stamp.
Allegedly, Woodmen Life reimbursed Doan per the first five submitted invoices in the amount of $450 each for a total of $2,260; however, the company refused to reimburse the sixth invoice after discovering it was not issued by Hawaiki Tower.
On June 23, 2011, DOE filed a motion for summary disposition on both liability and sanctions.
Respondent Doan's July 20th response to the motion did not contest the allegation that he had submitted false invoices but asserted that he had used the reimbursement funds for office furniture for which Woodmen Life had wrongfully delayed his reimbursement for more than two years.
SIDE BAR: Pursuant to FINRA Procedural Rule 9264(e) an Office of Hearing Officers hearing panel may grant summary disposition if there is no genuine issue with regard to any material fact and the Party that files the motion is entitled to summary disposition as a matter of law.
In plainer terms, if there isn't any meaningful dispute as to the facts in the case, why waste everyone's time with a full-fledged hearing? As such, a summary disposition is the equivalent of fast-tracking a case through the disciplinary hearing express lane. Of course, as you may well imagine, one party's lack of meaningful facts is another party's "are you crazy?"
Clearly, a Motion for Summary Disposition should be scrutinized and used sparingly because the result of granting the motion essentially denies the losing party an opportunity to a so-called "day in court" (albeit a FINRA disciplinary hearing).
In Doan, we have an interesting set-up for summary disposition. Respondent Doan didn't seem to deny that he submitted false invoices and cashed his employer's checks - so those facts don't appear to be denied. To that extent, he seems to at least admit that he's guilty as charged. His explanation for his misconduct is that he was justified in engaging in self help. The question for the FINRA Hearing Panel is whether there are any "material" facts in dispute between FINRA and Doan that require a hearing.
The Decision concluded there were no genuine issues of material fact, given Respondent Doan's stipulation to having submitted false invoices for the $2,250 he received - notwithstanding his claim for an off-set for allegedly unpaid, prior furniture expenses. Further, it was deemed as undisputed that Respondent took Woodmen Life's property without authorization, and he neither owned the funds nor was entitled to possess the funds - thus satisfying the legal test for wrongful "Conversion."
The Decision rejected Doan's self-help defense by noting that his claim of prior unreimbursed expenses did not justify his conversion throught deceit. If, in fact, Woodmen Life had wrongfully withheld reimbursement for the prior office furniture expense (and this was merely alleged), that did not justify committing a second wrong by Doan when he converted his employer's funds - the two wrongs would never add up to one right. Noting that Doan's misconduct was protracted over five months and undertaken for the purpose of financial gain, the hearing panel was hard pressed to find any mitigation and, as such, imposed upon him a Bar from associating with any member firm in any capacity for conversion and misappropriation of funds in violation of FINRA Conduct Rule 2010.
For variations on these expense violations cases, see: