A stack of the iPods
Denise Olson entered the securities industry in 1991 and by 2004 had joined Wachovia Securities, Inc. (later known as Wells Fargo Advisors, LLC) in 2004, where she served as a branch manager supervising some 50 financial advisors from about June 2005 until June 2010, at which time she was terminated for allegedly converting firm funds.
Wachovia had provided Olson with a corporate credit card for business expenses; and pursuant to the firm's expense policies, she was entitled to seek reimbursement for legitimate business expenses. When Olson charged personal expenses to the corporate card, she designated the charges on the firm's internal computer system and paid those exceptions.
All In The Family
On April 2, 2010, Olson purchased for $740.10 on her corporate card, two iPods at a Best Buy store as gifts for her niece and nephew. On April 30, 2010, Olson posted the charges on Wachovia's computerized expense reporting system as a business expense. In entering the charges for the iPods, Olson falsely described the expense as office equipment for a branch-office conference room.
During an internal audit, the iPod charges were discovered, and in response to an auditor's questions, Olson initially claimed that she had purchased equipment for the branch's conference room; however, she ultimately admitted to having used the card for the iPod personal expenses. After being fired by Wachovia, Olson repaid the disputed charges.
By way of explaining or rationalizing her subterfuge, Olson asserted that back in September 2009 when the branch office was being renovated, she had purchased two refrigerators but had not sought reimbursement. Apparently, Olson deemed the iPods as a set-off for the refrigerators but conceded during a regulatory investigation by the Financial Industry Regulatory Authority ("FINRA") that her self-help was a "mistake" - at a subsequent FINRA disciplinary hearing, she admitted to having "intentionally misled [her] company." FINRA Department Of Enforcement, Complainant, v. Denise M. Olson, Respondent (FINRA Office Of Hearing Officers, Hearing Panel Decision, 2010023349601, January 4, 2013).
The FINRA Hearing Panel found that Olson wrongfully converted $740.10 from Wachovia and falsified her expense account in violation of FINRA Conduct Rule 2010, which required her to observe high standards of commercial honor and just and equitable principles of trade. Although the allegations did not involve a security, FINRA deems Rule 2010 to encompass any unethical business-related misconduct that reflects on an associated person's ability to comply with the regulatory requirements of the securities business and to fulfill fiduciary duties in handling other people's money.
In her Answer to FINRA's Department of Enforcement charges, Olson admitted to the substantive misconduct but argued that the Hearing Panel should not sanction her for her "lapse in judgment." During a pre-hearing conference and at the hearing, Olson confirmed that:
Guilty With An Explanation
Although the FINRA Hearing Panel unanimously found on the issue of Olson's liability, the panelists split on the sanction - with a 2:1 majority imposing upon Olson a:
The Panel determined that Olson's misconduct was intentional - citing to Olson's admission that she saw an opportunity to recoup money she thought was owed to her, and, thereafter, took that opportunity. Also, the majority found that Olson's misuse of Wachovia's expense system was consistent with an effort to conceal misconduct. Finally, the majority was dismissive of Olson's effort to mitigate her misconduct by characterizing it as not harmful to any customers.
In considering her explanation that her conduct should be viewed, in part, as a set-off for her prior payment for the office refrigerators, the Panel responded that the proper and honest route would have been to seek reimbursement through the provided channels. As to her repayment of the iPod expenses, the majority pejoratively characterized that act as occurring after being caught, in contradistinction to a demonstration of honesty or remorse:"There is no evidence that she would have repaid Wachovia absent being confronted about the charge. . ."
All facts and circumstances considered, the majority concluded that Olson mis-coded the iPod charges in order to avoid detection and only fessed up after being confronted by a Wachovia auditor. As to her lamentations of having suffered enough upon losing her Wachovia job and having to settle for a lower paying position at Ameriprise, the Panel found that (footnotes omitted):
Olson's job loss and resulting financial difficulties are irrelevant factors in determining the appropriate remedial sanction for her misconduct. Sanctions are remedial in nature, not punitive. They are designed to prevent future harm. Accordingly, the fact that Olson was fired, or has already suffered, is not a factor in determining sanctions.
The dissenting hearing panelist would have imposed upon Olson only a six-month suspension and a $5,000 fine. Parting ways with the majority, the dissent found that Olson was
truly remorseful and accepted the consequences of her actions. She acknowledges that a serious sanction is warranted for her misconduct, is genuinely ashamed of her behavior, and avows that her lapse in judgment will not be repeated. Furthermore, Olson took full responsibility for her mistake . .
In mitigating the nature and extent of Olson's alleged misconduct, the dissent concluded that the charges presented a case that was essentially:
a single mistake by Olson mischaracterizing a $740.10 personal expense as a business expense. There is no pattern or practice of Olson violating industry rules or violating her employing broker-dealer policies, intentionally or otherwise. Furthermore, there was no customer harm.
I do not agree with the Panel majority's conclusion that several aggravating and no mitigating factors exist and, for the reasons outlined below, I find that Olson's violation was serious, but not egregious. . .
Will Olson remain barred from the industry if she appeals her sanction?
READ this "Street Sweeper" column involving similar facts that resulted in a reduction of a FINRA OHO Bar following an appeal to FINRA's National Adjudicatory Counsel ("NAC"):
"Hartford Life Wholesaler Fabricated Embassy Suite Bill For School Donation"
Over the years, I have frequently written about business expense cases. They hit at every level of Wall Street - at Goldman Sachs, Merrill Lynch, UBS, Morgan Stanley, JP Morgan, Wells Fargo. Sometimes it's a shlub who tried to get away with buying some Christmas presents while pretending they were business expenses. Sometimes it's a misguided hot-shot broker or trader who takes a few pals and clients to a strip joint. Sometimes it's a member of the C-suite who pays hundreds of thousands of dollars to decorate the office. And, yeah, sometimes it's having the firm pay for your niece and nephew's iPods.