September 19, 2013
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in October 21, 2010 and as amended thereafter, Claimants alleged breach of fiduciary duty, negligence, negligent supervision, fraud by omission, misrepresentation and breach of contract in connection with their efforts to recover damages attendant to securities investments including two promissory notes used to finance real estate developments known as Moorings at Carrabelle. Inc., Moorings Development, Inc. and Pirates Cove Marina, LLC. Claimants sought at least $1 million in compensatory damages plus punitive damages, interest, and costs. At the close of the hearing, Claimants requested compensatory damages of $1,070,000.00 plus a loan guarantee of $12,000,000.00. In the Matter of the FINRA Arbitration Between Dr. Nasirdin H. Madhany and Zeenat N. Madhany, individually and as Trustees of the Zeenat Madhany Revocable Trust, and Dr. Nasirdin H. Madhany and Zeenat N. Madhany as Trustees of the Nasirdin H. Madhany Revocable Trust, Claimants, vs. Scott Andrew King and Citigroup Global Markets, Inc. f/k/a Smith Barney, Respondents (FINRA Arbitration 10-04929, September 16, 2013).
Respondent Citigroup Global Markets, Inc. ("CGMI") generally denied the allegations, asserted various affirmative defenses, and requested the expungement of the matter from the Central Registration Depository records ("CRD") records of Respondent King.
Respondent King did not file with FINRA Dispute Resolution a property executed Submission Agreement but in December 2010, Claimants filed an Amended Statement of Claim, which, in part, withdrew their claims without prejudice against Respondent King,
The FINRA Arbitration Panel found Respondent CGMI liable for breach of fiduciary duty as financial advisor to Claimants as well as negligent supervision and ordered the firm to pay Claimants' compensatory damages in the following amounts:
- $400,000.00 (Pirates Cove); and
- $647,334.00 (Moorings).
The Panel found that Claimants and other investors had signed a $12 million loan guarantee in an effort to protect their investment in the Moorings; and pursuant to that guarantee, a judgment was entered against Claimants and the other investors, jointly and severally, on October 18. 2012, in the amount of $10, 031.220.25. Wachovia Bank, N.A. v. Robert C. Brooks et al. (Circuit Court, Second Judicial Circuit, Leon County, Florida; Case No. 2009-CA-3786).
Apparently, the Claimants had attempted to settle their $12 million joint and several liability for $2.1 million; however, the FINRA Arbitration Panel could not ascertain whether the settlement offer was accepted subject to a Release and Satisfaction. Consequently, the Panel noted its intent that:
[R]espondent CGMI be held liable for and shall pay to Claimants the damages suffered by Claimants arising from said judgment, except for costs, interest and attorney fees. Therefore. Respondent CGMI is liable for and shall pay Claimants $2,100,000.00 and any additional monies, if any, that they have expended or have agreed to pay to settle their liability under said judgment.
Respondent CGMI shall indemnify and hold Claimants harmless for any additional damages not to exceed $10.031,220.25. that exist or may arise, for which Claimants could be held liable, as a result of said judgment. Said indemnity shall continue until or unless said judgment is satisfied as against Claimants and a Release and Satisfaction of Judgment is filed on their behalf.
Respondent CGMI is liable and shall pay Claimants costs in the sum of $37,967.73.
Respondent King's request for expungement is denied.