Some days the sun shines brightly on Wall Street. Some days it's about nothing but the blues. In a recent FINRA Arbitration case, we have a former employee pitted against his former employer firm and boss. It's the stuff of song and law. Enjoy the lovely Louis Armstrong tune at the end of the story.
Case In Point In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in February 2015 and as thereafter amended, Claimant Alpert asserted breach of contract, unjust enrichment, violations of the New York Labor Law, a violation of New York Debtor Creditor Law. Claimant Alpert sought unspecified damages, interest, fees, and costs. In the Matter of the FINRA Arbitration Between Jacob Alpert, Claimant, vs. M. R. Beal & Company, Blaylock Beal Van, LLC, and Bernard B. Beal, Respondents (FINRA Arbitration 14-00409, March 3, 2016).Respondents M.R. Beal and B. Bernard Beal generally denied the allegation and asserted various affirmative defenses. Respondent M.R. Beal and Bernard Beal filed a Counterclaim asserting breach of fiduciary duty of loyalty, and misappropriation of M.R. Beal's assets. Counter-Claimants sought unspecified damages, interest, fees, and costs. Outta Here On September 28, 2015, Respondent Blaylock Beal Van argued that it had been improperly added as a Respondent and moved to be removed as a party. By order dated October 20, 2015, the FINRA Arbitration Panel granted that motion and the firm was removed as a Respondent.Missing In ActionThe FINRA Arbitration Decision asserts that Respondent M.R. Beal & Company did not appear at the arbitration hearing despite having been duly notified.Award The FINRA Arbitration Panel found Respondents M. R. Beal and Bernard Beal jointly and severally liable and ordered them to pay to Claimant Alpert:
$250,000.00 in compensatory damages at the rate of 9% interest per annum from April 1, 2012, until paid in full; and
$225,000.00 in compensatory damages at the rate of 9% interest per annum from April 1, 2013 until paid in full; and
$250 reimbursement for FINRA filing fees
Included in this FINRA Arbitration Decision was this:
ARBITRATORS' EXPLANATION OF DECISION The Panel found that Respondent M.R. Beal owed Claimant $250,000.00 in bonus compensation for 2011 and $225,000.00 in bonus compensation for 2012. Respondent B Beal is jointly and severally liable because of violations of New York's Debtor Creditor Law sections 273 and 276.
Bill Singer's Comment
Ummmm . . . what????
Let's sort of start near the beginning, when Claimant Alpert alleges unjust enrichment and breach of contract. One might ask -- in fact, I wondered -- just how Alpert was unjustly unenriched and what "contract" was purportedly breached. No matter where I looked in the FINRA Arbitration Decision, such revelations did not exist. Okay, sure, you might infer some plausible explanations but, you know, that's not exactly what should be involved when reading a final decision by a panel of independent arbitrators.
Then there are the allegations about violations of New York State's Labor Law and Debtor Creditor Law. Once again, couldn't FINRA have provided us with a modicum of facts as to what constituted the alleged acts that violated such laws? It's not Claimant's or the Respondents's faults; no, as I see it; it's a failure of FINRA to require adequate "content and context" in these arbitration decision.
As both a lawyer and someone with an interest in Wall Street's comings and goings, I'm left perplexed by this decision. It's not unusual for a former employee to sue his or her former employer firm for unpaid compensation or other financial consideration. Less common but not entirely unusual is to also name an individual (be that an officer or agent) as on the hook for unpaid compensation. In cases where a former employee is seeking unpaid compensation, the damages are generally demanded of the former employer entity, When a Claimant demands payment of compensation from an individual, however, I would think that, at a minimum, a FINRA Arbitration Decision would indicate the alleged bases upon which such liability against a man or woman is predicated. As to Respondent Bernard B. Beal, just who the hell is he in terms of "M.R. Beal & Company" and why does Claimant Alpert seek to put him on the hook? You may have an opinion but that's not the point. For starters, Bernard B. Beal, let's call him "B.B. Beal" is not "M.R. Beal," so don't be so quick to make an assumption.
Blaylock Robert Van, LLC, a leading minority-owned investment bank and financial services company, announced today that veteran municipal banker Bernard B. Beal has joined the firm as Chairman. Mr. Beal will oversee the firm's municipal banking, underwriting, sales, and trading activities. Underscoring the influence and prestige Mr. Beal brings to the firm, it will be renamed Blaylock Beal Van, LLC, pending regulatory approval.
Mr. Beal, who has more than three decades of municipal investment banking experience, is the founder and CEO of New York-based M.R. Beal & Company, one of the nation's leading minority-owned investment banks specializing in municipal and corporate finance. Since Mr. Beal founded his namesake firm in 1988, following a successful nine year career in municipal and corporate finance at Shearson Lehman Hutton, M.R. Beal managed municipal financings totaling in excess of $400 billion, and served as financial advisor on over 60 financings worth in excess of $7 billion. In 1999, M.R. Beal substantially increased its presence in corporate finance and expanded its equity research capabilities, and since that time participated in over $75 billion of equity and corporate debt financings.
. . .
Blaylock Beal Van, LLC is the combination of three longstanding founders of African-American owned and founded investment banking firms: Ronald Blaylock was the founder of Blaylock & Company, Inc. in 1993; Eric Van Standifer founded Robert Van Securities, Inc. in 1991; and those two firms joined forces in 2007 to form Blaylock Robert Van, LLC. And now Bernard Beal will add his more than 30 years of experience in the renamed Blaylock Beal Van, LLC as it continues its activities as a major minority-owned investment bank and financial services firm. ..
Okay, so, according to the above press release, Bernard B. Beal was the founder and Chief Executive Officer of Respondent M.R. Beal & Company, which he apparently left in 2014 to join Blaylock Beal Van, LLC. None of which even remotely explains how the hell Bernard Beal wound up on the hook in a joint/several capacity for $475,000 in damages awarded under New York State Debtor Creditor Law? If you are interested in learning more about some of the likely events that prompted Claimant Albert's lawsuit, you should read: "Beal Closes Firm to Seek Muni Synergy With Blaylock" (Bond Buyer, by Christine Albano, February 25, 2014). The Bond Buyer article asserts that:
The closure of M.R. Beal, meanwhile, left a bitter taste with former employees who, speaking on condition of anonymity, characterized the move as sudden, complained of canceled bonuses and pay cuts, and said the company's finances had recently deteriorated. Beal caught employees off guard with the shuttering of offices in Chicago and Texas, they said. A review of public filings shows that M.R. Beal might have been a casualty of a slump in business following the financial crisis due to a decrease in volume, as well as a nearly 21% decrease in underwriting spreads since 2009.
The company's senior-managed volume dipped to five deals in 2012 from 13 in 2011 -- and a record 25 deals in 2010, following seven in 2009 before the financial crisis. . .
The FINRA Arbitration Decision informs us that Claimant Alpert alleged liability under New York State's Debtor Creditor Law and that the arbitrators awarded $475,000 and that Respondent Bernard B. Beal was jointly and severally liable on those awards under New York State's Debtor Creditor Law Sections 273 and 276. Wonderful . . . except for the fact that we are never told what constituted the Debtor Creditor Law sections under which Respondent Bernard Beal was found liable. In case you're interested, here is what BrokeAndBroker.com Blog's publisher Bill Singer dug up:
New York Debtor Creditor Law Section 273: Conveyances by insolvent: Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.
New York Debtor Creditor Law Section 276: Conveyance made with intent to defraud: Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.
The FINRA Arbitration Panel found that the two six-figure awards totaling $475,000 were mandated under the provisions of New York State law that involved fraudulent "conveyances by insolvent" and "conveyance made with intent to defraud." So . . . who did the arbitrators find "insolvent"? Further, what conduct did the arbitrators find to be "fraudulent" or undertaken with that intent? I have no idea. If you can figure it out, let me know.
I compliment the FINRA arbitrators for their effort to provide an "Explanation of Decision," and, as far as that paragraph goes, compliments for the attempt. If nothing else, we learn, albeit at the end of the Decision, that the awards were for 2011 and 2012 bonuses.
In the end, Bernard Beal and M.R. Beal & Co. certainly got a case of the blues on Wall Street; which reminds me of that wonderful Louis Armstrong standard: Beale Street Blues.Okay, so it's a bit of a stretch with that extra "e" at the end of "Beal." So sue me under New York State Debtor Creditor Law.