January 9, 2021
T. S. Eliot famously wondered in "The Journey of the Magi": were we led all that way for Birth or Death? In today's Guest Blog, Aegis Frumento takes us back to the Feast of the Epiphany and those three wise men -- the Magi. In his modern-day pilgrimage, however, Aegis does not come upon a manger but upon a Capitol under siege. Oddly, Aegis finds himself asking Eliot's question albeit in a far different context.
You didn't get the bonus you wanted. You didn't get the raise you wanted. You didn't spend all of that 2% worth of annual T&E you were allocated. In your mind, you were owed. In your mind, someone was gonna pay. Then you came up with that brilliant idea about taking your spouse out for dinner at the really, really expensive restaurant. And you would pay for it on the corporate credit card. And you would tell those idiots in Accounting that it was a business meal with a client. Like who the hell is ever gonna know, right? Umm, not so right. In today's blog we come across the unfortunate case of a corporate officer who gamed his firm's business expense reimbursement system. If I'm writing about it, you should assume that the gambit didn't exactly work out.
Today's blog considers a Wall Street career that began in 1966, when Allen Holeman started out as an Operations Clerk in a FINRA member firm's Compliance Department. In 2009, during the onset of the Great Recession, Holeman was hit with an IRS tax lien for unpaid 2006 and 2007 taxes; and, thereafter, another lien for unpaid 2008 taxes. In the interim, Holeman entered into installment payments against those liens. Upon joining David Lerner Associates in November 2013 as its Chief Compliance Officer, Holeman apparently failed to timely disclose the liens. Things just didn't get any better for him from that point on.
It all started with a customer's complaint. Except the branch manager, who got named in the ensuing lawsuit, had no involvement in, or knowledge of, the activities at issue. Notwithstanding the no-involvement and no-knowledge aspects, FINRA still required that the manager's industry record be marked up by the inclusion of the customer's complaint. Worse, FINRA then collected a number of fees on its way to setting up an expungement arbitration by which the poor manager had to clear his name via a time consuming and somewhat expensive process. Thankfully, a FINRA Arbitrator found that the underlying customer lawsuit was meritless.
If you believe that you've been defrauded by your stockbroker and/or brokerage firm, you're not alone. Moreover, such a nagging suspicion is not something of recent vintage but a pox that has plagued Wall Street's houses for generations. Where there's money, there's fraud. Plain and simple. On the other hand, not all losses sustained in a brokerage account are properly ascribed to fraud. After all, you put your money down, you take our chances -- some investments make money and some end in losses. Not every hunch plays out. Not every can't-lose investment proves as such. In a recent FINRA arbitration, we see an angry investor demanding compensation from UBS Financial and her stockbroker. The sole FINRA arbitrator didn't see fraud or mismanagement but did see the unexpected impact of COVID.