An irreverent Wall Street Blog
by Bill Singer
Join BrokeAndBroker blog on Facebook  Follow the BrokeAndBroker blog on Twitter  Connect with BrokeAndBroker on LinkedIn  Join Bill Singer on Google+  Subscribe to RSS Feed

Citigroup is Dunne-in By FINRA Arbitration Loss
Written: May 7, 2010

As a result of the termination of employment of several employees and their subsequent employment with Convergent Wealth Advisors, LLC,  former employer Citigroup Global Markets, Inc. d/b/a Smith Barney (CGMI) filed a FINRA Arbitration Statement of Claim on September 4, 2008, which asserted claims against a number of Respondents for

  • Breach of Contract
  • Conversion/Fraud;
  • Breach of Fiduciary Duty;
  • Misappropriation of Trade Secrets;
  • Intentional Interference with Business Relationships;
  • Unfair Competition;
  • Civil Conspiracy; and
  • Raiding.

Claimant CGMI requested an Order from the FINRA Arbitration Panel:

  • Enjoining Respondents, for a period of one year following their termination, from soliciting Claimant’s customers or initiating contact with Claimant’s customers for the purpose of getting the customer to transfer their account, to open a new account with CWA, or otherwise to discontinue their relationship with Claimant;
  • Requiring Respondents to return all of Claimant’s records;
  • Requiring Respondents to remove all of Claimant’s proprietary and confidential information from their computers;
  • Precluding Respondetns from soliciting any of Claimant’s employees or customers;
  • Permitting Claimant to inspect Respondents’ computers to ensure no proprietary and/or confidential information remains on Respondents’ computers.

Further, Claimant sought compensatory damages, attorneys’ fees, costs, and a referral of the Respondents by the FINRA Arbitration Panel to FINRA for disciplinary actions, and any other relief that the Panel deemed appropriate.


In the Matter of the Arbitration Between Citigroup Global Markets, Inc. d/b/a Smith Barney, Claimant, versus Peter F. Dunne, George A. Dunn, Lori Van Dusen, David Mattia, Bruce Wall, Winship Rose, Richard Vankuren, Jeffrey Wagner, Thomas Hawks, Jeffrey Santos, James Henson, Douglas Smith, and Convergent Wealth Advisors, LLC, Respondents (FINRA Arbitration 08-03123, April 30, 2010).


The Respondents Weigh In


Respondents generally denied the allegations and asserted various affirmative defenses.


Respondents Dunne, Dunn, Wall, Ross, Santos, and Smith filed a Counterclaim asserting:

  • Tortious Interference with Economic Relations;
  • Unfair Competition;
  • Failure to Comply with the Protocol for Broker Recruiting; and
  • Failure to Comply with FINRA’s Rules 

Respondents Dusen, Mattia, Vankuren, Wagner and Hawks filed a Counterclaim asserting:

  • Tortious Interference with Economic Relations;
  • Unfair Competition;
  • Defamation;
  • Injurious Falsehood;
  • Failure to Comply with the Protocol for Broker Recruiting; and
  • Failure to Comply with FINRA’s Rules 

Respondents sought attorneys’ fees, costs, and other equitable relief.  Moreover, in furtherance of their Counterclaims, Respondents sought

  • Complete account information for all of Respondents/ current clients who were formerly clients of Claimant;
  • Compensatory damages;
  • Punitive damages;
  • Attorneys' fees;
  • Costs;
  • a referral of the Claimant by the FINRA Arbitration Panel to FINRA for disciplinary actions 

Claimant CGMI generally denied the Counterclaims’ allegations and asserted various affirmative defenses.


The Preliminaries


Respondent CWA is not a FINRA member and did not voluntarily submit to arbitration; and, as a consequence, the Panel made no determination with respect to claims against CWA.


In June 2009, Claimant filed a Notice of Dismissal of Respondent James Henson.


In September 2009, the FINRA Arbitration Panel granted Claimant’s Motion for Additional Time to submit discovery materials subject to a $10,000 sanction payable to Respondents for Claimant’s discovery failure.  Throughout this proceeding, the Panel dismissed five of Respondents’ Motions to Dismiss based upon allegations that Claimant had intentionally and materially failed to comply with the Panel’s discovery order.


The Decision


The FINRA Panel dismissed all claims and requests with prejudice. 


Bill Singer's Comment: Thirteen, count 'em, 13 Respondents!  And what does Claimant CGMI have to show for all its hardball?  Well, some 20 months after Claimant CGMI filed its Statement of Claim, the FINRA Panel essentially gave the firm a cockeyed look as if to say "What the hell are you talking about?"  Although all claims of all parties were dismissed, this was clearly a big black eye of a loss of Citigroup/Smith Barney.


As I have often said about these "send 'em a message" cases, very often the message gets lost in the mail.  Large firms such as Citigroup can afford the financial costs of playing hardball with these types of employee disputes.  The theory is that the employer needs to demand its terms for settlement or go to the mat at a hearing.  Assuming you buy the logic, the benefit of such a strategy is that the word gets out that you either pony up the settlement bucks or you could get crushed at a hearing (both in terms of compensatory damages, interest, their attorneys' fee, and all the other greater and lesser pains of such stress).


As a strategy -- as a theory -- that's great.  The only problem is that a firm such as CGMI has this one major Achille's Heel: It can't afford to lose a single arbitration.  When CGMI loses a case, such as this one, it becomes part of the lore of Wall Street.  Which means that brokers gather round the water coolers, at the bar on Friday afternoon, and on the online forums and talk about how so-and-so spit in CGMI's face and got away with it -- and if I ever decide to leave, I'm not taking any crap from them either!  


Previous Entries
May 27, 2015
If Hillary Clinton could use a personal server for her emails, why can't a registered representative use an AOL email account? Then there's the whole ... Read On
May 26, 2015
Stockbroker, Compliance, Legal, and Regulatory JobsEmployment Page Jobs#wallstreetjobs @brokeandbrokerNOTICE TO EMPLOYERS: Brok... Read On
May 23, 2015
SEC Commissioner Stein Stands Alone In Her Defense Of The Investing Public And IndustryOne, and only one, Securities and Exchange Commissioner got it ... Read On
May 22, 2015
One, and only one, Securities and Exchange Commissioner got it right. To her ever-lasting credit and to the shame of her colleagues, Commissioner Kara... Read On
May 21, 2015
Yesterday, I tried to predict the future. A few hours before the United States Department of Justice announced its settlement with JPMorgan Chase, Cit... Read On
May 20, 2015
It is now 8:30 a.m. EDT on May 20, 2015 and I am posting this Blog without much enthusiasm – I think the fancy French word for ho... Read On Job Search

Related Topics
    Tag Cloud
    Internet FINRA Bear Stearns Bloomberg SEC NASD NYSE Money Laundering Due Diligence Waiver Forbes China Broy Woody Allen Madoff NAC NPR Marketplace Stanford UBS Ketchum Antitrust NASDAQ RRBDLAW Schapiro Bill Singer BrokerAndBroker USERRA Morgan Keegan Arbitration Counterclaim Khuzami BrokeAndBroker Aleynikov Goldman Sachs brokeandbroker Promissory Note U4 Bill SInger EFL CFTC Huffington Post Flash Crash arbitration RBC Ponzi Affinity Fraud Wachovia Criminal Raymond James Expungement Fraud Securities Fraud Outside Business Activity Registered Rep Magazine FOREX FBI Banc of America Pro Se PCAOB Supreme Court Morgan Stanley Smith Barney E*Trade Margin email Galleon Penson U5 Defamation Protocol Wells Fargo Punitive Damages Citigroup Merrill Lynch ARS Employee Forgivable Loan Street Legal Morgan Stanley AWC Fidelity Bankruptcy Broke And Broker HFT David Sobel Day Trading Ameriprise Commissions Spouse Schwab Commission CRD Kenneth Starr IRS CNBC Complaint ATM Skimming Hacking Phishing Malware Naskovets Poteroba Koval Lincoln Financial Selling Away Outside Business Activities Rakoff 2nd Circuit Second Circuit IRA 401k Forgery Tax Email Netschi Moore Whistleblower Street Sweeper Countrywide Tran Bharara Facebook Online Severance Bonus Eligibility Rule TD Ameritrade Hedge Fund SAC 1099 Smith Barney Lehman Brothers SIPC IC3 Scottrade Lehman JPMorgan Chase Hertz Insider Trading Bank of America Department of Justice Elles Bribe Auction Rate Securities Raiding Spam Edward Jones Medicare Diabetes Dow Schumer Thain Walter Bid Rigging Real Estate Discrimination Wall Street Statutory Disqualification Form U4 Form U5 Indictment Boyland DOJ Corruption bill singer FTC Do Not Call FINRA Arbitration Costa Rica Settlement LIBOR Varney Plea Rule 8210 Eligibility RRBDlaw 8210 Appeal Fowler LPL Johnson Cellphone US Airways JPM BrokeandBroker Reg D MSSB Vault Loan SunTrust Discovery Employment Rosenthal Recruiting Lawyer Trading Platform JP Morgan Employment Tuesday Wrongful Termination Bank Guarantee WaMu Solicitation REIT Martin Credit Cards Rule 3050 Away Account Credit Repair PN Advisor Placement Group Fifth Amendment Forex Mortgage Private Placement Moon CGMI Failure to Supervise Merrill Anderson Exam Lee Borrowing Tax Lien Conversion Oppenheimer Wedbush Felony Misdemeanor Expenses ING Lien OTR Estate Jobs Florida Credit Card Elderly Flash Drive Annuity Expense Reimbursement FNMA BrokeAndBroke TIC DWI Promissory Notes Suitability Will POA Power of Attorney Casino NSF MF Global Counterfeit Preet Bharara Corzine Hacker Deferred Compensation RIA Prison Disclosure NASAA Aguilar FCPA Subway Testimony Identity Theft Gold Dell Bar Injunction Bank Deutsche Bank Hospital Due Process God HSBC Private Placements Eric Stein Wire Fraud FINOP CCO Compliance Audit Joshua Brown Backstage Wall Street Obstruction of Justice Reuters Retaliation Variable Annuity Arbitraiton Outside Account Options Telephone Wine Series 7 Social Media ADA Pacifico Non-Prosecution Agreement Confirm Tax Fraud Retirement OBA Equity Indexed Annuities EIA Disability MetLife Continuing Education Cheating OIP Tax Liens Willful CE Unregistered Impersonation Annuities BBVA Business Expenses ETF JOBS Act Mail Fraud Parking Variable Annuities Signatures BitTorrent Impersonator Wire Transfer Wire Crowdfunding Nasdaq Away Accounts WSP Laptop Dodd Frank Checks RMBS AML PST Solicited Unsolicited Congress SRO Password Wife Discretion Non-Solicitation Restaurant Commodities Private Securities Transaction Offer of Settlement Money Market employment jobs Great Recession Chase Investment Services Arrest Barclays Liens Failure To Supervise Apple Time And Price T&P Willfully Husband Letter of Authorization LOA Sexism Debit Card Knight Test Practice Sale Unfair Competition Signature Judgments Undisclosed Settlement Trainee Fee Trust Laser Side Bar Mattera Female Sales Assistant Kennedy Charge Sexist NML Argentina Embezzlement Silver Investor Alert Evidence Judgment Bank Fraud Deceased Bill Singer BrokeAndBroker TSSB OHO Leveraged ETF Mary Jo White Trustee Motion To Dismiss Frumento Conspiracy 6th Circuit Proctor Commissioner Stein Rule 3040 Customer Files Class Action Beneficiary NYAG Schneiderman 11th Circuit Insurance Gallagher White Self Regulation Short Sale Compromise Website Rule 2010 Check TRO Supervision Vacatur Remand SDNY Rule 12206 BrokeAndBroker Bill Singer Piwowar Stifel Rule 1122 Article V signature Confidential Inside Information Reg SP VA Regulation SP Fees Cease And Desist Customer Rule 3270 Rule 3240 Annual Compliance Questionnaire OWB 2Cir Red Flags Payroll Stockbrokers ALJ Cybercrime Loans BrokerCheck Altered Records
    Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+