In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in July 2009, Claimant Kipper asserted that Respondent Merrill Lynch had damaged his career and reputation, and had wrongfully withheld compensation. Ultimately, Claimant sought:
In the Matter of the FINRA Arbitration Between Carl J. Kipper, Claimant, vs. Merrill Lynch, Pierce, Fenner & Smith Inc., Respondent (FINRA Arbitration 09-04306 , December 20,2011).
Respondent generally denied the allegations and asserted various affirmative defenses.
The FINRA Arbitration Panel found Respondent Merrill Lynch liable and ordered it to pay to Claimant of $650,000.00 in compensatory damages and denied the requested expungement.
According to online FINRA reports as of December 27, 2011, Kipper was terminated by Respondent Merrill on February 1, 2008, allegedly because:
MR. KIPPER'S EMPLOYMENT WAS TERMINATED ON FEBRUARY 1, 2008 AFTER THE FIRM CONCLUDED THAT HE SENT UNAPPROVED CORRESPONDENCE IN VIOLATION OF FIRM POLICY AND SHOWED A LACK OF JUDGMENT IN THE HANDLING OF CLIENT'S ACCOUNTS.
EMAILING AN UNAUTHORIZED DOCUMENT TO A CLIENT AND USING A LACK OF JUDGEMENT REGARDING A CLIENT
Ahhh, but that somewhat dry recitation doesn't remotely do justice to what underpins this mess.
The State of Massachusetts' Securities Division filed aComplaint in 2008 against Merrill Lynch, Kipper, and Manuel Choy concerning some $14 Million in allegedly unsuitable Collateral Debt Obligations ("CDOs") that were sold to the city of Springfield, MA. As set forth more fully in the Complaint, within months of the city's purchase of the cited CDOs, the securities purportedly became illiquid and lost almost all of their value. The State sought an order instructing Respondents to permanently cease and desist,to pay a fine, to disgorge all profits. Additionally, the State sought to censure the Respondents and to have an independent consultant appointed.
Frankly, notwithstanding the big bucks involved, it's a somewhat old, tired tale. Once the mess spilled out into the airwaves, the finger pointing began. There were recriminations about what was bought, what was sold, what was permitted or prohibited, who knew which politicians, and, well, we've all been there and done this before, even if the names are different and the damages larger or smaller. READ THE STATE COMPLAINT and watch this 2008 Television News Report.
In February 2008, Merrill agreed to reimburse Springfield for nearly $14 Million. READ Massachusett Attorney General's RELEASE
This FINRA Arbitration is a bit of an odd one. Claimant Kipper is named in a 2008 State Complaint,which alleges misconduct in connection with the sale of some $14 Million in CDOs to the city of Springfield, MA. Respondent Merrill fires Claimant Kipper in 2008. In 2009, Merrill apparently settles the State Complaint through the reimbursement to Springfield of nearly the entire amount in dispute. In 2009, Kipper sues Merrill.
I have seen some press reports claiming that Kipper was exonerated by the outcome in this FINRA Arbitration. Frankly, I'm not sure how this FINRA Arbitration Decision can be viewed as an "exoneration" of the charges in the State's Complaint, which was not at issue in this private dispute resolution forum. Further, it doesn't seem that the State of Massachusetts pursued its CDO case beyond the reimbursement paid by Merrill.
Given that Claimant Kipper sought over $4 million in various damages from Respondent Merrill, the characterization of any "exoneration" must be diluted by the fact that the $650,000 in damages awarded by the FINRA Panel was less than 1/5 of the damages sought. Moreover, the Panel pointedly denied punitive damages and an expungement. Notwithstanding, $654,000 ain't chicken feed. Clearly the FINRA arbitrators thought Claimant Kipper was victimized by Respondent Merrill to some extent.
All of which only goes to show you how odd a place Wall Street is. A brokerage firm sells a city what subsequently looks to be more toxic than beneficial. The brokerage and brokers get sued by the State. The brokerage agrees to repay nearly all the lost investment. The brokerage fires the broker. The broker sues the brokerage. An industry arbitration panel awards over half a million dollars to the fired broker but refuses to expunge his record. And this, according to some pundits, is an exoneration! Gotta love it.