Bottle of White, Bottle of Red, Perhaps An Assisted Living Bond Instead at FINRA Arbitration

May 3, 2019

Today's FINRA Arbitration Decision invokes a seminar purportedly presented at a restaurant. Regardless of what did or didn't happen at that restaurant seminar, the public customer Claimant says that he got hit with a tab for about $50,000 in damages. There are the a la carte items involving $28,000,000 in bonds and $8,000,000 in an allegedly mismanaged investment; and, oh, there's also a supplement in the form of FINRA's expulsion of a member firm. 

Case In Point

In a FINRA Arbitration Statement of Claim filed in March 2017 and as amended thereafter, the public customer Claimant asserted omission of facts; misrepresentations; fraud; breach of fiduciary duty; negligence; failure to supervise; and unsuitability. As set forth in the FINRA Arbitration Decision, the "causes of action relate to Claimant's investment in bond offerings for assisted living facilities in Georgia and Alabama." Ultimately, Claimant sought up to $50,000.00 in damages plus interest, costs, and fees. In the Matter of the Arbitration Between John O. Everson, as Co-Trustee of the John O. Everson Revocable Trust UTA 12/2/96, Claimant, vs. Robert Warren Lawson; Rutland Walton Bussey; Elizabeth Ann Halsey; and John Joseph Taaffe ( FINRA Arbitration Decision 17-00597 / April 30, 2019)

Respondents Lawson, Bussey, Halsey, and Taaffe  generally denied the allegations and asserted various affirmative defenses.

A Bottle of White, A Bottle of Red, Perhaps a Bottle of Rose Instead

In response to motions to dismiss by Respondents Lawson, Bussey, and Taaffe, the sole FINRA Arbitrator denied Bussey's and Lawson's motions but granted Taaffee's. In granting Taaffee's motion, the Arbitrator offers this rationale:

Respondent Taaffe moved for dismissal on the grounds that he had never spoken to Claimant Everson, nor did he even know him. Claimant claimed he saw Respondent Taaffe at a restaurant, sometime in 2015, where Respondent Taaffe presented a seminar, or was present with those presenting a seminar. He further stated Respondent Taaffe failed in his duty to correct misrepresentations of Respondent Halsey, when she was conducting the seminar. Respondent Taaffe disputed any interaction with Claimant, stating he never met Claimant, and that he did not conduct restaurant seminars. He may have attended a presentation given by Respondent Halsey that was also attended by Claimant but could not be sure since Claimant did not provide any specifics on dates, places, or times. If he was at a presentation by Respondent Halsey, he was not aware of any misrepresentations by her, nor was he under a duty to monitor or correct her. The Arbitrator did not agree with Claimant's assertion that it was Respondent Taaffe's responsibility to correct Respondent Halsey just because he worked in the same office as her. 


In February 2019, Claimant filed with FINRA a notice of settlement with Respondents Lawson and Bussey, and, further, withdrew without prejudice the claim against Respondent Halsey. Thereafter, Respondents Halsey, Lawson, and Bussey moved to expunge the arbitration from their Central Registration Depository records ("CRD"). 


Claimant did not object to the requested expungements of Lawson's and Bussey's CRDs. Claimant participated in the three expungement hearings but only contested Halsey's. The sole FINRA Arbitrator denied Lawson's and Bussey's  requested expungements.

In seeking expungement, Respondent Halsey allegedly argued that "she was not in a position to know about omitted information because she was only in a sales position." Claimant objected to Halsey's requested expungement noting disagreement with her "contention that she was not in a position to know the omitted material information." 

No Specifics . . . No Knowledge . . . No This . . . No That 

The Arbitrator recommended the expungement of Halsey's CRD based upon a finding that she was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds. In recommending expungement, the Arbitrator offered this rationale in part:

The claim alleged that Respondent Halsey sold bonds to Claimant and she, along with other representatives, "forgot to mention they had previously issued some $28,000,000.00 to the same owners within the last eight months." The claim also alleged that neither "Beth Halsey, Lawson, nor the Bank were properly taking care of an $8,000,000.00 dollar investment." Claimant also said that he felt the sales staff was responsible for his losses and covering up. There is nothing specifically complained of that Respondent Halsey did to indicate that she was involved in any wrongful acts related to Claimant's bonds. Claimant's amended claim accuses Respondent Halsey of misrepresentation and omissions of material facts but fails to indicate how, or when she knew, or should have known of activities related to the specific wrongful acts of other parties' misappropriations and wrongdoings. 

Respondent Halsey denied all of Claimant's general allegations against her from the outset of this case, both in her pleadings, and the initial pre-hearing of this case. Respondent Halsey indicated she was merely the salesperson of the bonds and had no knowledge of underwriting for them, nor had she any duty to investigate them, or the properties tied to them, or to speculate on the actions individuals might take in the future. She did not know the individuals specifically named as wrongdoers by Claimant. Further, she left regular employment with non-party Lawson Financial Corporation in May, shortly after the sales took place, which is why none of the 17 exhibits in the Statement of Claim are signed by her, and the two addressed to her are responded to by her supervisor, Respondent Bussey. Claimant's specific allegations are against individuals engaged in activities Respondent Halsey had no knowledge of since she was no longer working at non-party Lawson Financial Corporation. She made no specific representations to Claimant in her general sales presentation to a potential investment group dinner at a restaurant, where Claimant stated he first encountered her regarding his particular investment. In his Response to her Motion for Expungement, Claimant restated Respondent Halsey's wrongdoing, but again without specificity as to actions, parties or dates. The Arbitrator did not agree with Claimant's assertion that Respondent Halsey's refusal to join him as a complaining party against the other Respondents should be held against her. 

Bill Singer's Comment

As set forth in part in "FINRA Expels Lawson Financial and Bars CEO Robert Lawson for Fraudulent Municipal Bond Sales / Lawson Misused Customer Funds and Breached Fiduciary Duties as a Co-Trustee of a Customer Trust Account "(FINRA Press Release / February 2, 2017)

The Financial Industry Regulatory Authority (FINRA) announced today that it has expelled Phoenix-based Lawson Financial Corporation, Inc. (LFC) from FINRA membership, and has barred LFC's CEO and President Robert Lawson from the securities industry for committing securities fraud when they sold millions of dollars of municipal revenue bonds to LFC customers. 

The bonds at issue were underwritten by LFC and related to an Arizona charter school and two assisted living facilities in Alabama (which were the borrowers on the bonds). FINRA found that Robert Lawson and LFC were aware that each borrower faced financial difficulties, and Lawson transferred millions of dollars to the borrowers and associated parties from a deceased customer's trust account, in order to hide the borrowers' financial condition and to hide the risks associated with the bonds.  FINRA determined that when LFC customers purchased the bonds, LFC and Lawson hid the material fact that Lawson was improperly transferring millions of dollars from the trust account to various parties when the borrowers were not able to pay their operating expenses or required interest payments on the bonds. 

FINRA found that Lawson and his wife, Pamela Lawson (LFC's Chief Operating Officer), who were co-trustees of the trust account, violated FINRA rules by breaching their fiduciary duties as trustees and engaging in self-dealing with the trust account.  FINRA also determined that Robert Lawson misused customer funds. In addition to expelling LFC and barring Robert Lawson, FINRA suspended Pamela Lawson from associating with any FINRA member firm for two years and fined her $30,000 to be paid prior to her return to the securities industry. This disciplinary action settles a May 2016 complaint filed against LFC, Robert Lawson, and Pamela Lawson. . .

Bottle of White, Bottle of Red, Perhaps An Assisted Living Bond Instead ( Blog)

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