Wells Fargo / Wachovia Wins And Loses Against Former Employee

August 25, 2010

By FINRA Arbitration Statement of Claim filed January 20, 2010, Claimant Wells Fargo, represented by Michael S. Colombo of StreetWide Asset Recovery Group, Inc., sought to recover from Respondent Joseph Morgan

  • $14,090.05 representing the unpaid balance due on a promissory note,
  • $4,227.01 in collection costs, and
  • $1,475.00 in FINRA filing fees.

Respondent Morgan represented himself without legal counsel (pro se) and filed a Counterclaim for $16,126.22 in commissions owed. In the Matter of the Arbitration Between Wells Fargo Advisors, LLC f/k/a Wachovia Securities LLC, Claimant, versus Joseph Morgan, Respondent (FINRA Arbitration 10-00284, August 19, 2010).

A Double Knock-Out

The single FINRA Arbitrator hearing the case  found

  • Respondent Morgan liable for $14,090.05 in compensatory damages but denied all other damages; and
  • Claimant Wells Fargo liable to $16,126.22 in compensatory damages on Respondent's Counterclaim. 

Accordingly, Claimant Wells Fargo / Wachovia was required to pay to Respondent the net award of $2,035.27.

Bill Singer's Comment:  Claimant Wells Fargo / Wachovia sued Respondent Morgan for some $16,000 in damages/costs but wound up over $2,000 out of pocket to its former employee. Whether that constituted a worthwhile collection effort depends on many considerations.  Ultimately, you have to wonder -- and I would suggest that it is a very, very fair question to pose -- whether a major Wall Street firm such as Wells Fargo / Wachovia is wasting its time and money pursuing its former employees in such an aggressive manner.  At the end of the day, for all its posturing and bluster, this industry Claimant lost money on a net basis because it chose to sue its former employee, who then successfully counterclaimed for unpaid commissions. 

Did Claimant win its claim?  Without question, the Arbitrator awarded the bulk of the damages sought by Wells Fargo / Wachovia against its former employee -- so, "yes," solely based upon that consideration, Claimant was successful.  Nonetheless, the Arbitrator also awarded all of Respondent's sought counterclaimed damages. It's hard to factor out of the equation that latter aspect of the case.  To some extent, Wells Fargo / Wachovia started this mess but Morgan finished it.  

The "let sleeping dogs lie" school of litigation would have argued against the filing of Wells Fargo/Wachovia's arbitration claim, which may have prompted Respondent Morgan to retaliate with his $16,000 counterclaim.  None of which is meant to suggest that both parties were not equally pig headed and itching for a fight.   Nonetheless, what is clear from the caption of the FINRA arbitration is that  Respondent Morgan did not initiate the arbitration and, after all, he walked away the apparent winner solely based upon who took the most chips from the table when the game ended. 

Large corporate employers fall easy prey to the belief that lawsuits are effective ways to "send a message." In theory, that take-no-prisoners reputation is supposed to prompt the quick resolution of disputes for top dollar as former employees quake in their boots with fear.  That theory is, indeed, reinforced by the 99 out of 100 arbitration wins. The problem is that the former employer really can't afford that one loss out of a hundred.  It's that one loss that becomes legendary and is circulated around the industry. What will likely be lost around the office water coolers and in  the emails discussing this case is that Wells Fargo / Wachovia did win most of its claimed damages.  That will soon become an overlooked fact. What will become the takeaway of this and similar cases is that you can beat your former employer if you hang tough, go to the mat, and counterclaim. Inevitably, Wells Fargo / Wachovia employees will learn of this decision and become emboldened when responding to repayment demands from their former employer. 

For those of you unfamiliar with industry collection firms such as StateWide Asset Recovery Group, Inc., which represented Claimant Wells Fargo / Wachovia during this FINRA arbitration, visit http://www.streetwiderecovery.com/about.html for a description of the line of business.

According to StateWide's website, it specializes in the recovery of securities and securities-fraud related debt and works exclusively for the financial services sector.  Michael Colombo, President of StreetWide, is described as having

a proven track record of settling 90% of collections cases before they reach the arbitration stage and a history of recovering an average of 80 to 90 cents on the dollar

Colombo was apparently an in-house collection agent for Paine Webber, Gruntal and Co. and GKN Securities. Following his in-house stints, he has engaged at StreetWide in collections for Legg Mason Wood Walker, Inc. , Raymond James and Associates, Inc. , Paine Webber, Inc. , Morgan Keegan and Co., Inc. , Merrill Lynch, Wachovia Securites, MetLife Securities, Harris Investor Services/CSFB, Ryan Beck and Co, Inc., and Pershing, LLC.  Apparently, StateWide also serves in some collection capacity for FINRA.

And do me a favor -- the next time you want to blame lawyers for the explosion of litigation in this country, just consider that this case was fueled by a former employer, a former employee, and that no law firm appeared at the hearing on behalf of either party.  On the other hand, who am I to complain? It's just more business for me. No matter how silly it may be.




Regulatory lawyer Bill Singer has analyzed and posted the latest crop of FINRA disciplinary cases

  • Some three decades on Wall Street and you can only imagine all the regulatory cases that I've come across -- which is why this is all the more amazing. Quite possibly, this is the most staggering number of allegations of violations that I've ever seen. READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008011678303
  • What happens if you sell shares of a security to public investors using a private placement memorandum that omitted a convicted felon's association with the issuer, which is a material fact
    READ HERE  at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008011678302
  • You know that old line about asking someone up to your apartment to see your etchings? Well, did you hear the one about the broker who got barred because of his lithographs?  
    READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#2008015279301
  •   You think that I'm tough on the SEC or FINRA?  Well, consider this slam from a recent federal appeals court:

    This case involves wealthy and sophisticated customers who were under no press of time to decide whether to invest; customers who invested specifically in furtherance of a desire to speculate; and a broker who did not profit from his wrongdoing and who has been fined and suspended for his violations. There is nothing in the SEC's decision to indicate why, in these circumstances, awards of restitution are appropriate under Principle 5. Indeed, the SEC's decision is incomprehensible insofar as it attempts to amplify any meaningful causal connection between Siegel's putative bad acts and the Downers' and Landrys' losses. And the SEC has cited no precedent, and we have found none, supporting restitution in a case of this sort. The SEC's judgment is fatally flawed for two reasons: First, the SEC's judgment is not supported by reasoned decisionmaking. Second, the SEC cites to no controlling precedent that includes reasoned decisionmaking supporting restitution under Principle 5 in a case of this sort. We therefore vacate the restitution order.

    READ HERE at http://www.rrbdlaw.com/enforcement-actions/index.php?cid=1#C05020055

  • Talk about things getting testy on Wall Street.  Consider all these innovative approaches to not exactly taking various industry examinations in accordance with the rules.  READ HERE at http://www.rrbdlaw.com/enforcement-actions/tags.php?term=Testing




      Advisor Placement Group

      Putting the Advisor's Interest first...always.

      Are you a Financial Advisor looking for a solution?
      The Advisor Placement Group (APG) specializes in assisting financial advisors in a variety of areas such as:
      • Broker/Dealer and/or RIA evaluations and transitions
      • Practice management
      • Valuation and purchase
      • Succession planning
      • OSJ recruiting
      • Industry legal issues

      Our job is to assume the due diligence and negotiations on behalf of advisors so you can focus on managing your business and clients.

      Your Best Fit

      There are thousands of Broker/Dealers out there. Some of them, in our opinion, aren't really a good fit for anyone. We relentlessly look for the best. Your practice is unique and your broker/dealer should be a partner that understands and fulfills your needs. Our discovery process and placement experience can help you find the very best fit. And a better fit means a more productive, profitable relationship. Consider the Advisor Placement Group as YOUR resource for the financial industry!

      All of our services share one thing in common: The good of the Advisors we work with.

      Broker/Dealer Placement

      This is our flagship service. If you are looking to move out on your own, especially for the first time, or you are thinking about changing your Broker/Dealer, you owe it to yourself to contact us. It's what we do the most, and it's what we do the best.

      Strategic Partners

      We also work closely with numerous individuals and companies who have proven themselves in their respective line of work within the financial advisory industry and highly recommend them including, but not limited to, legal representation, advertising, marketing, and compliance solutions, and a HR/benefit options for registered reps.

      Visit our website at http://www.advisorplacementgroup.com/home

      CONTACT US (Please mention BrokeAndBroker.com when you call):

      Chris Mielnicki

      213 Mountain View Dr Woodstock, GA 30188
      315.430.7433 - phone

      Dan Lovelace

      1208 Camellia LN New Braunfels, TX 78130
      214.641.9207 - phone

      Craig Enderlin

      709 W. San Antonio St. Fredericksburg, Tx 78624
      830.456.1443 - phone