本文发表在 rolia.net/zh 相约加拿大网上社区枫下论坛
Panel Orders Waddell & Reed to Pay
Ex-Broker $27.6 Million in Damages
By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
An arbitration panel ordered a Waddell & Reed Financial Inc. brokerage unit to pay $27.6 million in damages to a former broker, in a decision likely to increase the debate about punitive damages in Wall Street-related arbitration cases.
The panel said that Waddell exhibited "reprehensible conduct" in smearing the broker's reputation after he was fired.
The award to Stephen B. Sawtelle, 47 years old, includes $25 million in punitive damages, which are granted above and beyond actual losses. It's the largest punitive judgment in a securities arbitration case and among the largest punitive arbitration awards ever.
The three-member panel of the National Association of Securities Dealers found that Waddell & Reed had "orchestrated a campaign of deception" after Mr. Sawtelle's firing that, among other things, gave his clients the impression that Mr. Sawtelle was "untrustworthy" and "was in some way involved with the embezzling of client funds."
In addition to awarding damages, the panel ordered the firm to expunge "defamatory" information from his brokerage-industry record. In a filing with regulators, the company indicated that Mr. Sawtelle at the time of his termination was involved in an investigation by a governmental body, and under internal review "for fraud or wrongful taking of property, or violating investment-related statutes, regulations rules or industry standards of conduct." As is customary in arbitration decisions, the panel didn't provide a rationale for the size of the award.
"This thing was a thorough attempt, right up to the very end, to destroy this guy," says Mr. Sawtelle's lawyer, Jeffrey L. Liddle of Liddle & Robinson.
Waddell & Reed, an Overland Park, Kan., mutual-fund company, plans to appeal and is "confident that, within the court system, a more appropriate finding will be rendered," says Thomas Butch, an executive vice president of Waddell & Reed Inc. "With all due respect to the panel, we believe their finding is not supported by the facts of the case and the size of their award is without any logic whatsoever. We obviously would not terminate any adviser without what we believed to be a compelling reason."
For years, securities firms have sought to limit the amount of punitive damages arbitrators can award -- both in employment cases and those involving aggrieved investors. This is crucial because, unlike in court, winning appeals in arbitration cases is very difficult because the Federal Arbitration Act provides a narrow window for reversing such decisions.
The case "could test judicial review of punitive damage awards," says Richard Ryder, publisher of Securities Arbitration Commentator, a newsletter in Maplewood, N.J. Punitive damages are awarded in just 2% to 4% of all securities arbitration cases, Mr. Ryder said, and in less than 10% of those securities cases that involve employment disputes.
More broadly, the case could lead some financial-services firms to review their practices involving brokers who have left the firms. That is because questionable tactics long have been common in the behind-the-scenes battles that erupt over investor accounts when brokers leave their firms. Financial firms in recent years have taken aggressive steps to keep clients from leaving when brokers jump ship, including suing former brokers who try to take clients with them. More often, battles are fought in the trenches. When brokers leave a firm, branch managers immediately hand client accounts to remaining brokers, who start making their pitches to get the business. In their quest for clients, remaining brokers sometimes are less than upfront about their former colleagues' practices and departures.
The Waddell decision "will have a chilling effect on firms who do what they shouldn't be doing in the first place," predicts David Robbins, a securities lawyer in New York.
Mr. Sawtelle, who is based in Connecticut, had been a financial adviser with Waddell & Reed for 17 years before he was terminated in February 1997. Mr. Sawtelle was the firm's top producer in 1995 and 1996. The year before he was fired, he says in an interview, he earned more than $1.1 million from the sale of mutual funds and insurance products.
Waddell & Reed is a rare animal in the financial-services world -- its brokers mostly sell its own mutual funds. The firm caters primarily to small investors who live outside major metropolitan areas, but has been expanding recently.
In his arbitration claim, Mr. Sawtelle alleges that Waddell & Reed fired him in retaliation for his testimony before the Securities and Exchange Commission, which was investigating the embezzlement of money by a former Waddell & Reed broker Mr. Sawtelle had previously supervised.
Mr. Sawtelle told the SEC that Waddell & Reed had declined to follow his recommendation that the broker be terminated, the claim says.
After Mr. Sawtelle was fired, Waddell & Reed re-routed his mail and his phone calls and gave his clients the impression that Mr. Sawtelle "had mishandled their investments" and "was no longer in business," the arbitration panel found. One client was so alarmed, according to Mr. Sawtelle's claim, that he called the North Haven, Conn., police to find out if Mr. Sawtelle "had been reported missing or if there were any outstanding warrants" for his arrest.
Mr. Sawtelle asserts in his claim that immediately after he was fired, each of his 2,800 customers got a letter from Waddell & Reed saying the firm wanted their business, saying that he was "not authorized" to handle their accounts. Over the next several days, according to his attorney, the firm put on a full-court press to snare his customers, even hiring a telemarketing company to make the calls. Mr. Sawtelle also asserts in the claim that Waddell & Reed made it difficult for customers to move accounts to his new employer, Hackett Associates Inc., a small securities firm based in Wyomissing, Pa.
Some clients were also told that if they filed customer complaints against Mr. Sawtelle, they would be able to switch to a mutual fund that carried lower fees without paying a back-end sales charge, according to Mr. Sawtelle's claim.
The panel didn't specifically address the specific conduct alleged by Mr. Sawtelle.
The decision followed 108 hearing sessions. In awarding punitive damages, the panel found that the firm and a Waddell executive violated the Connecticut Unfair Trade Practices Act.
In the interview, Mr. Sawtelle said that he worked from 5:30 a.m. to midnight for three years after he was terminated in an effort to win back his customers. Roughly 2,600 of Mr. Sawtelle's 2,800 customers eventually moved their accounts to his new firm.
更多精彩文章及讨论，请光临枫下论坛. 网址: rolia.net/zh