Embezzling broker gets 51 months for his crimes.

OK, so it’s been a while.  What with Thanksgiving, Hannukah, Christmas, New Years and a family trip, I wasn’t that focused on sharing my thoughts with the world.  But today something struck me.  On Wall Street reported that a broker in Washington state was sentenced to 51 months for embezzlement.  How he did it was interesting to me.

First, he was barred from the securities industry and fired by LPL.  Then he convinced his clients (the article was silent on how) to move their accounts to TD Ameritrade.  He then kept their usernames and passwords so he had access to the accounts at any time.  Then, when TD Ameritrade got wind of a potential problem, they barred him from doing business with them.  For some of the victims, this flag wasn’t red enough.  They believed him when he told them that TDA was trying to force him to join their firm.  So the true believers moved their accounts to Etrade where the thievery continued.

This guy had a record.  It could be found on Brokercheck.  But it appeared that the victims didn’t look or didn’t care.  FINRA and the regulators have focused large amounts of time and energy on making sure that Brokercheck is accurate and extensive.  But do people use it?  I think a very small percentage.  I would be surprised if it’s more than single digits percentage-wise.  Instead, it is used by recruiters, lawyers and others in industry (including brokers competing for an account).  The Brokercheck system has been around in one for or another for 25 years (it used to be hard copy).  How much fraud and theft has this really stopped?  I’ll bet it costs more to run the system than the sum of the avoided losses.

So now that he’s been sentenced, he’s truly sorry.  Sorry that he caused pain or sorry that he got caught?

On a small world note, I know the judge.  Judge James Robart was a securities lawyer in Seattle back in the day.  He was a smart guy and a good person.  He said, “This is a crime of greed — pure unadulterated greed — plain and simple.”  He’s right.  Unfortunately, I think that some of the victims of this theft will have difficulties that will last far beyond the 51 months this guy is in jail.


That’s the first view of 2015 by one lawyer from Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.


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Ex-Newbridge Securities Broker Sentenced to Six Years in Prison “-” No Surprise Here.

The Palm Beach Post reports that Brent Deviney had a gambling addiction.  He blames that gambling addiction for the theft of funds from his in-laws.  If anyone had looked at Deviney’s record with any sort of jaundiced eye, they would have realized that he was a ticking bomb waiting to go off.

For all the brouhaha about the FINRA Brokercheck system, this case pretty much confirms that Brokercheck does not help people avoid bad brokers.  Prior to his problems at Newbridge, he was accused of forging customer names on account documents so that he could become the servicing broker on annuity accounts.  The State of Florida delayed his registration for 3 months, fined him $5,000 and put him on a supervision agreement for 2 years.  FINRA suspended his license for 6 months (but gave him credit for the 3 months that Florida meted out) and fined him the same $5,000 that Florida did.  In fact, FINRA gave him full credit for the money paid to Florida.  But he managed to stay in the business because a firm was willing to hire him.

Fast forward a couple of years and, SURPRISE!, he’s stealing money from his in-laws and his wife’s IRA.  He was also the subject of a million dollar arbitration award, but that was after he was fired.  Based on the description of the claims, it appears that at least some of the money he stole from his wife came from a Merrill Lynch account.  His wife and his mother-in-law’s estate both obtained awards against him.

Society will get its revenge.  This miscreant will be put away for 6 years starting in a couple of weeks.  That will give him plenty of time to think about what went wrong here.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida.  I’m Marc Dobin

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FINRA Dispute Resolution Statistics Show No Advantage To All-Public Panel

I keep waiting to be wrong.  In fact, there are many instances where I am wrong.  But I don’t think I am in this instance.

FINRA has released its latest arbitration statistics and the hand-wringing and stat-twisting from the Claimants’ bar will likely continue unabated.

But the numbers are the numbers and here’s what we know through the end of March 2014.  The “win” percentage of all-public panels so far in 2014 was 33%.  The “win” percentage of majority-public panels was 43%.  Isn’t that a surprise?  So, again I ask – What was the purpose of this change?  It’s like the placebo portion of the test is getting healthier than the patients taking the test medication.

Worse still, the numbers have flipped.  If we include all of 2013 and the first three months of 2014, the all-public panels are at 42% and the majority-public panels are at 44%.  And the numbers are trending up, not down.

So I ask again – Why did we do this?  Will the Claimants’ bar now allege that even the all-public panels, devoid of any industry panelist influence, are still biased against claimants?  Or is it, as I have thought all along, that crappy cases go to hearing and the Claimants’ bar thinks, apparently without basis, that an all-public panel will be comfortable with wool over its eyes.

That’s the admittedly smug view of one lawyer from Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.

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Microcap fraudster stopped by SEC

Are people really this stupid?  Really.  Are they this stupid?  This removes my faith in humanity.

A guy holds a large position in a thinly traded penny stock.  He uses nominees offshore to do it.  He then sends an email blast to 700,000 sheep, I mean “people”, touting the stock.  He apparently found a bunch of sheep, I mean “people”, who believe everything they receive in their inbox.

So a bunch of these sheep, having received this unsolicited email, think “Here’s a great idea.  Let’s buy this piece of crap thinly-traded stock because this email says great things about it.  And while I’m at it, I’ll buy some of those all natural male “enhancement” pills, too.”

So the POS stock increases in price and volume, giving the promoter/emailer/sheep fleecer a handy profit of over $1,000,000.  But the SEC caught wind of this plot and shut it down.  You can read what they did here.  Nice work by the SEC to protect the sheep from themselves.  But really, who believes these emails?  Remember the voicemail scam from a bunch of years ago?  A woman left a voicemail saying that her boyfriend gave her a hot stock tip that she’s not supposed to share.  The key was that the voicemail was supposedly for someone else.  That’s what made the tip sound legitimate.  You can read about one SEC enforcement action on phony voicemail tips here.

Folks, investing is not as easy as buying a stock you hear about in an unsolicited email or a misdirected voicemail.  But if you’re interested in a bridge….

That’s the view of one lawyer in Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.

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Welcome to Anthony Aiello at Laidlaw & Company (UK) Ltd, the latest cold call cowboy.

Today’s entrant in the cold caller race is Anthony Aiello.  Anthony hails from New York, of course, and works for Laidlaw & Company.

Anthony tried to remind me of a phone call we had “last April” where he supposedly gave me a stock recommendation.  He didn’t give me any such recommendation and we had no such conversation.

Interestingly, he claims to have notes where he wrote down that we spoke.  Even more interesting is that he didn’t work for Laidlaw then, he was with another firm.  He didn’t tell me “I was with another firm, then, maybe you remember that firm” or anything of that nature.  He just flat out told me about a conversation that didn’t happen.

It boggles my mind that FINRA allows these people to have licenses.  They’re so busy worrying about the big splashy headlines that they ignore the hand-to-hand combat that takes place over the phone all over the country.  Someone is training these cold-callers that it is OK to make things up during a conversation.  How is that proper?  Or do these guys (haven’t had a woman cold-caller yet) simply decide that the mark on the other end of the phone is too busy to remember what conversations they had 9 months ago?  Incredible.

As regular readers of this blog know, Anthony is not the first cold caller and I doubt he will be the last.  Maybe he’ll learn from this encounter and decide to make money in an ethical manner.  After all, he only graduated from college in May 2012.  I have socks with more experience.

That’s the “you interrupted my lunch for this?” view of one lawyer from Jupiter, Palm Beach County, Florida.  I’m Marc Dobin.  Don’t call me.

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Welcome to the party, Ken Abbas (real name Kumail Abbas) from C.K. Cooper & Co., Inc.

Dear Ken Abbas – As promised, I am mentioning your name in my blog. Unlike you, I like to tell people the truth. You see, you told me that we spoke in October of last year. We never spoke and you know it. Of course, in October of last year, you were working for a different company.

I asked you if you had looked me up on the internet and you said you hadn’t. I looked you up on brokercheck.finra.org and found that you have worked for a variety of unknown and barely known brokerage firms. Prior to that, it seems the only qualification you had for being a broker was working at Enterprise Rent-a-car, Taco Bell and Target after graduating from high school in 2004. Yes, Ken (which is not your real name, that is Kumail), I checked you out. And I’m not sure I would want to rent a car or buy a Big Beef Burrito from you, let alone take a securities recommendation.

You see, dear readers, the cold callers have gotten my name. I don’t know how. But they call me and think that I’m an idiot. I always ask “Do I know you?” and they always tell me about some stock recommendation that they made to me in the past, which is a blatant lie. So, with a relationship based on a lie, why would I do business with them. I can only imagine what they do to older people who are easily confused and not armed with the same information as me, including a healthy dose of skepticism.

Please, cold callers, do your homework. Check me out and then think twice about calling me. Better yet, don’t call me at all.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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Further proof of the toothlessness of corporate billing policies.

We are continuing to analyze Wells Fargo’s counsel’s bills. Aside from identical billing entries for both identical or differing amounts, it seems that the firm may have figured out a way to recoup its investment, then waste it, on electronic discovery aids.

There are a number of paired entries where one legal assistant bills a .10 or .20 to tell another legal assistant to input documents into a Summation database. Summation, like the program our firm uses, Caselogistix, is a database that enables the law firm to categorize and search discovery documents, among other things. Then the second paralegal bills for importing the documents into the database and categorizing them.

The irony? I could see no laptop computer on the other side of the table. Summation has “briefcasing” abilities that allows the entire database, including the word index, to be saved on a laptop and used at trial. Caselogistix has the same functionality and I had my client’s entire database on my laptop. The other side, however, had a collection of banker’s boxes and no laptop in use that I could see. Whenever there was a document issue, I could see the senior associate leafing through the exhibit notebooks (one 4 incher and one 3 incher) trying to find a document to address the question. Again, no laptop.

Clients should not be paying for such inefficiency. I had Wells Fargo’s entire notebook in electronic form on my laptop. It was in a pdf file and I could word search it. I had better searching capabilities of Wells Fargo’s exhibit book than Wells Fargo did.

Wake up, corporate America. If you publish a billing policy, enforce it. I represent corporations with billing policies. I follow them. I have clients with e-billing and UTBMS codes. Most billing policies I’ve seen, other than one client that actually was part of FedEx, prohibit the routine use of overnight delivery services. But the fee affidavit I referred to was sent to me by email around 3:30 on Friday afternoon and then a hard copy was sent “Priority Overnight” for delivery Monday morning. I received it before 9:00 a.m. For what reason? Wells Fargo shouldn’t pay for this waste and neither should my client as the recipient of the fee application.

Dear reader (readers?), please instruct your staff about the judicious use of overnight delivery. If I am sent an email, what requirement is there to send a Priority Overnight FedEx, unless you have family members whose incomes depend on the success of FedEx?

I have represented very large corporations, and still do. But there are people within some corporations who seem to feel that a large law firm, with all of its inefficiencies, is the only way to get effective representation. Or the in-house decision-maker feels a large law firm provides “cover.” But when they do this, and pay the bills that contain obvious wastes of resources, how will a law firm ever become more efficient? Paying the bills of a firm that uses Summation in the office but not at trial, but instead sends a high-priced associate to manage the paper, rewards inefficiency. Most firms I represent will not allow two lawyers to attend a hearing without prior permission. Was there permission?

This was a $200,000 collection case. My firm has two lawyers and a paralegal. Wells Fargo is an enormous corporation. Did they think I was going to outgun them with my “vast” resources from the world HQ in Jupiter, FL? At one point they had five people working on this file. That’s two more people than I have in my firm. The staffing on this file was ridiculous as was the billing.

That’s the incredulous view of one lawyer from Jupiter, Florida. I’m Marc Dobin and I billed no one for this blog entry.

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Corporate Billing Policies – Proof They are a Joke.

Within the last 20 years, corporate billing policies have become much more prevalent. This was a result, in my opinion, of lawyers and law firms becoming pigs and billing for ridiculous things and outrageous amounts. Most law firms, chastened by this increased scrutiny, tightened up their billing practices and changed the way they do business. Most clients did so as well.

Well, I found an exception. As I mentioned, I just finished trying a case against Wells Fargo Advisors. In connection with that case, which was tried in less than two days, I submitted a bill for the work my firm did, including costs, to the arbitrators. That bill was in the low $30,000 range. That’s about right for a case of the type and size I was handling.

Opposing counsel, however, apparently did a lot more work than I did. Their bill was over $150,000! That’s not a typo folks. For a two day collection case, with defenses. At the hearing, the law firm sent a senior partner, at a higher rate than mine, and a senior associate, who’s rate was about 75% of mine. Collectively, the firm seems to have billed its client about $10.50 per minute for the hearing.

There are many outrageous entries. There’s a 36 minute entry by opposing counsel to review a two-line email that I sent to FINRA. Then a 12 minute entry to write a two-word response. There’s what appears to be duplicate billing. There’s billing for administrative tasks like changing the due date on a calendar. I saw at least one entry where the file was billed for one legal assistant to tell another what to do.

There’s billing for hours and hours of reviewing the arbitrators’ bios. There’s billing for “organizing arbitrator ranking award information.” I thought that corporate clients stopped paying for administrative tasks a long time ago. Apparently Wells Fargo is in the minority. The firm even paid for legal assistants to update pleading binders, a task that most corporate clients stopped paying for. If you’re a lawyer and you’re reading this, get Wells Fargo’s work. It seems that they either pay for stuff that most clients no longer pay for, or they don’t review their bills closely enough to see that they’re paying for things that their policy, if they have one, prohibits.

When I received this affidavit of fees on Friday, I only looked at the total. Now that we’re digging deep into the bill, we found that this firm, which claims to represent brokerage firms, charged their client to research FINRA rules on whether or not exhibit notebooks had to be exchanged. This is basic stuff. Any firm that does this work would know that there is no such requirement without spending 48 minutes to figure this out. They could have asked their client and only billed twelve minutes for that.

There are plenty more examples of entries that a corporate client should not pay but apparently did.

That’s the view of an astounded lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin and I did not bill my client for this message.

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Things I learned at an arbitration with Wells Fargo Advisors last week.

As you might know, I handle a lot of securities arbitrations. I usually end up learning a thing or two during the course of the arbitration. I thought I’d share some things with you.

1 – Wells Fargo Advisors does not have a policy stating that commissions generated by a client only belong to the “broker of record.” This may be the practice, but the branch manager testified that there is no such policy.

2 – Wells Fargo Advisors, as a matter of course, compounds interest monthly when it calculates the amount it is claiming on promissory notes. However, the promissory notes do not provide for monthly compounding of interest. When the witness was asked why the interest was compounded monthly, he essentially said “because that’s how we do it.” Wells Fargo withdrew its monthly compounding of interest calculation and was going to submit the simple interest calculation by affidavit. Haven’t seen the affidavit yet.

3 – Wells Fargo Advisors has a prepaid management fee agreement. A Wells Fargo witness claims that it is electronically attested to. No such agreement was produced.

4 – Wells Fargo Advisors’ practice of conducting most supervision through a central office, rather than at the branch level, has actually reduced the level of supervision, in my opinion as someone with over 25 years’ of experience in the securities business, not increased it. For example, a central supervision office employee has no “feel” for the office. That employee won’t recognize patterns or put a broker’s rep number to a name and then wonder why the broker is engaging in certain transactions. Instead, it appears that the branch manager pretty much waits for the central office to tell him/her what to do. In the meantime, there are certain things that the central office doesn’t look for and the branch manager can’t see. It’s a shame, too.

I used to describe being a branch manager as requiring as much art as science. Walking around the office, the branch manager can “feel” what’s going on. The manager can tell who is working and who isn’t. But if the manager is simply waiting for a computer to tell him or her what to look for, rather than being proactive, then it may be too late. And then to remove many of these tasks and assign them to some remote office to look at, well that’s just asking for a problem.

As an example, many years ago, probably close to 30, a regional administrative manager walked into a satellite office at 2:30 or so in the afternoon. The lobby was full of clients waiting to see one of the two brokers in the office. The office looked very busy. But the office had only entered 3 or 4 order tickets by 2:30. The regional admin thought it was odd and they decided to close the office and move the the brokers to the main office, under greater supervision. The brokers refused to relocate and resigned. After they left the firm, the wheels came off of the Ponzi scheme they were participating in. The regional admin was right. A computer could not detect what the regional admin understood. By the way, that regional admin is now a branch manager with Wells Fargo. And I hope his talents aren’t being wasted by relying only on computer printouts.

Today I enter my 21st year as a resident of the Sunshine State. When I left New York, branch managers managed. They reviewed. They gave sales advice. They mentored. Now they wait for HAL (that’s a Space Odyssey reference there) to tell them what to do. In my opinion, heavily relying on computers for branch office supervision (and I love computers for many things) is a mistake. Computers don’t feel. They don’t see. They don’t hear. But that’s what good managers do. Or at least they did until someone decided that computerized supervision was the next big thing.

That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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The Market Crashed 25 Years Ago Today. Where Were You?

Onwallstreet Magazine has created a slideshow addressing the numbers of the 1987 crash. It’s pretty interesting. I know a broker who actually signed his FA Training Agreement on that day.

I was working at a mid-size firm in Princeton, New Jersey, when the wheels came off the market. It’s now part of the Pepper Hamilton organization. We wandered around wondering what the world was going to be like post-crash. I left that office a long time ago, but I still have friends there. (Yes, I have friends.)

I later learned that my friends in New York were working around the clock putting their finger in the dike while the flood started. I returned to Prudential Securities in 1988, just under a year after the crash. We were working out a huge backlog of unpaid debts. There was also a huge influx of customer complaints.

The volume that day – over 600 million shares – was unheard of at the time. Now that notion seems quaint. In 1987, a lot of the blame was placed on “program trading.” People were wringing their hands about computers manipulating the market. We still have computers calling the shots, causing market breaks, and people wringing their hands about computers manipulating the market.

The big issue for brokerage firms and their customers became a customer’s ability to understand the risk and desire to have market-based risk. The same issues came up in 1989, which was primarily due to the failure of the United Airlines LBO. The issue then came back in 2000, with the “tech wreck.” and again in the fall of 2008 with the failure of Lehman Brothers and the recession. Every once in a while, the market feels the need to remind us that we are not in control, we can only plan for the worst and hope for the best.

It is often said that a failure to study history will result in repeating the mistakes. In my 25+ years in this business, I have found that there are very few historians.

That’s a 25 year view of one lawyer from Jupiter, Palm Beach County, Florida. I’m Marc Dobin.

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