Friday, September 18, 2015

Local Morgan Stanley Branch Churned & Pumped Away in Multi-million Dollar Fraud

A Financial Industry Regulatory Agency (FINRA) arbitration panel awarded $2.5 million in damages, fees and attorney's fees against Morgan Stanley, Morgan Stanley Smith Barney, and several current and former employees.  The panel determined Morgan Stanley broker Steve Wyatt and other employees churned trades and committed fraud, as six investors lost millions.   The victims are Dr. Lon Lutz, Dr. Rahul Vohra, Sherry Vohra, Barbara Carter Summers, Dr. Jeff Summers, and Dr. Michael Winkelmann.

The victims filed a complaint against Morgan Stanley, Steve Wyatt,  Hilary Zimmerman, and Fred Brister, III in 2012.  Brister is the branch manager.  FINRA did not publish the complaint, but did post a final order on July 24 on its website.   Wyatt responded to the complaint but did not sign a submission agreement. 

The formal language used by FINRA states:

Claimants asserted the following causes of action: violations of FINRA rules on suitability; unauthorized trading; use of manipulative, deceptive or other fraudulent device or contrivance; lack of fair dealing; churning; failure to uphold the standards of FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade); violation of all FINRA rules and industry requirements for supervision; violation of SEC Rule 10b-5 regarding use of manipulative and deceptive practices; violation of Miss. Code Ann. § 75-71-501 (2015) et seq. regarding general fraud; violation of the Investment Advisers Act of 1940 and rules regarding common law negligence and fraud, including negligent and fraudulent inducement; and violation of all industry, statutory and common law rules regarding fiduciary duties...
Strip away the legal jargon and the Wall Street mumbo jumbo and it means one thing: Morgan Stanley employees lied to the victims, used them as pump monkeys, and treated them as pigeons while they churned trades and lined their own pockets. Trusting pigeons who relied on Morgan Stanley to protect their money. Little did they know they were instead sacrificing themselves for the greater good of the greed of Morgan Stanley, et al.

The victims asked for the following damages from the foxes who guarded their money:

Dr. Lon Lutz: $154,000
Dr. and Mrs. Vohra: $381,334
Barbara Carter Summers: $3,148,812
Dr. Jeff Summers: Unspecified amount
Dr. Michael Winkelmann: $745,467

They also asked for interest on the damages, punitive damages, and attorney's fees, and claimed they spent nearly $200,000 on attorneys, court costs, and expert witness fees.

Morgan Stanley asked FINRA to dismiss the claims and expunge any trace of this rather unpleasant affair. It is the gentlemanly thing to do, you see. Civilized men do not do something so crass as sue each other.  It is just not proper.   Mr. Wyatt asked for the same relief as well. They were in this affair together, after all.

The victims asked FINRA to dismiss their claims against Wyatt and Zimmerman.  Morgan Stanley and Brister squirmed and squealed but in the end, a hearing was held. The panel deliberated, found them guilty, and started handing out damages to the victims:

Dr. Lon Lutz: $125,460
Dr. and Mrs. Vohra: $308,253
The Summers:$1,404,880
Dr. Michael Winkelmann: $397,575

The panel did not stop with these awards, and then moved to more damages. (They were all awarded jointly and severally):

$68,350: Morgan Stanley, Morgan Stanley Smith Barney and Brister for costs
$78,333: reimbursement by defendants for expert witness costs.
Pre-award interest of 2.5% per annum since July 13, 2012. Ouch.
Post award interest on damages and other awards at a rate of 4.5% per annum until satisfied.
$55,800: fees for adjudication of case by panel.
All requests for expungement were denied.

Attorneys Kim Breese of Jackson, Judson Lee of Madison  and Joseph Peiffer of New Orleans represented the victims. (Disclosure: Mr. Breese advertises on this website.)

JJ also reported in 2014 that Wyatt was suspended, fined, and fired for his activities:

FINRA fined former Morgan Stanley broker Steven Wyatt $12,500 and suspended him for four months in a consent agreement issued last July.* The agreement states Mr. Wyatt purchased shares of Morris Innovative, a medical device company, without his employer's knowledge and then secretly directed several Morgan Stanley clients to invest their money in the same company.

The order states Mr. Wyatt purchased $58,750 (43,518 shares) in the company in October 2009 and February 2010. Mr. Wyatt, however, purchased the shares in his wife's name. Mr. Wyatt did so without notifying Morgan Stanley of his private stock-trading activities, a big no-no in the world of FINRA and securities regulation. Mr. Wyatt also used his personal Yahoo email account to recommend purchasing shares of the company, instead of using his Morgan Stanley email account.

Mr. Wyatt brought four of his clients to a meeting with company representatives. Mr. Wyatt naturally promised "an overwhelming rate of return" (shades of Stanford Group?).  Morgan Stanley fired Mr. Wyatt after the allegations were raised.
FINRA reports Mr. Wyatt is "currently not licensed to act as a broker."  FINRA also reports on its website the following complaints are pending against Mr. Wyatt:

 Damage Amount Requested: $1,000,000.00


Money Wank said...

Interesting that they're all probably millionaires already.

Kingfish said...

So? Does that mean they don't have the right to be protected from fraud? Should the law only be used to protect the poor?

Anonymous said...

You may very well see numerous investor leave Morgan Stanley like rats leaving a burning ship.

I dont have much with Morgan Stanley but you can bet I'll be leaving.

Anonymous said...

Remember, this is an arbitrator, not a court or a judge. In other words, these brokers REALLY screwed somebody. This isn't a verdict from a jury of unemployed drop outs.

Anonymous said...

Hey Money Wank, I am "already" a multi- millionaire, and I didn't get there by thinking " hey, what's 745,000, I'm already a millionaire." Trust me, you will never be "already a millionaire."

Anonymous said...

@9:33......Soooooo, criminal charges to follow???

Kingfish said...

The Secretary of State's Securities Division usually investigates first, then makes a criminal referral to the A.G.

Anonymous said...

So.....are you saying that was not done, or hasn't been done yet or you don't know?

Ignoring the douche who claims to be a millionaire since I'm a nuclear scientist.

Anonymous said...

Steve Wyatt seems to be enjoying his early retirement in his mid-40s. Money is coming from somewhere...or his mother-n-law

Anonymous said...

What is amazing about this 4 year saga is that Morgan Stanley refuses to apologize or even take any responsibility for the fiasco involving clients of many years. Their arrogance and untrustworthiness is breathtaking.

Anonymous said...

Guess Morgan Stanley is keeping "manager of the year" Fred Brister on the job until these things are finished. Letting him "retire" would look bad in future cases. If current clients suffer because of lack of management at the office, well that is their problem. MS interests always come first.

Anonymous said...

Wasn't Mr. Brister president of The Country Club of Jackson?

Anonymous said...

Delbert won't do anything to his buddy Fred. His office has had this case for four years.

Anonymous said...

Hey morons, what Money Wank meant was that Steve Wyatt and the other MS guys were probably already millionaires, so why did they do it? Not the victims. Jeez.

Anonymous said...

Um, no they weren't oh brilliant one. Wyatt lives in his mother in law's house after he couldn't pay for his.

Anonymous said...

Actually Wyatt and his partner, Hilary Zimmerman were paid over $3 million in December of 2007 by Brister (Morgan Stanley's $) to move to Morgan Stanley. Another bright move by Brister.

Anonymous said...

Brister's real "job" is golf. Somehow I'm not surprised or shocked about this systemic M/S screw-up. Hey, make money for M/S, the manger and yourself. Everything is good.

Anonymous said...

Wow, big newspaper ad campaign by the lawyers - Ledger, Northside Sun, Rankin County News.
How many more MS/Wyatt clients are there?

Anonymous said...

Huge ad campaign is right, but before you hire those lawyers you may want to talk to the clients. I'm hearing they have more than a few complaints about how they were treated. This story keeps getting worse!

Anonymous said...

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