Award FtNRA Dispute Resolution
In the Matter of the Arbitration Between:
Claimants Dr. Thomas J. Kiebach, et al.
Case Number: 13-01692
vs.
Respondent Pershing LLC
Hearinq Site: New Orleans, Louisiana
Nature of the Dispute: Customers vs. Member
This case was decided by an all-public panel.
REPRESENTATION OF PARTIES
For Claimants: Phillip W. Prels, Esq., Charles M. Gordon, Jr., Esq., Crystal Burkhalter, Esq., Caroline P. Graham, Esq., Charles Matthew Thompson, Esq., Jennifer R. Dietz, Esq , John Grinton, Esq. and Hugh Seligman, Esq., Preis Gordon, A.P.L.C, Baton Rouge, Louisiana.
For Respondent Pershing LLC: Thomas M. Farrell, Esq., Jeffrey J . Chapman, Esq , Elizabeth F. Edwards, Esq. and Melissa W. Nelson, Esq., McGuireWoods LLP, Richmond, Virginia.
CASE INFORMATION
Original Statement of Claim filed on or about: June 6, 2013. First Amended Statement of Claim filed on or about: June 27, 2013. With the exception of Claimants Ruth G. Lessing, Ruth G, Leasing IRA, Kevin R. Courville and Monica Courville. all Claimants signed the Submission Agreements' June 6,2013. Claimants Ruth G. Lessing, Ruth G. Lessing, IRA, Kevin R. Courville and Monica Coun/ille signed the Submission Agreements: June 25, 2013.
Statement of Answer to First Amended Statement of Claim filed by Respondent on or about: October 10, 2013. Pershing LLC did not sign the Submission Agreement.
Motion to Preclude Claims and Purported Evidence Regarding Anti-Money-Laundering ("AML") Issues filed by Respondent on or about: September 8, 2014. Opposition to Motion to Preclude Claims and Evidence Regarding AML Issues filed by Claimants on or about: September 12, 2014.
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Motion in Limine on CD Purchases for which Documents are Lacking filed by Respondent on or about: September 8,2014. Opposition to Motion in Limine on CD Purchases filed by Claimants on or about: September 11, 2014.
Motion for Explained Decision filed by Claimants on or about: September 15, 2014 Response to Motion for Explained Decision filed by Respondent on or about: September 16, 2014.
CASE SUMMARY
Claimants asserted the following causes of action in the Statement of Claim, as amended: breach of fiduciary duty; breach of contract; violation of the Louisiana Securities Act; violation of the Texas Securities Act; breach of duty as third party beneficiary; fraud; and negligent misrepresentation. The causes of action relate to an alleged Ponzi scheme involving Claimants' purchase of Stanford International Bank Certificates of Deposit ("SIB CDs")
Unless specifically admitted in its Answer, Respondent denied the allegations made In the Statement of Claim, as amended, and asserted various affimiative defenses.
RELIEF REQUESTED
In the Statement of Claim, as amended, Claimants requested: rescission of the sale of the SIB CDs plus interest on the purchase price; compensatory damages in the amount of $80,000,000.00, representing actual damages equal to the purchase price of the SIB CDs minus the current value of the SIB CDs; attorneys' fees; pre-judgment and post-judgment interest; costs; such other and further relief to which Claimants may be justly entitled; and all other equitable and legal relief as deemed just and appropriate by the Panel.
In the Statement of Answer, Respondent requested denial of Claimants' claims.
OTHER ISSUES CONSIDERED AND DECIDED
The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.
A complete list of Claimants is attached to this Award as Exhibit A.
Respondent did not file with FINRA Dispute Resolution a properly executed Submission Agreement but is required to submit to arbitration pursuant to the Code of Arbitration Procedure (the "Code") and, having answered the claim, appeared and testified at the hearing, is bound by the detennination of the Panel on all issues submitted.
Prior to the appointment of a Panel in this matter, Claimants filed their First Amended Statement of Claim in order to add the following parties as additional Claimants in this matter: Ruth G, Lessing, individually and on behalf of the Ruth G. Lessing IRA; Kevin R Courville; and Monica Courville.
FINRA Dispute Resolution Arbitration No. 13-01692 Award Paoe 3 of 6
On or about May 21,2014, the United States District Court for the Middle District of Louisiana (the "Court") issued a Permanent Injunction enjoining the parties listed below from proceeding in this arbitration, or from commencing or prosecuting any other arbitration, against Respondent with respect to the claims asserted in the Statement of Claim, as amended. The Court held that FINRA lacked jurisdiction over these parties because they did not have a direct customer relationship with Respondent, as required under Rule 12200 of the Code, and these parties did not have a written agreement with Respondent to arbitrate their claims.
1. Wanda Bevis 2. Thomas "Eddie" Bowden 3. Robert E. Feldman 4. Deborah Forbes 5. Russell Shane Gautreaux 6. Mark Calvin Johnson Trust No. 1 (Ameritrust Corporation, Trustee) 7. Claude Marquette 8. Kathleen S. Mier 9. Louis Mier 10. William Phillips 11. Holly Schwendimann 12. Howard Sklar, as Trustee on behalf of Albert Sklar QTip Trust FBO Howard Fred
Sklar, Albert Sklar QTip Trust FBO Judy Sklar and Albert Sklar QTip Trust FBO Suzanne Irene
On or about September 4, 2014, Claimants filed a Notice of Non-Participation in Putative Class Action Pursuant to Rule 12204(b)(2) of the Code in which they opted out of the matter entitled Lynne Turt<, e ta l v. Pershing, LLC, Docket No. 3:09-CV-2199, U.S. District Court, Northem District of Texas, Dallas Division.
Respondent filed a Motion to Preclude Claims and Purported Evidence Regarding AML Issues in which it asserted that: there is no private right of action for violation of AML laws; AML laws do not create a duty or standard of care that can be incorporated into other causes of action; and injecting AML compliance into this case would be manifestiy unfair. In their Response, Claimants asserted that: Claimants have not alleged a cause of action under AML; Respondent's violation of FINRA rules is admissible into evidence as evidence of a breach of a required standard of care of a FINRA broker; case law has already established the existence of a cause of action against Respondent and it would be illogical not to allow all evidence to be introduced to prove the claims; and AML laws do not preclude Claimants from introducing evidence on the standard of conduct that should be followed by a FINRA member firm.
Respondent filed a Motion in Limine on CD Purchases for which Documents are Lacking in which it requested that the Panel preclude certain identified Claimants from presenfing any evidence regarding the alleged CD purchases because they have failed to produce documentation that is relevant and necessary to evaluate their claims In their Response, Claimants asserted, among other things, that: Claimants have not been involved in any willful conduct regarding production of documentation, and have abided by the Panel's Order regarding third party discovery; Respondent, and not the unsophisticated elderly Claimants, have a record-keeping function; and Claimants will
FINRA Dispute Resolution Arbitration No. 13-01692 Award Page 4 of 6
prove at trial that they executed customer agreements with Respondent and thereafter purchased SIB CDs.
On or about September 14,2014, following a telephonic conference with the parties, the Panel issued an Order that denied Respondent's Motion to Preclude Claims and Purported Evidence Regarding AML Issues and Respondent's Motion in Limine on CD Purchases for which Documentation is Lacking,
Claimants filed a Motion for Explained Decision to which Respondent objected. The Motion and Response were fonA aixJed to the Panel for its consideration at the outset of the evidentiary hearing. On or about October 28, 2014, the Panel issued an Order that denied Claimants' Motion.
The parties have agreed that the Award in this matter may be executed in counteipart copies or that a handwritten, signed Award may be entered.
AWARD
After considering the pleadings, the testimony and evidence presented at the hearing, and the post-hearing submissions (if any), the Panel has decided in full and final resolution of the issues submitted for determination as follows:
1. Claimants' claims are denied in their entirety.
2. Respondent is liable and shall reimburse Claimants the sum of $10,000.00, representing costs associated with the hearing testimony of a witness taken in New York, New York on October 7, 2014. Said costs are comprised of plane fare, local transportation, hotel, meals, addifional court reporter expenses and telecommunication transmission costs.
3. Any and all relief not specifically addressed herein, including Claimants' request for attorneys' fees, is denied.
FEES
Pursuant to the Code, the following fees are assessed:
Filing Fees FINRA Dispute Resolution assessed a filing fee* for each claim:
Initial Claim Filing Fee =$ 1,800.00
*The filing fee is made up of a non-refundable and a refundable portion.
Member Fees Member fees are assessed to each member firm that is a party in these proceedings or to the member flrm(s) that employed the associated person(s) at the time of the event(s) giving rise to the dispute. Accordingly, as a party, Respondent is assessed the following:
FINRA Dispute Resolution Arbitration No. 13-01692 Award Page 5 of 6
Member Surcharge =$ 3,750.00 Pre-Hearing Processing Fee =$ 750.00 Hearing Processing Fee =$ 5,500.00
Hearina Session Fees and Assessments The Panel has assessed hearing session fees for each session conducted. A session is any meeting between the parties and the arbitrator(s), including a pre-hearing conference with the arbitrator(s) that lasts four (4) hours or less. Fees associated with these proceedings are:
One (1) Pre-hearing session with a single arbitrator @ $450.OO/session =$ 450.00 Pre-hearing conference: May 28,2014 1 session
Five (5) Pre-hearing sessions with the Panel @ $1,200.00/session =$ 6,000.00 Pre-hearing conferences: February 5, 2014 1 session
March 14,2014 1 session July 24, 2014 1 session August 14, 2014 1 session September 9, 2014 1 session
Fifteen (15) Hearing sessions @ $1,200.00/session =$18.000.00 Hearing Dates: October 6, 2014 1 session
October 7, 2014 2 sessions October 8,2014 2 sessions October 9, 2014 3 sessions October 13, 2014 2 sessions October 14,2014 2 sessions October 15, 2014 2 sessions October 16, 2014 1 session
Total Hearing Session Fees — = $ 2 4 , 4 5 0 . 0 0
The Panel has assessed $12,225.00 of the hearing session fees jointly and severally to Claimants.
The Panel has assessed $12,225.00 of the hearing session fees to Respondent.
All balances are payable to FINRA Dispute Resolution and are due upon receipt.
NO?/03/2014,« 10:24 AM
FINRA Dispute ResolulJon Arfaifnation No. 13-01682 Award Page 6 of 6
p '• ('. 1
ARBITRATION PANEL
Michele N. O'Brien Brian P. Jakes, Sr. Mario Alberto Arteaga, Jr.
Public ArtDitrator, Presiding Chairperson Public Arbitnator PublicArbitrator
I, the undersigned Arialtrator, do hereby affirm that 1 am the individual described herein and who executed this instrument which is my award.
CoHcurrinq Arbitrators' Signatures
Mfchele N, O'Brien Public Arbitrator, PresWIng Chairperson
Signature Date
Brian P. Jakes, Sr. PublicArbitrator
Signature Date
Mario Alberto Arteaga, Jr. Publio ArtDitrator
Signature Date
Date of Service (For FiNRA Dfepute Resolution office use only)
11/03/2014 HON 11(02
RNRA Dispute Resolutton Arbitration No. 13^16^ AwaniRsoa6of8
ARBiTRATlOW PANEL
MIcMe N. O'Brien Brian P. Jalcea, Sr. Mario Alberto Arte^a, Jr.
Public Arbifrator, PresWIng Clhairperson Public Arbitrator Public Arbitrator
i, the unders^ned Arbitrator, do hereby affirm that I am the individual described herein and who executed this tnatrument which la my award.
Ckincurrinfi Attiitaiteis* Slgnaturis
Michd PuMb
lien Id Chairperson
Brian P. Jakes, Sr. ^ Public Arbitrator
SIgnatore Date
S^r^ture Date
Mario Alberto Artee^a, Jr. PublicArbitrator
Signature Date
3/i datod^^^toe (For FINRA Dispute Re^iutlon oMce lse on^
bv I 2014 §:52AM
Artttration No. 13-01682 Award Page 6 of 6
U. 2289
ARBITRATIQN PANEL
Michele N. O'Brien Brian P. Jakes, Sr. Mario Alberto Arteaga, Jr.
Public Arbitrator, Presiding Chairpereon Public Arbitrator Public ArtDitrator
I, the undereigned Arbitrator, do hereby afflrm that I em the individual described herein and who executed this Instrument which is my award.
Concurrinq Arbitrators' Signatures
Michele N. O'Brien Public Arbitrator, Presiding Chairpereon
Signature Date
Brian P. Jakes, Sr. Public Arbitrator
Signature Date
Mario Alberto Arteaga, Jr. ^ Public AriDitrator
Signature Date
Date of Service ( (For FINRA Dispute Resolution office use only)
Kiebach Claimant
Baiimann. Mamie Helen (Mamie C. Sanchez as power of attorney for Mamie Helen Baumann)
Heau champ, Royce E.
Becker, Joseph
Benton B Johnson Test TR II (AmeriTrust Corporation, as Trustee on behalf of Benton B Johnson Test TR II)
Benton Bruce Johnson Trust #1 (AmeriTrust Corporation, as Trustee on behalf of Benton Bruce Johnson #1)
Beven, Terence
Boyd, Linda
Burris, Jerry
Carter, Anita Ellen
Chi.sholm, Jim
Comeaux, Patrick
On behalf of Account FINRA ClalniMnt
ID Mamie Helen Baumann
Royce E. Beauchamp IRA
Joseph R. Becker
Benton B Johnson Test TR SAS; STSGC20072D/C
Benton Bruce Johnson Trust #1
Terence or Elizabeth Beven; Terence Beven IRA
Jerry W Boyd or Linda S Boyd
Jerry M. Burris IRA
Anita Ellen Carter
Clyde J. Chishoim IRA
Patrick J. Comeaux IRA
Courville, Kevin R and Monica
D'Amore, Mallory Chastant (Paige)
D'Amore, Ralph
Daniel, Carolyn H.
Daniel, F. Kenneth ("Ken")
Danielson, Roderick ("Rod")
Dawson, William
Dehay, Wallace L. ("Kelly) Jr.
Demarest, Fred
Dore, Cindy
Diiinestre, Marcel and Margaret
Kevin R Courville and Monica Courville
Mallory Chastant D'Amore
Ralph Daniel D'Amore MD A Processional Corp; Ralph D. D'Amore IRA
Carolyn H. Daniel IRA
12
13
14
15
F. Kenneth Daniel and Carolyn M. Daniel; F. Kenneth Daniel IRA
Roderick L. Danielson
William C. Dawson IRA
Wallace L. Dehay IRA
Fred R. Demarest IRA
Marcel J Dumestre Jr. or Margaret Dumestre
17
18
20
Cynthia R. Dore Separate Property 21
l arr. Leah Leah S Farr IRA
Fischer, Martin J.
Forbes, Kendall
Gentry, Cindy L.
Gentry, Tommy G.
Giambrone, May
Gildersleeve, Lynn
Gildersiecve, Robert
Gill, Gordon
Martin J. Fischer
George Kendall Forbes; G. Kendall Forbes IRA
Tommy G. Gentry and Cindy L. Gentry; STC Custodian FBO Cindy L. Gentry IRA; International Bank and Trust Company FBO Cindy Gentry IRA 33-51226 IRA FBO Tommy Gene Gentry (Pershing as Custodian); S I C Custodian FBO Tommy G. Gentry IRA; Tommy G. Gentry and Cind> L. Gentry Michael J Giambrone or May L Giambrone
Lynn G. Gildersleeve Bene IRA; Lynn G. Gildersleeve; AKA Lynn Gildersleeve Michelli Inlervivos Trust Robert V. Gildersleeve Bene IRA; Robert Gildersleeve Jr Trust Intervivos Trust
Gordon C. Gill IRA
24
25
26
28
29
. 0
31
32 Gill, Nancy Nancy N Gill
Goeckel, Jon K.
Goeckel, Loretta B
Jon K. Goeckel IRA; Jon K Goeckel and Loretta B Gt)cckel; Jon Goeckel
IRA FBO Loretta B Goeckel; Jon K Goeckel and Loretta B Goeckel
33
34
Graham, Jason
Graham, Robert
Gruenwald, Charles (Dr.)
Hailman, Bamey L,
Haney, Patrick
Hart, Charles
ffebert. Patsy
Ilutcherson, John R.
Kenaley, Donald H.
Kiebach, Thomas
1 .anders. Don
Jason Scotl Graham
Robert E. Graham
Charles Gruenwald, Jr.
Bamey L, Hailman IRA
Patrick Haney
Charles Hart IRA 33-51202; Charles Hart IRA STSGC41251
Patsy J. Hcbert
John R. Hutchcrson IRA
Donald H. Kenaley IRA
rhomas J. Kiebach
Don G. Landers: Don G. Liinders RA
36
37
38
39
40
41
42
43
44
45
Landry, Daniel and Dianna Daniel P Landry or Dianna l.ynn Landry; Daniel P. Landry IRA
46
Laplante, Merrill
Lessing, Ruth G
Magee, Greg
Marston, Ronald
Merriii L Laplante 47
Ruth G. Lessing; Ruth G. Lessing 48 IRA
Gregory A. Magee IRA
Ronald R. Marston IRA; Ronald and Susan Marston
Martha JC Johnson Gen Skpg Tr (AmeriTrust Corporation, as Trustee on behalf of Martha JC Johnson Gen Skpg Tr)
Mayhall, Jean Anne
Mayhall, Jean Anne and John Wade (on behalf of Microchip ID Systems Pension Fund)
Melilli, Kathleen
Millet, Jacqueline
Martha JC Johnson Gen Skpg Tr-SAS
Jean Anne Mayhall
Microchip ID Services INC Retirement Plan
Kathleen F. Melilli IRA
Jacqueline A. Millet IRA
Nix, Bobby STC Custodian FBO Bobby J. Nix IRA
49
50
51
52
53
54
55
56
57
5H
Nix. Margaret Margaret S. Nix IRA
Oliver, Kirk R. Kirk R. Oliver or Mary C. Oliver: Kirk R. Oliver IRA
Oliver, Mary C.
Ordoyne, Arthur
Ordoyne, Lonnie
O'Rear, Bennie and Claudia
Patemostro, Mary Ann
Philippe, Lynn
Power Packing Co. Inc. Agency
Rathbone, Monroe J. (IV)
Rath bone, Richard (Dr.)
Roland, James and Susan
Mary C. Oliver IRA; Kirk R. Oliver or Mary C. Oliver
59
Arthur J. Ordoyne IRA 60
Lonnie P. Ordoyne IRA
Bennie M. O'Rear and Claudia P. O'Rear
Angelo A. Patemostro or Mary Ann Patemostro
Lynn J. Philippe IRA; Lynn J Philippe; Joseph H Philippe or Lynn J Philippe
Richard F. Rathbone; Richard F. Rathbone IRA
James W. Roland and Susan S. Roland
62
63
64
Power Packing Co. Inc. Agency 65
Monroe J. Rathbone IV; Monroe J. ' 66 Rathbone IV IRA
67
68
Romig, Jessie Jessie Romig 69
70 Savoy, Julie Julie Savoy IRA
Schwendimann, Robert
Smith, Bruce P.
Smith, G. Rogers or Harriet
Smith, Robert
Starkey, Rodney
Stegall, Carol H. and James
Stone, Walter Bruce
Tarver, Terry
Unglesby, Gail and Lewis
Wade, John
John R. Schwendimann IRA
Bruce P. Smith
G Rogers Smith or Harriet S Smith
71
72
73
Robert E. Smith, Jr. IRA; Robert Smith or Carolyn Smith
Rodney P. Starkey IRA
74
75
James H Stegall or Carol II Stegall; 76 James H. Stegiill IRA
Walter B. Stone IRA
STC Custodian FBO Terry Tarver IRA; Terry Tarver IRA
Gail H Unglesby
77
78
79
John R. Wade HO
HI
82
White. Charles Charles L. White IRA
Wilkewitz, Ken Kenneth G. Wilkewitz IRA
Wilson, Stephen
Witmer, Martha
Witmer, Sharon
Bone and Joint Clinic FBO Stephen M Wilson
Martha J Witmer
Sharon J. Witmer IRA
m
85
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