AWARD FINRA Dispute Resolution In the Matter of the ... · Edwin Russell Sanford, II, Walter M....

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AWARD FINRA Dispute Resolution In the Matter of the Arbitration Between: Names of Claimants Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis, Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust DAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and JTWROS, Robin S. O'Malley, individually and JTWROS, Kerry Rinehart, David A. Rubin, individually and as JTWROS, Dawn L. Rubin, individually and JTWROS, Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner vs. Case Number: 13-01753 Hearing Site: Houston, Texas Name of Respondent Pershing, LLC NATURE OF THE DISPUTE Customers vs. Member The case proceeded under the Majority Public Panel Rule / Majority Public Panel REPRESENTATION OF PARTIES Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis, Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa

Transcript of AWARD FINRA Dispute Resolution In the Matter of the ... · Edwin Russell Sanford, II, Walter M....

AWARD FINRA Dispute Resolution

In the Matter of the Arbitration Between:

Names of Claimants

Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis, Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust DAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and JTWROS, Robin S. O'Malley, individually and JTWROS, Kerry Rinehart, David A. Rubin, individually and as JTWROS, Dawn L. Rubin, individually and JTWROS, Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner

vs. Case Number: 13-01753 Hearing Site: Houston, Texas

Name of Respondent

Pershing, LLC

NATURE OF THE DISPUTE

Customers vs. Member

The case proceeded under the Majority Public Panel Rule / Majority Public Panel

REPRESENTATION OF PARTIES

Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis, Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa

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Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and JTWROS, Robin S. O'Malley, individually and JTWROS, Kerry Rinehart, David A. Rubin, individually and as JTWROS, Dawn L. Rubin, individually and JTWROS, Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner, hereinafter collectively referred to as "Claimants," were represented by Scott D. Hirsch, Esq., Scarlett, Gucciardo & Hirsch, P.A., Boca Raton, Florida, Michael E. Criden, Esq. and Lindsey Grossman, Esq., Criden & Love, P.A., South Miami, Florida, and Donald L. Ferguson, Esq., Portland, Maine.

Pershing, LLC ("Respondent" or "Pershing") was represented by Thomas Farrell, Esq., McGuire Woods, LLP, Houston, Texas and Elizabeth F. Edwards, Esq., McGuire Woods, LLP, Richmond, Virginia.

CASE INFORMATION

The Statement of Claim was filed on or about June 11, 2013. The First Amended Statement of Claim was filed on or about September 6, 2013. All of the Claimants signed the Submission Agreement and filed same with FINRA.

The Statement of Answer was filed by Respondent on or about October 8, 2013. The Submission Agreement of Respondent was signed on or about October 2, 2013.

CASE SUMMARY

Claimants asserted the following causes of action: common lawfraud; aiding and abetting breach of fiduciary duty; negligence; breach of contract; violation of FINRA Anti-Money Laundering Conduct Rule 3310; violation of FINRA Conduct Rule 2120; violation of FINRA Conduct Rule 2110; violation of NASD Conduct Rule 3010(a); and civil conspiracy to defraud. The causes of action related to Claimants' allegations that Respondent engaged in misconduct by aiding and abetting a Ponzi scheme and money laundering carried out by Stanford Group Company and Stanford International Bank, Ltd. Claimants alleged that they suffered financial losses as a result of their investments in Stanford issued CDs which Pershing promoted and assisted by transferring funds from client accounts held at Pershing for CD purchases.

Unless specifically admitted in its Answer, Respondent denied the allegations made in the Statement of Claim and asserted affirmative defenses.

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RELIEF REQUESTED

Claimants requested an award in the amount of:

Actual/Compensatory Damages $16,000,000.00 Exemplary/Punitive Damages (in excess of) $48,000,000.00 Interest Unspecified Other Costs Unspecified Other Monetary Relief Unspecified

Respondent requested that the claims asserted against it be denied in their entirety.

OTHER ISSUES CONSIDERED & DECIDED

The Arbitrators acknowledge that they have each read the pleadings and other materials filed by the parties.

On or about October 8, 2013, Respondent filed a Motion to Stay Pending Compliance with FINRA Rule 12204(b). On or about October 17, 2013, Claimants filed a Non-Participation in Class Action Pursuant to Rule 12204(b)(2) of the FINRA Code of Arbitration Procedure and Opposition to Respondent's Motion to Stay. Accordingly, the case was not stayed.

On or about October 8, 2014, Respondent filed a Motion to Preclude Claims and Purported Evidence Regarding Anti-Money Laundering ("AML") Issues. On or about October 22, 2014, Claimants filed a Response in Opposition to Pershing's Motion to Preclude Evidence Regarding AML Issues. On or about October 27, 2014, Respondent filed a Reply to Claimants' Response in Opposition to Pershing's Motion to Preclude Evidence Regarding AML Issues. The Panel denied the Motion in its Order dated October 28, 2014.

On or about October 21, 2014, Claimants filed a Pre-Hearing Brief. On or about October 21, 2014, Respondent filed a Pre-Hearing Brief.

At the hearing. Claimants made a Motion to Conform the Pleadings to the Evidence. The Panel granted the Motion.

At the hearing, the parties requested permission to file post-hearing submissions. The Panel granted the request. On or about November 25, 2014, Claimants filed a Post-Hearing Brief. On or about November 25, 2014, Respondent filed a Post-Hearing Brief.

The parties have agreed that the Award in this matter may be executed in counterpart copies or that a handwritten, signed Award may be entered.

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AWARD

After considering the pleadings, the testimony, the evidence presented at the hearing, and the post-hearing submissions, the Panel has decided in full and final resolution of the issues submitted for determination as follows:

1. ) Claimants' claims, each and all, are hereby denied and dismissed with prejudice;

2. ) Other than Forum Fees which are specified below, the parties shall each bear their own costs and expenses incurred in this matter; and

3. ) Any relief not specifically enumerated, including punitive damages, is

hereby denied with prejudice.

FEES

Pursuant to the Code, the following fees are assessed:

Filing Fees

FINRA Dispute Resolution will retain the non-refundable filing fee* for each claim:

Initial Claim filing fee = $ 1,800.00

*77?e 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 firm that employed the associated person at the time of the events giving rise to the dispute. Accordingly, as a party, Pershing, LLC is assessed the following:

Member surcharge =$ 3,750.00 Pre-hearing process fee = $ 750.00 Hearing process fee = $ 5,500.00

Discoverv-Related Motion Fees

Fees apply for each decision rendered on a discovery-related motion.

Three (3) Decisions on discovery-related motions on the papers with one (1) arbitrator @ $200.00 = $ 600.00

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Claimant submitted two (2) discovery-related motions Respondent submitted one (1) discovery-related motion Total Discovery-Related Motion Fees = $ 600.00

The Panel has assessed $300.00 of the discovery-related motion fees jointly and severally to Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis,Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and JTWROS, Robin S. O'Malley, individually and JTWROS, Kerry Rinehart, David A. Rubin, Individually and as JTWROS, Dawn L. Rubin, individually and JTWROS, Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner.

The Panel has assessed $300.00 of the discovery-related motion fees to Pershing, LLC.

Contested Motion for Issuance of a Subpoena Fees

Fees apply for each decision on a contested motion for the issuance of a subpoena.

One (1) Decision on a contested motion for the issuance of a subpoena Three (3) arbitrators $200.00 (maximum of $600) = $ 600.00 Total Contested Motion for Issuance of Subpoenas Fees = $ 600.00

The Panel has assessed $300.00 of the contested motion for issuance of subpoenas fees jointly and severally to Deborah Crowell, Larry J. Davis, Teresa K. Davis, Marilyene Davis,Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and JTWROS, Robin S. O'Malley, individually and JTWROS, Kerry Rinehart, David A. Rubin, Individually and as JTWROS, Dawn L. Rubin, individually and JTWROS, Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner.

The Panel has assessed $300.00 of the contested motion for issuance of subpoenas fees to Pershing, LLC.

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Hearing Session Fees and Assessments

The Panel has assessed hearing session fees for each hearing session conducted. A session is any meeting between the parties and the arbitrators, including a pre-hearing conference with the arbitrators, that lasts four (4) hours or less. Fees associated with these proceedings are:

Two (2) Pre-hearing sessions with Panel x $1,200.00 = $ 2,400.00 Pre-hearing conferences: January 17, 2014 1 session

January 21, 2014 1 session

Twenty-Two (22) Hearing sessions x $1,200.00 = $ 26,400.00 Hearing Dates: October 28, 2014 2 sessions

October 29, 2014 2 sessions October 30, 2014 2 sessions October 31, 2014 2 sessions November 3, 2014 2 sessions November 4, 2014 2 sessions November 5, 2014 2 sessions November 6, 2014 2 sessions November 7, 2014 1 session November 10, 2014 2 sessions November 11, 2014 2 sessions November 12, 2014 1 session

Total Hearing Session Fees = $ 28,800.00

The Panel has assessed $14,400.00 of the hearing session fees jointly and severally to Deborah Crowell, Larry J . Davis, Teresa K. Davis, Marilyene Davis,Horacio Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, AnnaLisa Mendez, individually and as Co-TTEE of the Horacio and AnnaLisa Mendez Rev. Trust UAD 03/28/01, Sandra Dorrell, James Hamilton, Catherine Hamilton, Sidney Holmes, Vicki E. Holmes, Dr. Peter Isaac, Pamela Meador, Eastex Medical Lab PP & Trust, East Texas Medical Lab, Inc., East Texas Pathology, P.A., Michael A. Long, William Newman, Floormasters Def. Benefit Plan, Daniel T. O'Malley, individually and J T W R O S , Robin S. O'Malley, individually and J T W R O S , Kerry Rinehart, David A. Rubin, individually and as J T W R O S , Dawn L. Rubin, individually and J T W R O S , Edwin Russell Sanford, II, Walter M. Smith, Delphaine E. Smith, Harvey Trammell, Jami H. Gilliland Co-TTEE of Gilliland Family Trust, Abe S. Goren, Co-TTEE of Gilliland Family Trust John B. Turbeville, Jr., Richard Turner, and Billye Turner.

The Panel has assessed $14,400.00 of the hearing session fees to Pershing, LLC.

All balances are payable to FINRA Dispute Resolution and are due upon receipt.

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ARBITRATION PANEL

Karen Roberts Washington - Public Arbitrator, Presiding Chair Clark Willis Richards - Public Arbitrator

Jeffrey M. Aboloff - Non-Public Arbitrator

I, the undersigned Arbitrator, do hereby affirm that I am the individual described herein and who executed this instrument which is my award.

Concurring Arbitrators' Signatures:

Isl Karen Roberts Washington Karen Roberts Washington Public Arbitrator, Presiding Chair

Decembers, 2014 Signature Date

Isl Clark Willis Richards Clark Willis Richards Public Arbitrator

Decembers, 2014 Signature Date

Isl Jeffrey M. Aboloff Jeffrey M. Aboloff Non-Public Arbitrator

December 10, 2014 Signature Date

December 10, 2014 Date of Service (For FINRA office use only)

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ARBITRATION PANEL

Karen Roberts Washington - Public Arbitrator, Presiding Ctiair Clark Willis Richards - Public Arbitrator

Jeffrey M. Aboloff - Non-Public Arbitrator

I, ttie undersigned Arbitrator, do hereby affirm that I am the Individual described herein and who executed this instrument which Is my award.

Concurring Arbitrators' Signatures:

Washlnaton Karan Roberts Washington ?iina< Public Arbltrator,..Presidina Chair

Clark Wilirs RlBiarcis Public Arbitrator

Je f f re^^ to fo f f Non -Public Xrbitrat

Signature Date

( 2-.

Signature Dale

Signature Date

Date of Service (For FINRA office use only)