December 03, 2010
Posted in: FINRA | Arbitrations | Risky Investments
Millions of Americans were affected by the collapse of mega-bank Washington Mutual, but perhaps no one suffered as much as Patricia Chapman.
On Wednesday arbitrators for the Financial Industry Regulatory Authority ordered Citigroup to pay Chapman $3 million for improper investment advice. In 2008 when Chapman was a customer of Smith Barney, the investment arm of Citi's conglomerate, her broker Bill Elliot allegedly advised her to invest in heavily in Washington Mutual.
Shares in Washington Mutual declined sharply in 2007, only to freefall in 2008 after the collapse of the mortgage market. The bank would later be seized by the Securities and Exchange Commission, only to be sold to JPMorgan Chase. Normal investors in the old WaMu lost everything; in May of this year, Chapman asked regulators for $70 million in damages.
As part of the charge against Citi, Chapman claimed the broker-dealer had repeatedly failed to produce documents as part of the discovery process, when both sides are required to submit evidence and testimony upon request. FINRA arbitrators would deny this part of her request, meaning only they lacked the sufficient evidence proving Citi was dragging its heels.
According to Reuters, Chapman originally approached Elliot-a broker of 43 years-to recommend "suitable risk-management strategies." Even with all of his experience, which included stints at several major broker-dealers including Lehman Brothers and Paine Webber, Elliot planned a concentrated investment in a bank that was set to fail.
To give you an idea of how seriously Citi takes this case, FINRA arbitrators had to deny the broker-dealer's request to expunge this whole matter from Elliot's record. An individual investor loses nearly everything after her broker recommends one of the most foolish investments in United States history, and Citi focuses its efforts on clearing the broker's name.
If you were another investor duped into investing in Lehman Brothers, Washington Mutual, or other securities destined to fail, do not hesitate to contact us for a free consultation of your case.
