Imposter FINRA Arbitrator Exposed: Plaintiff Wins Appeal
Fake Arbitrator’s $131 Million Decision “Unfair,” Appeals Court Says.
FINRA arbitration is virtually the only way to recoup financial damages caused by a negligent stockbroker. That’s why recent news about an “imposter” arbitrator (which led to a successful FINRA arbitration appeal) is extremely distressing.
The “imposter” was chairman of a three-person panel of arbitrators that denied a $100 million-plus stock fraud arbitration seven years ago. Fortunately, after a rare victory in appeal, the plaintiff may have won a second chance at arbitration.
In the original 2008 arbitration, the real estate website company Move Inc. claimed that Citigroup Inc. mismanaged a portfolio of auction-rate securities, causing $131 million in damages. Move claimed that Citigroup:
- Breached its fiduciary obligations
- Breached its contractual obligations,
- Committed negligent misrepresentation
- Violated various FINRA, SEC, and other laws
A year later, the arbitrators ruled in favor of Citigroup, and Move lost its case.
Arbitrator Who Decided the Case Was a Phony
Later, in March 2014, Move discovered that the lead FINRA arbitrator was an imposter. In fact, the real name of the arbitrator was James Hamilton Hardy Frank, and he was not the California attorney, James Hamilton Frank, who he claimed to be.
Move challenged the arbitration judgment in 2014, but a lower court upheld the decision – even in the face of evidence that the arbitrator was fake. In its denial of the appeal, the court cited a three-month deadline, saying that Move failed to contest the decision within the allotted time.
Plaintiff Attorney Brilliantly Argues FINRA Arbitration Appeal
Move appealed the lower court’s decision, bringing the matter before the U.S. Court of Appeals in San Francisco. Move’s attorney made extremely compelling arguments during the FINRA arbitration appeal when she said (see court session video):
At the time the arbitration was conducted in Oct. 2009, the financial meltdown had been going on for about a year. There had already been a well-publicized consent agreement between the SEC and Citigroup Global, in which Citigroup agreed to repurchase $7 billion worth of auction-rate securities from individuals, charities and small businesses, a settlement not available to Move. An award of $131 million would have generated tremendous public interest, publicity and press. And, we submit that Mr. Frank, based on what we know about him now, had every reason not to want publicity and not to want to be in the spotlight.
Appellate Court Rules in Favor of the Plaintiff
Last week, the U.S. Court of Appeals in San Francisco overturned the lower court’s ruling saying that the 2009 arbitration decision was unfair because an imposter arbitrator had decided the case. Accordingly, the court of appeals said:
Move’s right to a fundamentally fair hearing was prejudiced by the fraudulent misrepresentations of the arbitration panel’s chairperson, resulting in proceedings led by an arbitrator who should have been disqualified from the dispute under the rules and regulations of the Financial Industry Regulatory Authority.
FINRA has since confirmed that the imposter arbitrator fabricated information his Arbitrator Disclosure Report and posed as someone he wasn’t. Furthermore, FINRA confirmed it removed the man from its arbitrator roster and removed him from off all arbitration cases.
You can read more about the appeals court case here: Move Inc. v. Citigroup Global Markets Inc., 14-56650, U.S. Court of Appeals for the Ninth Circuit.
Can I Appeal My FINRA Arbitration?
This case proves that a successful FINRA arbitration appeal is possible under certain circumstances. However, as you can tell by watching the recorded hearing session, the appellate court’s scrutiny of this matter was severe.
Also, the defense council said in the recorded session that the grounds for vacating an arbitration ruling are narrow. Incidentally, this is why it is so important for plaintiffs to litigate every FINRA matter with expertise and care. Once such an arbitration has been decided it is next to impossible to get it overturned.
If you suspect that your stockbroker’s negligence or unlawful activity caused your investment losses, the Consumer Investor Resource Center can help. Our stock fraud counselors will listen to your story and provide free advice about your legal rights and options.