Ex-Wells broker ordered to repay firm $1.2 million

Finra arbitration panel denied broker's claim that Wells Fargo made false promises during recruiting

Jun 12, 2014 @ 1:54 pm

By Mason Braswell

Wells Fargo, Finra, arbitration, promissory note, Smith Barney
+ Zoom

A former Wells Fargo Advisors broker who sparred with his old firm over an upfront loan has lost the fight and must repay his firm nearly $1.3 million, according to an arbitration panel.

In one of the largest promissory note cases this year, an arbitration panel with the Financial Industry Regulatory Authority Inc. denied veteran adviser Philip DuAmarell's claim that Wells had oversold its corporate stock plan services when he was being recruited and ordered him to repay the unvested portion of an upfront loan that was provided when he joined the firm.

Brokers rarely prevail in promissory note cases, which are some of the most common arbitration claims, according the Securities Arbitration Commentator, an arbitration award research service. Firms frequently sue brokers who leave or are terminated before their loan is forgiven.

The firms win some portion of their claims in around 90% of promissory note cases, according to Harry Jacobowitz, database manager of the Securities Arbitration Commentator. Mr. DuAmarell's is the third largest promissory note case this year, according to Mr. Jacobowitz.

“They are also, thanks to the amount of documentation involved, the single most successful type of case” for firms, according to the research service.

Mr. DuAmarell left Wells Fargo in 2010 after less than three years to join Bank of America Merrill Lynch. He argued that he had been misled during the recruiting process about the firm's ability to serve corporate stock plans, according to the lead attorney on his case, Robert Girard II of Freeman Freeman & Smiley. Mr. Girard said Wells Fargo had also misled Mr. DuAmarell about how much he would make for assisting executives with making trades in their company's stock.

Mr. Girard said that they had shown the arbitrators e-mails seeking to prove that Mr. DuAmarell was enticed to leave Citigroup Global Markets Inc.'s Smith Barney brokerage because of Wells Fargo's platform. He left after it became clear that he was unable to do business with clients in the same way as at Smith Barney, in which he managed corporate stock plans that were part of a client's compensation. He asked for $3 million in damages in his counterclaim.

“The recruitment process is competitive out there with everybody vying for the same successful brokers,” Mr. Girard said. “Our guy relied on what was being told to him during the recruitment process. He walked away from an 18-year career at Citigroup Smith Barney.”

A Wells Fargo spokesman, Anthony Mattera, declined to comment on the case.

The firm does, however, have a platform for serving corporate stock plans, according to a source familiar with the award who asked not to be named because he did not have permission to speak about the case. The firm argued that Mr. DuAmarell's production improved after he joined the firm.

Merrill Lynch offered Mr. DuAmarell approximately $1.5 million to join the firm in 2010, the source said. Mr. Girard confirmed that Mr. DuAmarell received an offer, but said he thought it might have been slightly less. A call and e-mail to Mr. DuAmarell was not returned.

Ultimately, the panel denied Mr. DuAmarell's claim against Wells Fargo without providing an explanation.

To prevail in promissory note cases, the broker generally must prove that the contract was invalid or included a special exception that would apply to the reason that the broker left.

Although Mr. DuAmarell was ordered to repay the loan, Mr. Girard said that it was a good sign that the panel did not hold him liable for around $400,000 in legal fees and interest for Wells Fargo, as is typical in promissory note cases.

“I'm not going to read into what the panel did or didn't do, but I do think that they must have considered some of [the counterclaim],” he said.

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