Finra panel orders Morgan Stanley to pay $34 million to estate of former Home Shopping Network chief

Arbitration panel cited the firm for churning Roy M. Speer's account and for violating a Florida law against exploitation of vulnerable adults

Mar 22, 2016 @ 9:05 am

By Mark Schoeff Jr.

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A Finra arbitration panel awarded more than $34 million to the estate of Roy M. Speer, the co-founder of the Home Shopping Network, in its claim against Morgan Stanley for churning Mr. Speer's account.

The all-public arbitration panel ruled that Morgan Stanley, broker Ami Forte and branch manager Terry McCoy were jointly liable for unauthorized trading, breach of fiduciary duty/constructive fraud, negligence, negligent supervision and unjust enrichment.

The arbitrators also found that Morgan Stanley violated a Florida law against exploitation of vulnerable adults. It awarded $32.8 million in compensatory damages to Lynnda Speer, Mr. Speer's widow and representative of the estate, as well as $1.5 million to reimburse costs incurred during the arbitration process, which spanned 13 months and involved 142 hearing sessions.

The chair of the arbitration panel signed the decision on March 18. It was posted on March 21.

Ms. Speer will next seek to recover potentially millions in attorneys fees in Florida court, according to her attorney, Scott Ilgenfritz, a partner at Johnson Pope Bokor Ruppel & Burns.

The award covered a period from January 2009 to June 2012 and involved investments in the banking and financial services sectors.

Mr. Ilgenfritz said there were about 12,000 transactions in six of Mr. Speer's accounts, 85% of which centered on corporate and municipal bond trading.

“The unauthorized trading was rampant,” Mr. Ilgenfritz said in an interview. “They were trading individual bonds like pork bellies.”

Mr. Speer, who died in August 2012, suffered from dementia, according to Mr. Ilgenfritz. He asserts that Mr. Speer was exploited by Ms. Forte, who was alleged to be in a relationship with Mr. Speer in addition to serving as his broker.

Mr. Speer's estate sought $118.7 million in compensatory damages and $366 million in punitive damages. The arbitration panel denied the punitive damages as well as requests for expungement by Ms. Forte and Mr. McCoy.

A Morgan Stanley spokeswoman said the award was not justified.

“Although disappointing, it is a small fraction of the more than $476 million sought by claimants,” Morgan Stanley spokeswoman Christine Jockle said in a statement. “Even so, the award is inconsistent with substantial evidence showing that the accounts were profitable for the client and managed in accordance with his wishes.”

Ms. Forte's attorney, Frederick Schrils, a partner at Gray Robinson, similarly said the accounts were handled “quite profitably” for Mr. Speer in a way that reflected “his wishes.”

“While no amount was justified given the facts of this case, it bears noting that the amount actually awarded to the claimant represented a very small fraction of the alleged 'damages' requested by her attorneys at the close of the case,” Mr. Schrils said in a statement.

Mr. Speer's widow hopes the case will lead to greater protections for elderly investors.

“One of her goals in this whole process was to bring to light the financial abuse and elder abuse of her late husband and to prevent other brokers and investment advisers from taking advantage of their elderly clients,” Mr. Ilgenfritz said.

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