Oppenheimer loses Finra arbitration of $36.7 million stemming from alleged Ponzi

Oppenheimer loses Finra arbitration of $36.7 million stemming from alleged Ponzi
The investors cited a violation of Georgia's RICO law to boost their award against Oppenheimer.
SEP 07, 2022

Oppenheimer & Co. Inc., long dogged by regulators over its advisers' sales of penny stocks, complex exchange-traded funds and other matters, Tuesday lost a huge arbitration decision of $36.7 million to eight investors who were sold a private equity fund by a former Oppenheimer broker, John Woods, near Atlanta. Last year, the Securities and Exchange Commission charged Woods with running a $110 million Ponzi scheme.

Several former Oppenheimer financial advisers were named as third-party respondents in the matter.

The investors originally claimed $6 million in compensatory damages, according to the award, which was issued under the aegis of Finra Dispute Resolution Services, the industry arbitration arm of the Financial Industry Regulatory Authority Inc. The investors alleged negligence, violation of Finra rules and other claims, and also alleged a violation of Georgia's RICO statute, which creates the potential for triple damages in such cases.

The investors also claimed punitive damages, which, all together, amounted to a final award of six times the original compensatory damages claimed. Punitive damages and RICO awards are highly unusual in Finra arbitration claims.

"Oppenheimer intends to file a motion to vacate the award in its entirety," a company spokesperson wrote in an email, adding that the firm believed the Finra arbitrators erred in several ways in making their decision.

“While Oppenheimer regrets that any of the claimants may have suffered losses due to the actions of John Woods, the firm believes that the other defendants, who are currently covered by a judicial stay and did not appear at the hearing, are the parties responsible for any losses,” the spokesperson wrote.

The third-party defendants did not appear to testify, according to the Finra award.

"The claimants’ compensatory awards were trebled under Georgia’s so-called Racketeer Influenced and Corrupt Organization, or RICO statute," said the claimants' attorney, John S. Chapman. "The Finra award provides no explanation, per usual, but our primary claims were, one, failure to supervise, and, two, Oppenheimer acting in concert with, or aiding and abetting, its employees who perpetrated the Horizon scheme."

RICO laws were first devised to combat organized crime.

"Under the Georgia RICO statute, whenever people combine or act in concert to do harm, the RICO statute may apply," Chapman said. "The RICO statute in Georgia rewards litigants who bring claims against conspirators ... by trebling damages and paying attorneys' fees and costs."

Latest News

Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households
Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households

Pew survey reveals slight majority consensus on tax rates, but views splinter based on political alignment and income levels.

The Fed's going to cut rates
The Fed's going to cut rates

While the Federal Reserve's decision to hold interest rates steady in March was widely expected, it's the reactions from financial professionals that provide a more nuanced picture of the central bank's approach.

Ontario Pension Fund revamps PE business in light of global risk
Ontario Pension Fund revamps PE business in light of global risk

The pioneering member of Canada's Maple Eight is stepping back from its go-it-alone private equity approach as a drought in deals and Trump's trade war prompt a rethink.

Raymond James, RBC reel in UBS advisors managing over $690M in assets
Raymond James, RBC reel in UBS advisors managing over $690M in assets

The firms' latest additions in Florida and Nevada come as a strategic change at UBS raises risk of advisor defections.

Assetmark debuts new advisor succession planning program
Assetmark debuts new advisor succession planning program

The new program offers opportunities and events structured for rookies, next-gen advisor leaders, and soon-to-exit veterans.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies