A sister who sued her brother and his brokerage firm won a $608,000 arbitration decision last month in a case that alleged, among other claims, churning of highly volatile stocks in the weeks leading up to the market collapse of September 2008.
Three Finra arbitrators awarded investors Diana Hojecki, along with her husband, James, $343,000 in compensatory damages, $15,000 in fees and punitive damages of $250,000.
Winning such large punitive damages is a rarity in such arbitration cases.
Mr. and Mrs. Hojecki’s complaint alleged churning of investments that included shares of General Motors Co., Lehman Brothers Holdings Inc. and Washington Mutual Inc. All three companies collapsed in the credit crisis, and their shares are valued for pennies on the pink-sheets market.
The brokerage firm, Calton & Associates Inc., and the sibling broker, Kenneth Popek, have filed a motion — essentially an appeal — to vacate the award. Such appeals, however, are very rarely won in securities arbitration cases. “It’s a sad situation when a family has this kind of disagreement,” said Dwayne Calton, president of Calton & Associates. “We think we did everything on our end.”
Ms. Hojecki “trusted her brother. She was an inexperienced investor,” said Mark Tepper, lawyer for the Hojeckis. After the sale of their home in New Jersey, they gave Mr. Popek about $290,000 in June of 2008 and saw it lose $242,000 in the span of three months.
“The case came down to suitability,” Mr. Tepper said. The account was traded as if the goal were short-term returns, and that was inconsistent with the investors’ goals of income, growth and protecting assets, he said.
Mr. Popek did not return a call to comment.