Morgan Stanley hit with $20M whistleblower suit from ex-brokers

Couple claim they were retaliated against after reporting illegal sales tactics at the firm's midtown Manhattan office

Aug 27, 2015 @ 12:50 pm

By Mason Braswell

Two former Morgan Stanley brokers in the firm's midtown Manhattan branch have sued the firm and a branch manager for $20 million in damages saying they were wrongfully terminated after blowing the whistle on alleged fraudulent activity and violations of securities laws at the branch.

The brokers, Jaime Feldman and her husband, James Boland, were terminated in 2011 after the firm said they did not meet performance requirements, according to the complaint. But the two, who are no longer registered, said the performance issues were a pretext for firing them after they levied a number of allegations at their former firm including that unlicensed trainees were cold calling prospects with misleading scripts, brokers were changing client risk profiles, and advisers were working from home without proper supervision.

The complaint alleges that interns and trainees in the office were cold calling employees at large companies such as Pfizer Inc. and Verizon Communications Inc. who were near retirement and had 401(k) plans at Fidelity Investments to solicit them to roll over their account to Morgan Stanley with the enticement of a 15% annual return.

Once the accounts were rolled over, the firm also changed clients' risk profiles to allow for investments in riskier closed-end funds, according to the complaint.

“This action arises out of defendant's termination of the employment of plaintiffs because of their objections to and complaints about fraudulent activity and violations of the securities laws at the Morgan Stanley branch office,” the complaint reads. “Morgan Stanley terminated the employment of plaintiffs for their 'whistle-blowing' activities.”

Ms. Feldman reported the concerns to the branch manager, David Turetzky, who was “indifferent” and told her to leave his office, according to the complaint. The next month, in May 2011, Mr. Turetzsky moved to terminate them based on substandard performance, according to the complaint.

A Morgan Stanley spokeswoman, Christine Jockle, said that there is no merit to the complaints. The two advisers were trainees and have made a number of claims since they were terminated in 2011, but none have been found to have any merit, she said in an email. "We believe this latest claim is equally without merit and will be dismissed," she wrote.

Finra investigated the branch and asked about the allegations in August 2011 following the plaintiff's complaints to regulators, but the complaint does not allude to any action having been taken. An attorney for the plaintiffs, Alice K. Jump of RPL Law, said she was not aware of any enforcement action.

The two had filed a complaint with the Occupational Health and Safety Administration in February 2012, shortly after they were fired. That complaint was assigned to an investigator, but no findings had been made by the time the two decided to take the case to federal court, according to the complaint.

Ms. Feldman-Boland began her career in the industry in 2002 at Metropolitan Life Insurance Co., according to registration records. She spent almost four years at Merrill Lynch before joining Morgan Stanley in 2008. Mr. Boland had worked with his wife at Merrill Lynch and joined Morgan Stanley in 2010 as a trainee, according to the complaint.

Ms. Feldman said in the complaint that her performance on occasion did not meet the firm's internal revenue goals, but she blamed the firm and the adviser she had been partnered with for interfering with her ability to prospect.

This case is the second time that an employee from the 52nd street branch has sued Morgan Stanley for wrongful termination in a whistle-blower suit. In 2012, Clifford Jagodzinski, a risk officer who was mentioned in the Bolands' complaint, sued the firm for $1 million,claiming he was told by Mr. Turetzky not to report alleged violations, including improper Treasury trades, drug use by an adviser and advisers working from home without registering their home office as an alternative work location.

Morgan Stanley denied the allegations and said that Mr. Turetzky and his supervisors supported an investigation into Mr. Jagodzinski's claims. The case settled for an undisclosed amount.

0
Comments

What do you think?

View comments

Recommended next

Upcoming event

Oct 22

Conference

San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print