Edward Jones loses $30 million cyberbullying claim over fake sex ads

A six-year-old cyberbullying case that centered on a former Edward Jones broker in California came to a head last month when a 12-person jury awarded the broker, Dalas Gundersen, $30 million in damages for defamation from the firm.

According to the Sacramento Bee, former Edward Jones broker Paul Betenbaugh posted three fake gay-sex ads on Craigslist in September and October 2015, using the physical description and business phone number of Gundersen, a former Edward Jones adviser in Willows, California, to “harass, intimidate and defame” him.

The ads featured graphic language to describe the desired sex acts, and Gundersen said his phone was inundated with unwanted calls and text messages, some including pictures of male genitalia; one caller was arrested for a violent crime shortly after contacting Gunderson, according to the news story.

The attacks against Gundersen began several months after he left Edward Jones at the end of 2014; he had been "discharged," meaning fired, by the firm, when he did not confirm clients' trade orders made to an employee who was not a registered broker, according to his BrokerCheck profile.

Then, in May 2015 he started a firm in northern California with independent broker-dealer Kovack Securities. When a broker leaves a firm for a new enterprise, as in this case involving Edward Jones, it's common for his former colleagues to attempt to solicit clients, but cyberbullying is an ugly extreme.

Gundersen, who had about $140 million in client assets, later in 2015 sued Edward Jones, Betenbaugh and Rodriguez, claiming damages.

At the start of September, a jury in Glenn County, California, voted 12 to 0 that the conduct of another Edward Jones broker, Liza Rodriguez, was defamatory, intentionally inflicted emotional distress and that she was an employee of the firm at the time. Rodriguez had been recruited and mentored by Betenbaugh, according to the Sacramento Bee article.

Betenbaugh in 2018 was fined $7,500 and suspended for three months by the Financial Industry Regulatory Authority Inc.

The jury ruled that Betenbaugh separately pay $8 million in damages, said John Garner, Gundersen's attorney, making the total damages closer to $38 million.

Rodriguez did not return a call Monday to comment. Betenbaugh also did not return a call to comment.

Edward Jones said it was going to fight the jury's verdict.

"We have already begun the process of seeking judicial review of the verdict," an Edward Jones spokesperson wrote in an email. "Mr. Betenbaugh's misconduct was and remains inconsistent with the values of our firm and his employment was terminated as a result."

"It's important to note that, prior to trial, the court ruled Edward Jones and Ms. Rodriguez had no knowledge of Mr. Betenbaugh's misconduct and are not responsible for it," the spokesperson noted.

The jury's verdict against Edward Jones and Rodriguez was split into two parts, according to a copy of the verdict form that was dated September 1. The first was $8 million for noneconomic loss, including loss of reputation, and the second part, $22 million, for future losses.