Investors win churning case against Wells Fargo in Finra arbitration

Wells and a former broker must pay $731,587. The claimants alleged investments were made 'with the sole purpose of generating additional commission or fees" for the broker.

Finra arbitrators ordered Wells Fargo and one of its former financial advisers to pay two investors $731,587 for allegedly churning their accounts.

Edward A. and Wendy M. Pesicka filed an arbitration claim on October 5, 2017, alleging that Gregory T. Pease, while affiliated with Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network, altered the Pesickas’ risk profiles on their account applications, “routinely churned” their investments and placed them in investments that exceeded their risk tolerance.

“Claimants allege that many of these investments were made with the sole purpose of generating additional commission or fees in Pease’s favor,” states the Aug. 8 award.

The investors accused Wells Fargo, Pease, Pease’s partner John P. Rauch and Rauch Pease Wealth Management of breach of fiduciary duty, fraud, negligence, unjust enrichment, aiding and abetting fraud and conspiracy, among other causes of action. Pease was serving as a “discretionary account benefit administrator” during the timeframe of the allegations, according to the award document.

A three-person, all-public Financial Industry Regulatory Authority Inc. panel based in Pittsburgh found Wells Fargo Clearing Services and Pease jointly and severally liable and awarded the Pesickas $731,587 in compensatory damages. Wells Fargo and Pease also must pay 6% annual interest on the award from October 6, 2017, through the date the award is paid in full.

Edward A. Pesicka is chief executive of Owens & Minor, a health care firm based in the Richmond, Virginia area. Attorneys representing the Pesickas did not respond to a request for comment.

A Wells Fargo spokesperson declined to comment.

The Pesickas sought damages of between $6.5 million to $9.4 million and treble damages. They also asked for attorneys’ fees and costs of $1.2 million. The arbitrators denied punitive damages, treble damages and attorneys’ fees.

Pease is no longer registered as a broker or an investment adviser, according to his BrokerCheck profile. Rauch is dually registered and continues to work at Wells Fargo Clearing Services.