Finra arbitrators ruled that Pershing must pay $1.4 million to several victims of R. Allen Stanford's Ponzi scheme.
The three-person, all-public
Financial Industry Regulatory Authority Inc. panel
found in favor of six claimants who alleged Pershing aided and abetted Mr. Stanford because the firm served as a custodian and clearing firm for him. The arbitrators ruled that Pershing was negligent.
The victims invested in CDs issued by Mr. Stanford's off-shore bank in Antigua. The transactions occurred between 2006 and 2009.
Mr. Stanford was convicted in 2012 of
committing a $7.2 billion fraud that revolved around selling CDs from the Antigua bank over the course of 20 years.
Pershing had reason to believe there was something nefarious about Mr. Stanford's operations, according to the victims' attorney, Scott D. Hirsch, owner of an eponymous law firm in Boca Raton, Fla.
"Rather than do something, they put their head in the sand and let it happen," Mr. Hirsch said.
Lawyers representing Pershing and a firm spokesman were not immediately available for comment. In 2014, Pershing won a similar Finra arbitration claim for $80 million that was later upheld in federal court on appeal.
The Finra arbitrators awarded $500,000 in compensatory damages to one couple; $330,000 to another victim; and $200,000 each to three others.
The original case included 18 claimants seeking more than $6 million in damages. The arbitrators denied the claims of all but the six claimants who received awards. The award document doesn't explain the reasoning behind the bifurcation.
Even though not all of their clients won, Mr. Hirsch and his co-counsel Charles Scarlett, also an owner of an eponymous law firm in Boca Raton, were happy with the outcome.
"This was truly a panel that listened to both sides, weighed the evidence and ultimately made the right call," Mr. Hirsch said.
The repercussions of Mr. Stanford's Ponzi scheme, which was overshadowed only by the $65-billion ripoff orchestrated by Bernie Madoff, continue today. Only about 6% of investors hurt by Mr. Stanford have recovered their money, according to Mr. Hirsch.
Sen. John Kennedy, R-La., has made advocacy for Stanford victims a priority. He brought up their plight at a
Senate Appropriations subcommittee hearing on Wednesday when questioning Securities and Exchange Commission Chairman Jay Clayton.
"They haven't recovered as much as I had hoped," Mr. Kennedy said.
The Finra arbitration decision is a bright spot for Stanford victims, Mr. Hirsch said. He and his colleagues have similar cases in the arbitration pipeline.
"This is certainly, in our estimation, a milestone," he said. "We're hoping this is the first of many recoveries for Stanford victims."
