A Financial Industry Regulatory Authority panel wants Citigroup to pay financial advisor siblings Robert Vincent Minchello and James Bryan Minchello, as well as administrator Martha Jane Sullivan, $24 million. The claimants, who were formerly employed by the financial firm, contend that they did not receive fair compensation for transactions involving an institutional investor client.
Prior to working for Citigroup they were with Banc of America Securities. When they landed at Citi, they brought a number of institutional investors with them. Transactions that the brothers conducted with one the clients, a technology incubator that at the time they already had a 10-year working relationship with, is at the center of the dispute with Citigroup.
The Claimants contend that Citi only partially paid them on a few of the initial transactions and then removed them from relationship with the client while refusing to compensate them for subsequent transactions. After leaving the financial firm in 2009 they submitted an arbitration claim with Citigroup. They had wanted $156.1 million in punitive damages and interest, as well as $78 million in compensatory damages ( and attorneys’ fees and other costs).
The FINRA panel awarded the team about $24 million for compensatory damages and 6% yearly interest for the period of December 15, 2004 through January 13, 2012. Citi must also pay the advisors $1M in sanctions. The Claimants’ securities fraud attorney says the award seem to be a “rebuke” of the practice that some investment banks engage in of not paying advisors that connect them with lucrative transactions or clients. The brothers and Sullivan are now with JP Morgan Securities LLC.
As you can read about in some of our recent blog posts, Citigroup has come under fire a lot recently over alleged violations. FINRA just fined Citigroup Global Markets $725,000 for allegedly failing to disclose certain conflicts of interest in its research reports and during research analyst public appearances. In December 2011, a judge turned down Citigroup’s request to have a $54.1M arbitration award against it overturned. That FINRA award was over Citigroup’s alleged failure to disclose to investors the risks involved in putting their money in municipal bonds.
Of course, there is also the $285 million settlement reached between Citigroup and the Securities and Exchange Commission that US District Judge Jed S. Rakoff has refused to approve. Instead, he ordered both parties to court to resolve this matter. The SEC as the housing market was collapsing in 2007, Citigroup sold Class V Funding III and then betting against the $1B mortgage-linked CDO. Clients were not told about this conflict and investors eventually lost almost $700 million. Meantime, the financial firm made approximately $160 million.
Boston financial advisors and assistant win $24 million in arbitration, Boston, January 23, 2012
Citigroup Ordered To Pay Advisor Team $24M in Arbitration Dispute, OnWallStreet, January 24, 2012
More Blog Posts:
Citigroup Request to Overturn $54.1M Municipal Bond Arbitration Ruling Denied by Judge, Institutional Investor Securities Blog, December 27, 2011
Citigroup’s $285M Mortgage-Related CDO Settlement with Raises Concerns About SEC’s Enforcement Practices for Judge Rakoff, Institutional Investor Securities Blog, November 9, 2011
Unsealed Documents in $54.4M FINRA Arbitration Case Reveal that Citigroup Did Not Disclose Municipal Bond Risks to Investors, Stockbroker Fraud Blog, January 21, 2012