A FINRA arbitration panel awarded full recovery of all losses plus interest, attorney fees, forum fees and costs to a former school teacher and her husband, who were victimized by her stockbroker brother.
The story was reported by Christine Jordan Sexton for the Daily Business Review and at Law.com.
Verdicts & Settlements
Case: James V. Hojecki, Diana R. Hojecki v. Calton & Associates Inc. and Kenneth Popek
Case no: 09-02171
Description: Breach of fiduciary duty
Filing date: April 17, 2009
Dates of arbitration: Jan 12-15, 2010
Arbitration panel: Nikola Bjelajac, Kimberlee Fowler, Syma Kasdin
Panel decision: $607,775
Plaintiff attorney: Mark A. Tepper, Mark A. Tepper P.A., Fort Lauderdale
Defense attorney: Robert Persante, Persante Law Group, Dunedin
Details: James and Diana Hojecki handed the profits from the 2007 sale of their home in Old Bridge, N.J., as well as money from some individual retirement accounts to Diana’s brother, Ameriprise broker Kenneth Popek. When he left Ameriprise the following year, he took the account with him to his new brokerage, Tampa-based Calton & Associates. Court documents filed by the Hojeckis, who moved to Miromar Lakes near Fort Myers, show Popek traded their stocks more than 100 times during a seven-month period in the midst of the 2008 stock market collapse. The value of the Hojeckis’ investments declined substantially.
A joint account lost $198,000 out of $267,000 invested, one IRA lost $25,000 of $27,000 invested, and two other IRAs lost about $9,000 each in less than four months, the couple claimed.
Plaintiff case: James Hojecki, a police officer, and Diana Hojecki, a teacher who stopped working in 2005 after she was diagnosed with thyroid cancer, allege her brother conducted and refused to stop unauthorized trading, exercised discretion without written authority and over-concentrated their investments in four money-losing stocks: Washington Mutual, Lehman Brothers, General Motors and Energy Partners.
“The broker was out of control,” the couple said in their claim with the self-regulated Financial Industry Regulatory Authority. “The broker also misrepresented to James and Diana that their accounts were making money.”
They allege the brokerage did not adequately supervise their accounts and both Popek and the firm violated the Florida Investor Protection Act. The couple testified on their own behalf at a four-day arbitration hearing. Securities litigation consultant Charles Pease of Solana Beach, Calif., testified on liability, stating the defendants violated industry standards.
Defense case: The defense argued the Hojeckis had a duty to object and notify the defendants if they did not want the trades to occur. The defense presented cell phone records indicating the plaintiffs and Popek were in constant contact. Furthermore, the defense argued the brokerage firm was not negligent as there was daily supervision of the account, and all manuals and processes were in compliance with the law.
Outcome: Eleven days after the hearing, the three-member panel unanimously awarded the plaintiff a total of $607,776: $342,957 in compensatory damages, $250,000 in punitive damages and $14,819 for expert witness fees, filing fees and costs. Attorney fees are to be determined later in state court. The panel denied Popek’s request that the matter be expunged from the national broker records database.
Quote: “This was a hotly contested case defended by a skilled adversary. We are pleased that the arbitrators saw through the defenses and understood that the broker’s transactions were unsuitable because they were inconsistent with the customers’ investment objectives and risk tolerance. The message to brokerage houses is loud and clear,” Tepper said. “You have a responsibility to supervise your brokers.”
Post-award: Tepper filed a motion Jan. 26 to confirm the award in Broward Circuit Court following the arbitration hearing in Fort Lauderdale. Persante filed a motion Jan. 27 to vacate the award in Lee Circuit Court. Defendants argued “the award represents or evidences a manifest disregard for the law as well as evident partiality by the arbitrators.” In his motion to vacate, Persante argues no evidence on the issue of damages was presented to arbitrators and no punitive award is allowed under state law. Tepper said he plans to respond that the defense is attempting to apply standards that do not exist to the arbitration process.