Wednesday, July 27, 2011

Arbitration Award Confirmed Against Daddy

Yesterday a New York State judge confirmed a Wall Street Arbitration award against me so I now owe $10.7M (plus about $4M in interest) to the investment bank that wouldn't let me lower my research rating on one of their clients five years ago. My lawyer argued that the award was "arbitrary" because the damages were based on "lost profits" that they claim they would have earned if a delayed financing by the bank had been completed a year earlier. We provided a dozen cases in which these types of claims had been denied in NY state courts and highlighted that the bank's own lawyers and expert's could not cite a legal precedent. However, the judge ruled that we had not demonstrated that the arbitrators showed a "manifest disregard for the law" and reminded my lawyer that arbitration awards are almost always confirmed because of this high legal standard.

Last year, the investment bank's team of four corporate trial lawyers succeeded in convincing a pliant industry arbitration panel that the financing in question had been delayed because of two New York Times articles about me written by Pulitzer prize winning journalist Gretchen Morgenson. The articles described how I had been fired by the investment bank after reporting emails to Congress that showed, among other things, that my boss asked me to "finesse my target price" rather than lower my rating on the corporate client and that I sent two emails to the head of compliance asking to have my name remove from coverage since I wasn't allowed to lower my rating. The law says you can't work on Wall Street unless you are licensed by an industry group called FINRA and they require you to resolve all your disputes in their private arbitration system. Because the FINRA arbitrators didn't provide any explanation for their $10.7M award it is hard to understand but even harder to overturn.

My initial decision to report the emails to Senator Grassley was based upon many factors, but they included my belief that then Attorney General Elliot Spitzer’s Wall Street Global Settlement would protect me. When I was fired (two business days after I told the investment bankers that I had reported the emails) I was disappointed to learn that the National Whistle Blower’s Act only covers federal employees. I was grateful that Senator Grassley took time to investigate my termination and force the investment bank’s chairman, General Wesley Clark, to admit I was fired for reporting the emails. I was also pleased that Gretchen Morgenson took the time to write two articles on my case. I was disappointed that the SEC under Chris Cox didn’t investigate the emails until after receiving a written request form Senators Grassley and Baucus and then decided not to prosecute the case against Rodman and Renshaw.