I was honored to hear today that The Society for Advancing Business Editing and Writing, known as Sabew, awarded me an honorable mention in its “Best in Business” competition in the investigative reporting category. My story, “Finra’s Black Hole,” looked at 30 years of brokerage industry arbitration records to see how women fared when they filed complaints about sexual harassment and gender discrimination. (Answer: Not very well). You can read my story here.
I was on Women’s Media Center Live with Robin Morgan today, talking about my investigation of 30 years of of sexual harassment complaints by women on Wall Street. You can listen to the interview here.
For victims of sexual harassment on Wall Street, the case of Kathleen Mary O’Brien was a bad omen.
In 1988, O’Brien, then a stockbroker at Dean Witter Reynolds, filed the earliest sexual harassment case we could find in a public database maintained by the Financial Industry Regulatory Authority, Wall Street’s self-governing organization, which is overseen by the Securities and Exchange Commission.
The year before, O’Brien had sued Dean Witter in Los Angeles Superior Court, but the brokerage firm successfully argued that she was legally bound to use Wall Street’s closed-door arbitration forum, then run by a FINRA predecessor, the National Association of Securities Dealers. The arbitrators’ decision in her case would turn out to be a common one in harassment cases over the following years: The claim was dismissed. The panel, offering no explanation as to how it came to the decision, charged her $3,000 in arbitration fees.
O’Brien’s case is one of 98 sexual harassment or hostile work environment claims and counterclaims made by women that The Intercept and the Investigative Fund found in the FINRA database over the past 30 years. You can read the full story here.
Holly Marchak and her husband lost $2.3 million when they were defrauded in the Ponzi scheme of the so-called “Brooklyn Madoff.” Nine years later, she’s still paying for it.
Marchak, 62, says she takes medication for anxiety, high blood pressure, asthma and heart problems. “There are times we don’t want to wake up in the morning,” she said. “My doctor has a mile-long, thick file on me and says it’s all stress-related.”
Everybody loves a half-price sale, and if you’re a recruiter on Wall Street, there’s always a markdown on female employees.
But the revealing lawsuits that used to challenge this outrageous pay gap and economically hostile work environment to women are few and far between today – and that’s how Wall Street wants it. The country’s biggest banks have made it harder than ever for women with complaints of unequal pay or treatment to make their cases in a public forum.
Check out your securities firm’s pitch in TV and print ads or on its web site. Chance are your broker has painted a picture of a paternalistic organization that’s devoted to doing the best thing for you and your portfolio over a period of many years.
But don’t count on that if you wind up facing them across the table at securities arbitration — your only choice in an industry that won’t open an account unless you agree to give up your right to sue in court. Lose money after broken promises that a product is safe or that a broker will be watching over your account, and you may quickly learn that all those assurances were nothing but fluff.
In my column today for TheStreet, I talk about the ways in which Wall Street tries to wiggle out of its responsibilities to its customers, arguing among other things that customers are the ones obliged to monitor their accounts. You can read it here.
A former broker at Morgan Stanley has filed a class-action race-discrimination complaint against the company, accusing it of making “an end-run around the civil rights laws” with a new policy that bars employee participation in class actions and forces civil rights claims into private arbitration.
Kathy Frazier said in her complaint that African-Americans were underrepresented in the ranks of brokers at Morgan Stanley and were paid “substantially less” than their counterparts.
Ms. Frazier previously worked at Goldman Sachs and Merrill Lynch and has an economics degree from Amherst College and a master’s degree in business administration from the University of Pennsylvania’s Wharton School of Business. I wrote about Morgan Stanley’s new policy for The New York Times DealBook. You can read the story here.
If you read the warm-and-fuzzy ads and Web site copy, you’d be convinced that you were a VIP in your stockbroker’s life. So why would your best-pal broker not want to work under a standard that he or she put your interests first?
The sad answer is in my latest column for TheStreet. You can read it here.
Finra arbitration is often a surprise to investors — not least of all because so many Wall Street customers have no idea that they sign away their right to court when they open an account.
But how about the surprise of learning that one of your arbitrators had been indicted? Or that he had said he was a lawyer, but wasn’t?
My June 24 column for TheStreet tells about Finra’s latest surprise arbitrator — the guy who was arrested for being a Peeping Tom. Really. You can read it here.
Sometimes, even a loss can be a win.
A San Francisco jury said last month that Kleiner Perkins Caufield & Byers did not discriminate or retaliate against its former junior partner, Ellen Pao. From my column for TheStreet.com:
The four-week trial had received intense media coverage for its allegations of porn-star talk in business settings and exclusion of women from company events. Rather than invite a woman on a company ski trip, “Why don’t we punt on her and find 2 guys who are awesome?” a Kleiner partner suggested in an email.
Pao lost. But women didn’t. The case brought huge attention to workplace issues that rarely get aired. Most employers require employees to agree to give up their right to sue before they even show up for the first day of work. So-called “mandatory arbitration” agreements keep gender discrimination complaints out of the public eye, and leave violators of our discrimination laws unaccountable.
You can read my column here.
Securities and Exchange Commission Chair Mary Jo White told members of the House Financial Services Committee yesterday that there would be “many challenges” in changing the rules so that stock brokers and investment advisers are similarly regulated.
That’s an understatement. Wall Street has been on a tear for years fighting efforts to demand more of stock brokers. From my column yesterday for TheStreet:
As things stand today, brokers need only sell “suitable” investments that match a client’s investment profile. But they needn’t act as fiduciaries who are duty-bound to put clients’ interests ahead of their own, as investment advisers are expected to do.
You might think it’s a no-brainer that people doing essentially the same job in the financial industry should be subject to the same rules, but you’d be thinking wrong.
There are two fights going on related to the duties of investment advisers and brokers. There’s the one Ms. White has a say in: Changing the rules so that brokers and advisers both are expected to put their clients’ interest ahead of their own — a so-called “fiduciary duty.” And there’s another related to retirement money. The Department of Labor would like to raise the standards for people giving advice in that arena, too. President Barack Obama publicly supported the idea on Feb. 23.
The unsightly battle that has Wall Street fighting to avoid a more ethical approach to its customers is the latest reminder of the gap between the way the industry portrays itself in its marketing, and the way it actually treats its customers. From my column:
“These guys advertise like doctors and lawyers and litigate like used car salesman,” said Joseph C. Peiffer, president of the Public Investors Arbitration Bar Association, or Piaba, a group of lawyers who represent investors in securities arbitration.
You can read the story here.
Say you hire a broker. You start out thinking he or she is terrific, of course, or you wouldn’t have signed up in the first place.
And then they wind up churning your account. Or putting you into mutual funds only because the funds generate high fees — for the broker, not you. Or persuading you to buy high-risk products that have no place in a portfolio like yours.
So you get around to thinking you’d like to sue. Well, tough luck, Mr. or Ms. Investor — you can’t. The day you opened that account, you signed a document saying you’d be willing to give up your right to court, and that you’d instead use Wall Street’s private arbitration system if your broker fleeced you. Welcome to Finra arbitration.
Public-minded politicians have tried for years to get laws passed to ban so-called “mandatory arbitration,” but all their efforts have failed. Wall Street’s lobby is a powerful one. Recently, though, a coalition of consumer groups wrote to a task force of the Financial Industry Regulatory Authority (Finra), which runs Wall Street’s arbitration, pressing for more disclosures about investigations of Wall Street’s private tribunals.
In my most recent column for TheStreet, I talk about the secrecy that surrounds Finra arbitration. You can read the column here.
In the ongoing gender discrimination case against Sterling Jewelers, owner of Kay Jewelers, Jared the Galleria of Jewelers and 10 other chains, an arbitrator this week released a 118-page opinion that moves the fight to a new stage and reveals new information about pay disparities and sexual harassment.
Kathleen Roberts, a former U.S. magistrate judge and an arbitrator at JAMS in New York, said that the women may proceed as a class with their claim challenging Sterling’s pay and promotion practices. She declined to let them proceed with another claim of intentional discrimination.
Because it’s private arbitration, most of the documents are not public. But the law firm for the women was permitted to post Judge Roberts’ opinion so that the thousands of women in the class would have details about this next stage in their case.
The judge referred to several internal company memos that show that Sterling has been aware of pay disparities between men and women for years. From my story in The New York Times on Feb. 3:
In her ruling, the judge cited an internal company memo from 2006 that said female hourly sales employees made 40 cents less an hour than their male counterparts on average, adding up to more than seven million annual affected hours. A memo the next year said that men at Sterling’s stores, which include Jared the Galleria of Jewelry, were paid 12.5 percent more base pay than women and that women at the management level were getting higher performance scores but receiving lower pay increases than men.
The judge also talked about evidence of sexual harassment. More from my NY Times story:
Women in some cases were expected to undress publicly at company events and “accede to sexual overtures,” the judge wrote. She cited evidence of “references to women in sexual and vulgar ways, groping and grabbing women” and soliciting sexual relations, sometimes as a quid pro quo for job benefits.
You can read my story here. The judge’s opinion is here. And a story that I wrote for The Times about the case last year is here. Sterling has 1,700 stores in all 50 states. Chances are you’ve done business with some of these guys at your local mall.
So your broker sold you some shoddy private placements and you sued? Brace yourself, because you might get sued back.
In The New York Times today, I told the story of investors who sued their brokers for selling them private placements that tanked only to be hit with a suit from the broker. The firms’ argument: That the customers signed indemnification agreements when they purchased the securities, and thus owe the firms money for legal fees and other costs.
“The investors make representations to buy these things” and have a legal obligation to be truthful, said Vincent D. Louwagie, a Minneapolis lawyer who represented the brokerage firm Berthel Fisher.
It’s tough to evaluate the cases when the firms win. If you do business with a brokerage firm, you are stuck in private arbitration, where nobody has to explain how they came up with a decision. Suffice it to say, though, that a lot of customers will get spooked when they find out they’re threatened with a countersuit after they already have lost money. You can read the story here.
Finra, which is the outfit that Wall Street pays to regulate itself, is pushing hard on a proposal that it thinks will help nail bad guys on Wall Street.
It sounds great on the surface: Give arbitrators permission to refer a rogue to the director of enforcement even as an investor’s hearing is going on. You know, so we can catch people like Bernie Madoff, who was such a trusted name on Wall Street that he was chairman of the Nasdaq Stock Market.
As of now, arbitrators have to wait until a hearing is over before they can tell headquarters that a villain is on the loose. Finra wants to be able to get on the case ASAP.
Nice idea, if only it didn’t have the potential to wreak havoc on the arbitration hearing of the poor slob who’s in the middle of trying to get his or her case resolved. It’s yet another example of the nutty things that can happen when you bar investors from going to court, where you don’t have all the secrecy of arbitration and thus don’t have to jump through hoops to figure out ways to get the word out. Here’s my story published tonight on TheStreet.com.
You may recall the bizarre story of the Long Island stockbroker who hoodwinked the producers of the Broadway show “Rebecca” into thinking he’d lined up millions of dollars for the show. The producers put up $60,000 and the broker, Mark C. Hotton, put the money in his pocket.
It was a strange tale in many ways, not the least of which was that Hotton had been fleecing investors of millions of dollars for years before he wound up in headlines for picking up a paltry $60,000 from the show biz chumps.
I nearly choked when I read that Manhattan U.S. Attorney Preet Bharara had said in a press release that the FBI had uncovered Hotton’s misdeeds “with lightning speed” in 2012. Hotton had been fleecing people ever since he forged documents and bounced a $31,550 check to buy some used cars in 1990. That’s some pretty slow lightning.
In my story for The New York Times last week, I wrote about the latest twist in Hotton’s story. His former employer, Oppenheimer & Co., had been ordered by arbitrators to pay out only $2.5 million of the $5 million that a married couple had lost at Hotton’s hands. Then, six months later, their lawyer discovered evidence that the firm had held back a smoking gun. Read about it here.
On Feb. 26, eight women who had sued Sterling Jewelers, Inc. were ushered into a private hearing room in midtown Manhattan with their lawyers, lawyers for Sterling, and an arbitrator. The door was shut behind them.
Like an increasing number of disputes between employees and employers, this one would be heard in a forum where the public and the press were forbidden.
I asked to attend the late February hearings on this sex discrimination case that could wind up including 44,000 women in 50 states, but the arbitrator declined my request. More important is that the Equal Employment Opportunity Commission – the agency in charge of enforcing federal civil rights laws – also asked, and also was declined.
Joseph Sellers, a lawyer for the plaintiffs, said that the agency was told it could ask for a transcript, although no guarantee was made that it would receive one.
Sterling, based in Akron, Ohio, is parent of 12 jewelry chains in the U.S., including Jared the Galleria of Jewelry and Kay Jewelers.
The two sides presented their arguments for and against a motion to certify a class of women who’d worked in sales positions at Sterling since 2003. The women at the hearing, who would act as representatives of the class, say that Sterling discriminated against them in its pay and promotion policies.
The case, which I wrote about Saturday in The New York Times, includes examples of some of the worst sexual harassment allegations I’ve ever heard, and that includes the vulgar behavior I wrote about in my book “Tales From the Boom-Boom Room: The Landmark Legal Battles That Exposed Wall Street’s Shocking Culture of Sexual Harassment.”
Sterling says the allegations are “without merit.” Continue reading