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Antilla Gets Silurians Award for NY Times story on brokers

The Society of the Silurians said last week that my June 10, 2013 New York Times article “A Rise in Requests From Brokers to Wipe the Slate Clean” won first place in the Excellence in Journalism Awards competition in the Business/Financial journalism category.

From the press release:

“Her article highlighted the quiet attack by brokers on BrokerCheck, the Financial Industry Regulatory Authority database that theoretically is intended to protect investors from unscrupulous securities salesmen. Antilla discovered tremendous acceleration in efforts by brokers to have mentions of misconduct expunged from their records and an apparent willingness on the part of the regulators to go along. Her article prompted the regulatory group to review the proposed easing of expungements and to issue new guidelines to securities case arbitrators.”

You can read the article here.

Not even the EEOC was allowed at this sex discrimination hearing

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 →

Sabew Commentary Award

Today, the Society of American Business Editors and Writers said that I won the “Best in Business” award for commentary in the news agency category for columns I wrote in 2013 for Bloomberg View.

Here’s a list of all the winners, including writers worth following on a regular basis, such as Jesse Eisinger of ProPublica and Michael Smallberg of The Project on Government Oversight (POGO).

If you’re looking for smart and talented financial journalists worth adding to your regular reading list, take a few minutes to go through the roster of Sabew winners.

Notes from the judges on my submission:

NEWS AGENCIES COMMENTARY

Winner: Susan Antilla, Bloomberg View, for her columns.

Terrific topics. Tough, engaging, enlightening, head-snapping. Well-reasoned arguments. Writes with authority and insight in a simple, declarative style that doesn’t wander. No navel-gazing. Sophisticated humor used lightly in a way that advances the argument. Not humor for humor’s sake.

Here are links to the stories the judges considered:

Do Deutsche Bank’s ‘Prettier’ Women Get the Best?

JP Morgan’s Teflon CEO Glides Past Reputation Hits

Hate Follows When the Police Try to Do Their Job

Top Stock Picks of 2013 Lose Out to Honey Boo-Boo

Custodians don’t always take custody: investors beware

Custodial banks typically earn their fees based on a percentage of the value of the assets they’re holding for you. But do they have any obligation to confirm whether there are any assets there in the first place?

A Hartford jury is deliberating over that and other questions in a case brought by former customers of Bernard Madoff. Westport National Bank was custodian of the investors’ accounts. But, as it turns out, when the bank took over the accounts in 1999, no assets existed, and the bank didn’t bother to check.

The custodial issue is becoming ever-more important as investors increasingly put “alternative” investments such as hedge funds in their retirement accounts. Pricing those investments can be dicey, and you shouldn’t expect that your custodian is doing any analysis to ensure that the prices they show on your statements are realistic.

I attended several days of the trial against Westport National Bank in Federal court in Hartford in June. Here’s a story I wrote about it for The New York Times.

Kim O’Grady becomes “Mr. Kim O’Grady” and Gets the Job

I missed this one when I was off on vacation last week. A management consultant in Perth, Australia — Kim O’Grady — told the story of how perplexed he was back in the late 1990s when he shipped out his impressive resume to employer after employer, but received nothing but rejection letters.

So he studied his CV to see what might be putting people off. “A horrible truth slowly dawned on me,” he wrote. “My name.”

That is, potential employers were probably figuring that  “Kim O’Grady” was a woman, not a man.

So he says he made a single change — “Kim O’Grady” became “Mr. Kim O’Grady” — and canvassed potential employers all over again. “I got an interview for the very next job I applied for,” he wrote. “And the one after that.”

(I’m awaiting a reply from Mr. O’Grady to understand why he’s revealing a story from the late 1990s all these years later.)

I wish I could say that things have changed in the two decades since Mr. O’Grady’s apparent epiphany. Academics at Yale University asked professors in the biology, chemistry and physics departments at six major universities to evaluate applications from recent graduates looking for jobs as lab managers, slapping the name “John” on half the applications and “Jennifer” on the other half. (There was no difference in the copy other than the first names.) “John” got an average score of 4 out of 7 for competence while “Jennifer” got only a 3.3.

Similarly, a female website developer who was having a tough time drumming up new business changed her name to “James Chartrand” and business picked up nicely. I wrote about that in a blog post on September 24.

There are no doubt neanderthals out there who consciously exclude a woman when they’re evaluating job applications, but the problem is more complicated than that. A New York Times story about the Yale study said that while scientists found bias to be pervasive, it “probably reflected subconscious cultural influences rather than overt or deliberate discrimination.”

Translation: Pay attention when you’re evaluating job applicants. You may not even be aware of what’s motivating you to proceed with some applicants, but to reject others.

How to be a problematic broker with a good record

Don’t believe everything you read – or don’t read — when you check up on your stockbroker.

Brokers and Wall Street executives with black marks on their public records are working hard to get those blemishes deleted, a topic I got into in my story for The New York Times last week.

In “A Rise in Requests From Brokers to Wipe the Slate Clean,” I summed up some of the more egregious examples of Wall Street employees persuading arbitrators at the Financial Industry Regulatory Authority (Finra) to recommend expungement of their peccadilloes.

Kimon P. Daifotis, for example, managed to get arbitrators in eight different cases against him to recommend expungement since last August – a remarkable feat considering that on July 16, the former Charles Schwab executive had agreed in a settlement with the Securities and Exchange Commission to be barred from the business and to pay $325,000 in penalties and forfeited profits related to his role the Schwab Yield Plus fund, in which investors had lost millions of dollars.

He didn’t admit or deny wrongdoing in that case and will be allowed to reapply for Finra membership in 2015.

Brokers have to take their expungement recommendations to court to be approved once an arbitration panel has recommended deletion, and Pasadena, California broker Debra Reda-Cappos will be doing exactly that on August 15. Investors Howard and Karen Snyder accused Reda-Cappos of breach of fiduciary duty and fraud in a complaint filed with Finra on October 12, 2010, and the two sides told the panel on October 3, 2012 that they had settled.

Neither Reda-Cappos nor her lawyer Kasumi Takahashi responded to my email queries. But in granting a recommendation that the Snyder case be expunged, the arbitrators noted that the claim was “false” and that the couple “did not prove their claim.”

It’s a no-brainer that they would not have proven their claim: There was no hearing to prove or disprove it.  So it’s more than a little weird that the arbitrators would use that as a way to justify cleaning up a broker’s record.

The Snyder case settled for $116,000, according to Reda-Cappos’ Finra records.

Before those arbitrators recommended the expungement, a lawyer for the investors, Leonard Steiner, told the panel that his clients were willing to say under oath that everything in their claim was true, according to the arbitrators’ award. But the panel didn’t ask the Snyders to do that, and gave the go-ahead on the expungement anyway, Steiner says.

Plaintiffs lawyers have been getting steamed that brokers are strong-arming investors to endorse expungements before they’ll settle. There’s a “disturbing trend” of firms routinely asking investors to agree that they won’t oppose expungement, says lawyer Brett Alcata of San Mateo California.

Those arrangements put the plaintiff’s lawyer in a box. They have an obligation to get the best settlement possible for their clients, but cringe at the idea that the next investor who comes along won’t get the full story on the errant broker. Finra shouldn’t allow settlements to include provisions that the customer won’t oppose expungement, says Steiner.

Sometime this summer, Finra will propose new rules that will make it even easier for brokers to expunge their records. Brokers have been irritated by a Finra rule enacted in 2009 that forces them to reveal complaints even when they are not named in a lawsuit. So if John Smith’s firm is sued because of fraud that Smith allegedly committed, the broker now has to list that on his BrokerCheck even if he isn’t a defendant.

Under pressure from the industry, Finra is expected to propose  a new “expedited” process to clean up black marks: The broker would be able to ask a panel for expungement at the end of an arbitration hearing, and the arbitrators would have the power to approve – but not deny – the request. Should that not work, the broker could take another stab at getting an expungement in a separate proceeding.

The proposals were mapped out in a Dec. 6 Finra memo to members of its National Arbitration and Mediation Committee. “We cannot comment on Board deliberations or confidential memos to Finra committees,” Finra spokeswoman Michelle Ong told me in an email.

Stockbrokers say the darndest things

I was at a local bank this morning, filling out the paperwork for a Certificate of Deposit, when I overheard a stockbroker in the next cubicle trying to answer questions from a worried elderly couple who’d come in with an account statement that had alarmed them.

“As long as you hold the CMO to term, you can’t lose money,” the broker said, referring to their investment in a collateralized mortgage obligation. I couldn’t help but wonder which would happen first — the maturity date of the CMO or the year of the couple’s estimated life expectancy.

I looked up at the bank officer who was doing the paperwork for my CD. “You guys sell CMOs?” I asked. Yes, indeed, she told me, not the least bit taken aback when I asked “Why are you selling risky stuff like that at your bank?”

He’s doing great!” she said of her huckster colleague, and I could hardly argue with that. “I’m sure he is,” I replied, my sarcasm going totally over her head.

I’d begun to scribble notes as the back-and-forth continued between the seniors and the broker. “It’s backed and guaranteed by the U.S. government,” the salesman told his customers. But the husband kept coming back with questions. “But the value’s gone down,” he said.

No sweat, the broker told him. That’s just partial return of your principal, he said. “This valuation number means nothing.” But no, the value’s gone down more than the amount of the principal repayment, the husband countered. “Pay no attention to the losses,” said the broker. “I have no concerns. This is the best buy in the industry.”

Best buy in the industry for the broker, maybe. Even if that investment winds up working out fine for the couple, they clearly didn’t understand what they’d purchased. And if they wind up losing, smart money says that broker will swear he never told those customers that anything about their CMO was “guaranteed.”

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