A former Smith Barney broker who won $1.3 million from the firm after he was terminated following a diagnosis of chronic fatigue syndrome, has won a second arbitration involving management of the money. He alleged a Gruntal & Co. broker mishandled $900,000.
Michael Wright, who worked in Florida, was terminated in 1996 after he disclosed his illness. He filed an arbitration claim against Smith Barney alleging a violation of the Americans with Disabilities Act (ADA). In 1997, an arbitration panel awarded him $1.3 million.
He then placed $900,000 with a former friend and broker, Rees Gherman at Gruntal & Co. Wright claimed the account lost $400,000 in four months in unauthorized and unsuitable trading.
In May 2001, an NASD arbitration panel agreed and awarded Wright $294,000 plus attorneys' fees.
At the time of the ADA award, Wright's case was widely publicized. The Wall Street Journal wrote a scathing editorial about ADA claims.
After winning the 1997 arbitration, Wright went on a series of trips over a four-month period during which he did not look at his trade confirmations and statements, his attorney Curt Carlson of Payton & Carlson in Miami says.
Several other clients also filed unauthorized trading claims against Gherman, Carlson says. Gherman resigned from Gruntal in 1998 and was barred from the industry by the NYSE in December 2000.
Wright and Gherman were friends for more than 10 years. Earlier in their careers, they planned on working as partners, Carlson says.
Of Wright's win Carlson says: “This is an important victory. … It shows even sophisticated customers are entitled to relief if their account has been mishandled.”
“This is just a terrible decision,” says Gherman's attorney, Howard Tescher of Kipnis Tescher Lippman & Balinsky in Fort Lauderdale, Fla. “This put brokers and brokerages on notice that if clients ignore their statements, [the rep and firm] still may get hit.”
A spokesperson for Gruntal did not return phone calls.