The Jack Nedelman Trust UA dtd Aug. 18, 1998 v. A.G. Edward & Sons Inc., Ted Mendoza
Published: Dec. 21, 2004 | Result Date: Nov. 10, 2004 | Filing Date: Jan. 1, 1900 |Case number: 0307024 Arbitration – $170,000
Facts
In December 1999, Dr. Jack Nedelman's children petitioned the court to appoint a conservator for their father. In March 2000, the court approved the conservatorship and appointed Sarah Kerley as the conservator and successor trustee of the Nedelman Trust. Most of the Nedelman Trust assets were held in a Merrill Lynch brokerage account. Kerley subsequently transferred the Nedelman Trust assets to Ted Mendoza at A.G. Edwards & Sons Inc. The AGE Client Information form reflected that AGE and Mendoza knew that Jack Nedelman was an 86-year-old retired doctor with a total net worth excluding his residence of $700,000, consisting of $650,000 in securities and $50,000 in cash, with conservative income as the Trust's investment objective. There was conflicting testimony at arbitration as to what were the Trust's true investment objectives and risk tolerance. In September 2000, Mendoza and AGE liquidated all of the investment grade corporate bonds, the utility stocks and the CD equivalents in the Trust account. In total, approximately $527,655 worth of conservative income producing investments were liquidated. At the same time, Mendoza and AGE purchased $525,000 worth of defined stock portfolios. All of the transactions were solicited and recommended by Mendoza and AGE and were approved by Kerley. Following the purchase of the defined stock portfolios, the portfolios and hence the value of the Trust portfolio declined substantially. The account was transferred back to Merill Lynch in May 2001 after suffering losses of $145,746. After Jack Nedelman died, the successor trustee filed an NASD Arbitration claim pursuant to a pre-dispute arbitration agreement the Jack Nedelman Trust had executed.
Result
The NASD arbitration panel unanimously found A.G. Edwards & Sons Inc. and Ted Mendoza liable and awarded compensatory damages of $120,000 against A.G. Edwards & Sons Inc.; $25,000 against A.G. Edwards & Sons Inc. and Mendoza; and $25,000 in attorney fees against A.G. Edwards & Sons Inc. The panel also assessed $6,525 in forum fees against A.G. Edwards & Sons Inc. and Mendoza, including the refund of the claimant's $1,425 filing fee and hearing session deposit.
Other Information
At the end of the claimant's case at the evidentiary hearing, the respondents brought a motion to dismiss the claimants' claims which were denied by the panel after due deliberation. The case was heard by a panel of three arbitrators including Anthony D. DeToro, chairman arbitrator; David Menaker, public arbitrator; and Ronald F. Rybandt, industry arbitrator.
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