REFCO Securities, Inc. v. City of Orange
Published: Jan. 31, 1998 | Result Date: Jul. 22, 1997 | Filing Date: Jan. 1, 1900 |Case number: NASD9203685 – $4,253,000
Judge
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
Harris I. Sufian
(technical)
Marcia Stigum
(technical)
James F. Sexton
(The Sexton Law Firm)
(technical)
Jack Edward Blumenthal
(technical)
Louis Kenneth Clain
(technical)
Andrea DaRoca
(technical)
Peter P. Skomorowsky
(technical)
Defendant
Elizabeth Ferguson
(technical)
Facts
In late 1989, the City of Orange invested a total of $7 million with Steven Wymer, who operated several registered investment advisory firms. The City alleged that as early as 1987 and continuing through December 1991, Wymer transferred the City's and other investor funds to accounts in his company's name or otherwise under his control at a broker/dealer or other financial institution. The City alleged that clients' funds were commingled and used to pay false or inflated profits, cover trading losses, purchase securities in the names of various clients or to fund clients' requests for a return of their investments. The City further alleged that defendant Kimberly Goodman, an account executive for Refco Securities Inc. (RSI), a registered broker/dealer, confirmed inflated account balances to auditors and sent false trade confirmations, monthly statements or other reassuring correspondence to customers. The City claimed it received quarterly interest payments from Refco Capital Corp. (RCC), totalling in excess of $1 million which served to reassure the City that its funds were safe and secure. The City sued RSI among others in federal court in April 1992. RSI successfully moved to compel arbitration before the National Association of Securities Dealers (NASD) and thereafter filed a claim seeking a declaration that it was not liable for any of the City's losses. The City counter-claimed, asserting the same claims alleged in its original complaint and sought to recover against RSI for violations of state and federal securities regulations, among other causes of action.
Settlement Discussions
There were no meaningful settlement discussions between the parties.
Damages
The City sought compensatory damages in the amount between $7.1 million and $8.7 million, depending upon whether a state or federal prejudgment interest rate applied and assuming no comparative fault on the part of the City. The City also sought treble damages under RICO and punitive damages for fraud and breach of fiduciary duty. The City's compensatory damages were computed based on the principal amount of its investment, plus interest, less offsets for recoveries from other parties and the City's anticipated distribution from an RSI settlement with the SEC.
Result
On the counter-claim, the NASD Arbitration Panel found by a majority decision that RSI was liable to the City of Orange for the sum of $4,253,000 in compensatory damages. The Panel denied the City's claim for treble and punitive damages. On RSI's claim, the Panel denied its request for a declaration that RSI was not liable to the City. No post-arbitration proceedings were held. Pursuant to the NASD Code of Arbitration Procedure, the entire amount of the award was paid by RSI to the City within thirty days of receipt of the award.
Other Information
The award was rendered approximately five years and three months after the case was filed.
Length
87 days
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