Former Stratton Execs Fined $10M
Four former officers of Stratton Oakmont Inc., a Lake Success-based securities company that is in liquidation proceedings, have been fined $10 million in punitive damages for allegedly defrauding an investor.
The award by a National Association of Securities Dealers arbitration panel appears to be the largest such award to a customer, according to Richard Ryder, publisher of Securities Arbitration Commentator, a Maplewood, N.J.-based newsletter.
The damages were ordered to be paid to F. Clark Gardner, a Pasadena, Calif., physician who complained in May, 1996, that a former Stratton broker, Samuel Weber, made unauthorized transactions in his account. He also said Weber misled him regarding securities and their risk and recommended unsuitable investments.
The panel ordered former Stratton president Daniel Porush to pay $4 million of the punitive damages. The other $6 million was levied equally against Jordan Shamah, Stratton’s former vice president; Andrew Greene, its former head of corporate finance, and Steven P. Sanders, Stratton’s former head trader. Additionally, the four must pay Gardner a total of $184,583 in compensatory damages and $24,375 in interest.
The company, Weber and Paul P. Byrne, Stratton’s former compliance officer, also were named in Gardner’s complaint, but proceedings against them were stayed because they declared bankruptcy.
Philip Aidikoff a Los Angeles lawyer representing Gardner, said tapes of one conversation in October, 1995, show his client asking Weber 23 times to sell shares of MVSl, a Vienna, Va.-based maker of electronic sensing devices. He said Weber kept appearing to misunderstand, even when Gardner – a former military officer – said, “This is a military command. S-E-L-L.”
Porush, Weber, Byrne and Shamah couldn’t he reached for comment. Porush was barred from the securities industry by the NASD, a self-regulatory organization, last December.
Steven Mintz, Greene’s attorney, called the arbitration panel’s decision “lawless” because Greene had no knowledge of or responsibility for Weber’s actions. Martin Unger, an attorney for Sanders, said he has already filed a request to vacate it. The Panel said in its decision that Greene and Sanders had no direct contact with Gardener, but that they should pay because their participation in Stratton Oakmont’s overall business.