William Blair & Co. LLC and two ex-brokers at the firm have been socked with a $1.1 million arbitration decision that centered on two brokers' setting up a phony e-mail address where they sent statements from the brokerage account of an 88-year-old widow.
William Blair & Co. LLC and two ex-brokers at the firm have been socked with a $1.1 million arbitration decision that centered on two brokers' setting up a phony e-mail address where they sent statements from the brokerage account of an 88-year-old widow.
The arbitration award, which was made Nov. 13, was decided in favor of Josephine DesParte, who had had a commission account with William Blair since 1979, according to the lawsuit.
In October 2007, two brokers — William Ross and Brian Kasal — changed Ms. DesParte's infrequently used William Blair account from one that was non-discretionary and commission-based to a discretionary, fee-based investment advisory account, according to the lawsuit, which was filed with the Financial Industry Regulatory Authority Inc. in January of this year.
According to the lawsuit, that's when the brokers began sending account statements and confirmations to a phony e-mail address. They did this even though Ms. DesParte did not own a computer or know how to use one, and also did not know how to check e-mail and had never been on the Internet, according to the claim.
That's when Mr. Ross or Mr. Kasal allegedly “listed a bogus e-mail address to which all confirmations and monthly account statements would be sent,” the lawsuit said. “At no point was [Ms. DesParte] aware that she was agreeing to this new account format.”
The claim alleged breach of fiduciary duty, omissions, negligence and negligent supervision. The arbitrators divided the award, which has no formal explanation, into three categories: $655,000 in compensatory damages, $380,000 for 2007 capital gains and $83,000 for returning fees. According to the award, both William Blair and the brokers are liable.
Ms. DesParte had been a client of Mr. Ross' for more than 30 years, William Blair noted in May in its answer to the original statement of claim. “Mr. Ross and Mr. Kasal did not conceal or attempt to conceal the sales of Ms. DesParte's securities or the new purchases from her,” William Blair said at the time.
A spokesman for the firm, Tony Zimmer, said the firm declined to comment. Both brokers are no longer affiliated with William Blair. Mr. Ross now works for Morgan Stanley Smith Barney LLC, according to Finra records, as does Mr. Kasal.
