New York Securities Lawyer Blog
On February 28, 2012, Ronnie Erickson and Stacy Erickson, individually and on behalf of The Ronnie L. Erickson Trust, The Stacy L. Erickson Trust, and The Ronnie and Stacy Erickson Charitable Trust (“Claimants”) filed an arbitration before the Financial Industry Regulatory Authority, Inc. (“FINRA”) against the independent broker-dealer National Planning Corporation (“NPC”), Christopher Ronald Olson (“Olson”) a broker and associated person formally registered with NPC, and Preferred Resource Group, Inc. (“PRG”).
Claimants’ Statement of Claim alleged the following causes of action: breach of fiduciary duty (under both common law and Minnesota Statute Section 45.026), negligence, negligent supervision, misrepresentation, respondeat superior, and violations of FINRA Conduct Rules 2010 and 2020, FINRA Rule 3270, NASD Conduct Rule 2310, and NASD Rule 3040. The causes of action relate to real estate investments trusts and other real estate investments. Claimants alleged that Olson “recommended several unsuitable transactions in real estate investment trusts (‘REITs’), and real estate investments involving Waterway Holding Group, LLC.” Waterway Holding Group, LLC is owned by Olson (who serves as its Chief Financial Manager) and another employee of PRG. Further, Claimants alleged that they “had to satisfy outstanding loan amounts on mortgages on the real estate investments in order to prevent foreclosure on the real estate investments.” Claimants also alleged that they were manipulated “into undertaking significant debt, paying millions of dollars in cash that cannot be recovered, and liquidating, annuitizing, and structuring their investment assets earmarked for retirement to pay the staggering debt obligations related to the real estate investment recommendations.” In their Statement of Claim, Claimants requested an award of $12,500,000 in compensatory damages.
NPC and Olson filed a Statement of Answer on May 17, 2012, denying the allegations and asserting various affirmative defenses. NPC filed an Emergency Motion to Bar Claimants from Arbitrating Claims Not Alleged in the Statement of Claim on June 21, 2013. On June 25, 2013, Claimants filed an Opposition to NPC’s Motion to Bar. The arbitration panel denied NPC’s Motion to Bar on July 2, 2013. On August 23, 2013, Claimants notified FINRA that they would be withdrawing all claims against PRG without prejudice. Further, all claims against Olson were stayed as a result of his filing for Chapter 7 Bankruptcy.
After eleven (11) days of hearing sessions, the FINRA arbitration panel presiding over the matter issued an arbitration award (“Award”) against NPC on November 18, 2013 in the amount of $6,157,884 in compensatory damages, plus $1,200 in adjournment fees and $15,600 in hearing session fees, based upon the sales practices abuses alleged by Claimants. The decision was split, with the two public arbitrators agreeing, and the security industry arbitrator dissenting. The dissenting arbitrator did not provide a reasoned opinion as to why he was dissenting.
Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses, including losses suffered in Ponzi Schemes. Additionally, Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.