A FINRA arbitration panel found Wells Fargo liable for $2.8 million after the firm allegedly failed to spot fraudulent activity in a client account.
College Health and Investment, a family limited partnership based in Boca Raton, Fla., accused Wells Fargo of breach of fiduciary duty and negligent supervision over the partnerships assets held with Wachovia, which merged with Wells Fargo in 2008.
From 2005 to 2008, Esther Spero, a secretary at a law firm representing College Health and Investment, misused the familys financial information, forged signatures and embezzled some $6 million, according to a 2010 complaint filed with the U.S. District Court for the Southern District of Florida.
The Defendant fraudulently opened accounts in the name of [College Health and Investment] and/or names similar thereto at Wachovia and elsewhere to give the appearance that the accounts were related to facilitate transfers of funds from one account to another and then to herself, and other persons and entities for her direct benefit, the claim said.
Spero was found guilty in civil court but was unable to pay. The family and their attorney in the case, Robert W. Pearce, then filed a complaint with FINRA requesting $4.4 million on negligence charges related to the portion of the claimants accounts held at Wachovia.
After 26 arbitration hearings which took place over 12 days in May, a panel of arbitrators awarded College Health and Investment $2.8 million, including $418,987 in interest and $35,000 in legal fees. The final total reflected a 60/40 split of responsibility for the losses, faulting the claimant for not discovering the losses sooner, according to Pearce.
Its not 100%, but its a decent award, Pearce said. This was a hotly contested arbitration proceeding.
A spokesman for Wells Fargo said they were disappointed by the outcome of the case.
Were disappointed in the panels decision and dont believe it was warranted by the facts presented during the hearing, a spokesman wrote in an email. We are looking into next steps.
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