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How Does FINRA Lose 8 Hours of Testimony? Wall Street’s “Kangaroo Court”

Posted by Larry Doyle on March 13, 2012 11:03 AM |

I will admit that having written extensively and aggressively about Wall Street’s self-regulator FINRA over the last three years, I did not think there was anything more I could see that would surprise me.

Today I am surprised, shocked, and saddened.

For those in our nation who have a semblance of decency and a desire to see due process reflected in legal hearings and financial arbitration, I believe you will be similarly dismayed.

The case to which I will refer strikes deep into the core of Wall Street arbitration. 

I hope you are sitting down and do not have any sharp objects nearby as Dow Jones’ Al Lewis provides a scathing expose of a FINRA arbitration entitled Broker Bankrupted in Kangaroo Court,

Mark Mensack joined Morgan Stanley (MS) in 2008, landing an $873,000 signing bonus, but now he’s in personal bankruptcy and just moments away from losing his home in Cherry Hill, N.J.

He’s turning 50. He’s got a wife and three kids. And this is where he’s landed after losing an arbitration with his former employer before his industry’s self-regulating body, the Financial Industry Regulatory Authority.

Mensack claimed he was forced to leave Morgan Stanley after he accused the firm of taking hidden fees from its retirement-account customers. In July, a Finra panel ruled against this would-be whistleblower and ordered him to pay Morgan Stanley $1.2 million, essentially demanding most of his bonus back after quitting, plus interest and legal fees.

It is extraordinarily difficult to successfully appeal a Finra ruling. It is even more difficult when Finra mysteriously loses several hours of recorded testimony.

Mensack told me that when his attorney requested recordings for an appeal, Finra wouldn’t produce them. He said he eventually learned eight of about 18 hours of testimony from his case were missing. He sent me audio files that were inexplicably cut off at the end. He also showed me a Jan. 13 letter that Finra regional director Katherine Bayer wrote to his attorney. It said:

“Finra is required to make a…recording of every hearing. …Unfortunately, portions of testimony returned to us by the panel are missing. …I apologize for this and any perceived miscommunications from the Finra staff about the status of the recordings. …I understand Mr. Mensack’s disappointment with the arbitrator’s decision. However, Finra has no authority to reverse the award.”

A Finra spokeswoman declined to comment on the case.

The plaintiff’s charges of Morgan Stanley effectively double dipping into its 401-K accounts is obviously a very serious allegation. If I were a Morgan Stanley 401-K customer, I would be on the horn to my representative TODAY.

Those charges are NOT the main point here.

If there is supposed to be a whiff of justice and fair dealing in our nation, then each and every plaintiff is entitled to a fair hearing and a full record of testimony.

The fact that FINRA cannot and did not provide the full testimony of his hearing to Mr. Mensack renders the FINRA arbitration process as nothing more than a kangaroo court.

Richard Ketchum and his cronies at FINRA can talk all they want about progress on the financial regulatory front.

If they want to have a scintilla of credibility with the American public then they should go back and rehear Mr. Mensack’s case AND this time make sure that ALL of the testimony is properly recorded and provided for all the parties involved.

Statements such as,

 …Unfortunately, portions of testimony returned to us by the panel are missing. …I apologize for this and any perceived miscommunications from the Finra staff about the status of the recordings…

may work in kangaroo courts of third world nations but last I checked, this is America.

This smells.

Losing 8 of 18 hours of testimony?……America?………Really?

Come on Mr. Ketchum, you have work to do here.

Reopen the case.

If you read this story and agree with my statement compelling FINRA to reopen the case, I hope you will leave a comment here stating as much. I thank you.

Simply after reading this, I think I want to take a shower.

Nice work by Al Lewis.

Isn’t it time to  subscribe to all my work via e-mailRSS feed, on Twitter or Facebook?

Do your friends, family, and colleagues a favor and get them to do the same. Thanks!!

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

Larry Doyle

  • Mark J. Novitsky

    Larry…This is why since 2004…when tragically as a Corporate, SEC, National Security Whistleblower I really started being aware of just how systemically corrupt every single component of White-Collar Financial Crimes are owned and manipulated lock, stock, and barrel by the corrupt politicians and the crooked “elite” they are supposed to regulate. It matters not which “team” is in power…Coke or Pepsi…I mean Democrat or Republican…we vote this way or that way…for this guy or that guy and always end up with the same thing…choosing between 2 pre-selected bought and paid for packaged candidates. As you know I have aggressively lobbied since 2004 for the ONLY real solution to actual Finance Reform…would be an immediate re-introduction and passage of the late MN. Senator Paul Wellstone’s 2002 S.3143 The Consumer & Shareholder Protection Association Act! — Calling for the creation of a private citizen / consumer / 99% protectorate and actual cop on Wall Street. Outside of and overseeing the political bureaucracy, ineptitude and corruption associated with the SEC, FINRA, OTS, OCC, etal and the congress who took an oath and supposed to be entrusted to the public good. News about this coming soon.

    • Mark Mensack’s situation is very similar to mine. Raymond James ruined all for me as well. After I had been reporting some underhanded broker dealings for a year, I finally faxed a letter to the heads of RJ, not knowing that the regulators were grabbing their files at the time because of stealing brokers. RJ, the DFI, the NASD all admitted in final reports and in letters that I had done nothing inappropriate, but RJ needed my name because they did not a market collapse and publicity of how easy it was to steal from accounts. I recently found out that RJ did this to me for $14.9 Billion dollars fraudulent tax loss that they are taking till 2017. They are escaping regulation of course. If only 7% of large public companies are doing the same very easy fraud, that would be $3 Trillion to pay own our natl debt, maybe saving medicare, etc. I recently made a Petition on search under Stop Creditor, Tax, and Securities Fraud

  • mikaele

    How do you fix this? As an ARPS victim folks who are supposed to protect me sound like there is nothing they can do!What would the founding fathers do?What ever they did would be considered patriotic, right? I read somewhere that Bill Gross said ” don’t be plankton” about us being duped. It seems this industry is about people being burned over and over then bad guy gets caught, pay fine, admit no wrong doing, continue:
    Thanks Larry.

  • Jack Harper

    Just goes to show what happens when you do not hire your own court reporter.
    Never go to court without your own court reporter.

  • “It’s done up and down the street…common practice,” the insider tells me. And the targets are mostly brokers. “Yeah, companies double-dip, and they’ve got an easy target with us. You know, if we buck the system we’re toast.”

    Apparently Mr. Mensack, like the character in NETWORK NEWS, got mad as hell and decided he wasn’t going to take it any more. But the moment he appealed to FINRA, the “system” kicked in and heartlessly took Mr. Mensack down. Let’s hear it for yet another Wall Street badge of integrity!

    “It’s disgusting,” another New York-based broker confessed. “But what can you do? Quit? Go to arbitration? Loose and be blacklisted for life?”

    The excuse for this double-dipping of brokers’ 401(K)accounts, according to sources, who out of fear for their livelihood spoke anonymously, is that their employers supply them with new technology and upgraded data systems. And, yes, somebody’s got to pay for it–the end users: the brokers.

    “They’re doing us a favor,” one source remarked with ill-concealed cynicism.

    The Mensack debacle should alert concerned regulators to this “favor” handed out by brokerages–a favor accompanied by an unspoken threat of dismissal if the brokers should squawk.

    Mr. Mensack took a big risk in appealing to FINRA, because that industry-financed institution is part of the game about which most brokerage clients know little or nothing. And while it’s true that clients are manipulated, it is equally true that brokers suffer their share of black eyes.

    In the Mensack case FINRA acted like FINRA.It’s not surprising that the organization claimed it couldn’t find Mr. Mensack’s missing testimony (in truth, it probably can); it also has leverage to review the case, but it won’t, because brokerages pay for the upkeep of this kangaroo court of last resort.

    “It’s the way of the world,” sighed one disheartened broker after having reviewed the Mensack story.

    But is it really? Greed and dishonesty are not given to us by cosmic forces, they are entirely man-made. As long as we are willing to suffer the tender mercies of the Street and its enablers at FINRA, we will only wind up harming ourselves.

    Brokers of the world unite!

  • Harry Johnson

    Sorry, I cannot find any sympathy. Those of us working for a living will never see those kind of paydays, no matter how educated, experienced or productive we are. The whole wall street thing is a big fat scam and the boy came up on the downside of the scam. He could try working for living, making 30 or 40 thousand a year with no bonuses. There are a lot of people stuck there.

    Sure the arbitration is dishonest but so is every last part, parcel, inch and ounce of wall street. There is not a single honest thing about the whole finance world. He, like nearly all brokers, is just lucky he is not in jail. He needs to pick himself up, downsize his expectations and go find honest work.

  • Obsvr-1

    @Harry Johnson,

    whole heartedly disagree — we need the insiders to step up, tell their story and fight the beast without being punished or silenced by the beast keeper (gov’t, regulators, DOJ). All of this secret handshake, back scratching and crony-corporatism BS only perpetuates the corruption metastasizing throughout the system.

    I have this wonderful dream that someday lawyers will go after each other in a bloody battle worthy of a new sporting event that everyone can watch as a new form of entertainment. As there are lawyers lurking beneath the surface of the effluvium in all of these unethical, fraudulent and disgusting events.

  • robertsgt40

    Let no good deed go unpunished. There is no length the criminal elite(bankers and their owned politicians)will not go to protect the largest Ponzi scheme in recorded history.

  • Thank you, Obsrv-1. No one of conscience will deny that the opaque soup of financial services is filled with unpleasant surprises, and too often these are downright lethal. Yet there are some truly solid people in the mix, ethical people who value clients and work hard on their behalf. These are the rarities, and too many of the brightest drop out in despair. It’s a shame, because when the good ones vanish the psychos move in. (Check out Al Lewis’ recent column on “Wall Street Psychos.”)

  • Obsvr-1

    thanks phil for the ref to Al Lewis’ article

    Psychos on Wall Street

    link for those interested:


    Excerpt from the article:
    The latest edition of CFA Magazine, a trade publication for chartered financial analysts, features an article claiming one out of 10 people working on Wall Street are psychopaths.

    I found it amusing what Mr. Antar said:
    “First of all, it’s not one out of 10,” says Sam Antar. “It’s probably eight out of 10.”

    Mr. Antar now teaches law-enforcement organizations how to spot psychos.

    Wouldn’t it be easier to teach law-enforcement how to spot an ethical person with integrity — then everyone else is a psycho ??

  • Chris

    Quit the association and don’t pay it.

  • RB

    I think this is all about sending a message to others who would dare to step forward and be whistle-blowers. The namby-pamby legislation put in place to protect them won’t stop the retribution.

    Once someone dares to air their dirty laundry in public, they then close ranks and ban together with their brethren in the self-policed committees, the Courts and also in the Administration and use every tool at their disposal to exact their pound of flesh from the party who was brazen enough to take them on on their home court.

    These days they don’t even bother to make sure their actions are legal. Who is going to take them to task? They are nearly all in on the graft and corruption and the few among them who still have even a shred of ethics can be kept in line with various favors or threats when necessary. After all, they don’t want to lose their place at the trough!

    It is only going to get worse as we move ever closer to the inevitable financial collapse that they already know is coming.

    It is apparent the American public will be caught flat-footed and almost totally unaware when the collapse arrives, while the financial elite on the other hand will have built up their ill-gotten gains into a treasure chest of assets which will either be offshore or hidden and protected in other ways to fund their futures after the event.

    The extremely small percentage of the masses who bought physical gold as protection will have it confiscated, whether they hold it personally here in the U.S. or whether the corrupt Administration is forced to use any and all means to compel offshore warehousing operations to repatriate the gold of U.S. citizens directly to the U.S. Government.

    Please don’t think they don’t know a financial collapse is coming (after all, they helped to engineer it) and certainly don’t start believing that they are suddenly going to have a change of heart, get a conscience and begin doing the right thing in the interim just because a handful of bloggers and respondents (myself included) are miffed. We will all be utterly disappointed on both counts.

  • Harv

    Good Lord, this is pathetic. There will be more and more of the kangaroo courts in the future. What a shame.

  • Robert FitzGibbon

    I just today received word that AAFES (Army and Air Force Exchange Service), the military’s PX/BX retail system is screwing me out of the bulk of my whistle-blower settlement…including the loss of lifetime medical care, $20,000.00 cash and PX/BX lifetime retail privlidges.

    …I have seen blatant corruption and the theft of billions of dollars from AAFES employees, military members and abused local national employees…

    ..they do this to whistle blowers all the time and the great part of my situation is that the government was selling unsanitary BURGER KING WHOPPER MEAT illegally in JAPAN

    …..government officials for AAFES were taking bribes to approve multi-billion dollar deals…and stealing the money they received from the out-of-date BURGER KING WHOPPER MEAT…


    the government steals billions in overtime from the employees of these stores that AAFES owns and the companies like BURGER KING shut up because they make billions of dollars from AAFES facilities…and they all profit from the theft……

    …so understand your government…..just like AAFES is part of the military…and the military is really the government, and they are all a group of corrupt thieves and criminals…

    Everyone should call BURGER KING and ask about the sale of contaminated meat to the Japanese folks….


    Robert FitzGibbon

    p.s.-if you are a labor lawyer or disability attorney who would like to create a multi-billion dollar class-action lawsuit against a 12 billion dollar a year US GOVERNMENT RETAILER….send me a message….now that they have violated my agreement…I don’t have to be quiet anymore…

  • mitch stanley

    I’m Shocked but not surprised with the outcome. Wall Street is corrupt & we as a family do not invest in the stock market! I appreciated the advice above to bring your own staff to record.I wonder if they would allow you to do it or would it be prohibited??

  • LD

    Bloomberg’s Bill Cohan writes on this case,

    This is FINRA and Wall Street at their very worst. Instead of the smug self-satisfaction on display by both FINRA and Morgan Stanley, the only just outcome here is for the award in the arbitration to be vacated and for Mensack to be able to pursue his whistleblower claim in New Jersey Superior Court as he originally wished. Anything short will go to prove that the FINRA arbitration process is an utter sham.

    Whistleblower Gets Sham Justice from Wall Street Court

  • Jim Hall

    Welcome to the Matrix.

    Something has to give.

    Trust has been lost.

  • Cynthia Harman

    I am also a 50 year old whistle blower against Edward Jones and just received a decision from FINRA on 3-16-2012 case # 11-0145. They denied my claim entirely. Kangaroo court you bet ya…Finra’s arbitration board allowed Edward Jones to have
    a security guard posted during this hearing. They also allowed one of the arbitrators whose firm was mentioned in part of this action to remain on the panel. The attorney for Edward Jones- James Spears attacked one of my attorneys who is a female verbally during his closing statements. Not to mention the arbitrators did not uphold their own ruling as to discovery. Edward Jones fabricated and simply refused to disclose most of these documents. We were able to produce some of these on our own. Our timeline proved retaliation by Edward Jones.
    Last but not least Edward Jone’s head of HR willfully omitted in his documentation my claims of a hostile workplace and a request for counsel to be present while they questioned me, this was proven in a taped and transcripted document.
    Kangaroo Court ….I think I would have had a better chance in a third world Country!!!!

    • LD


      Thank you for sharing your story. I hope others will see this commentary and related comments so as to be prepared for what may lie ahead of them in pursuing their cases with FINRA.

      Ultimately I hope your story and that of Mark Mensack’s and others will bring about the needed changes in this process.

      Thanks again for writing. Please spread the Sense on Cents.

    • micael e tierney

      indeed,constitutional protections do not ezist at finra and nobody cares!!!!!

  • michael tierney

    until finra arbitraton awards are reviewed by a court(or someone who has a clue about the constitution,the securities industry is too dangerous a place to altering verdicts are now pronounced with no thought of fairness or constitutional protections.
    sue me in court if you have a beef but don’t let 3 idiots with their own clear ,self serving agenda judge me.
    finra is not capable (or willing) to regulate fairly.

    • michael tierney

      no comments? i am surprised that constitutional disregard wouldn’t pique someones(mr holder?) interest.

  • micael e tierney

    it’s called the constitution.insist that arbitrators read it.

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