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Mensack v Morgan Stanley, FINRA

Posted by Larry Doyle on February 26, 2013 5:43 AM |

What do you think you would do if in the process of appealing a case, you were informed that the court stenographer had “somehow” lost (deleted or destroyed, perhaps??) 8 hours of testimony? Do you think you might be a little pissed off?

Just a little?

Mind you, what if the 8 hours of “lost” testimony were not just any 8 hours. That is, they were not the first 8 hours. They were not the last 8 hours. What if they were 8 hours of selected intermittent testimony including key points when the plaintiff alleges the defendant perjured himself?

Must be a banana republic and kangaroo court for such a gross injustice to have transpired, right? 

Well, I will let readers make their own assessment regarding references to marsupials and herbaceous fruits but there would certainly appear to be many similarities in this case that I highlighted here a year ago in writing, How Does FINRA Lose 8 Hours of Testimony? Wall Street’s “Kangaroo Court.”

I was pleased to see late last week that this fight continues as plaintiff Mark Mensack has moved to take his case out of Wall Street’s “kangaroo court” with the filing of a lawsuit in New Jersey Federal District Court.

Let’s navigate as the Chicago Tribune highlights, Whistleblower Files Federal Lawsuit Against Morgan Stanley, FINRA,

A former Morgan Stanley broker who tried to blow the whistle on what he called unethical sales practices, and was later ordered to pay $1.2 million following his departure, is seeking his day in federal court.

Mark Mensack filed a lawsuit against Morgan Stanley and Wall Street’s top watchdog in a New Jersey federal district court on Friday, accusing the firm of perjury, among other claims. Mensack also found fault with the industry’s arbitration hearing process that resulted in the award against him.

“That needs to be brought to light,” Mensack said in an interview on Friday, referring to his claim that Morgan Stanley committed perjury. Mensack said his attorney proved that key evidence was fabricated against him during the hearing.

When Mensack sought to review the testimony of the arbitration hearing in hopes of vacating the award, he found that roughly eight hours of the testimony were “destroyed, never recorded or were otherwise missing and unavailable.”

“It’s an indication of injustice in the system,” said Mensack, who is now seeking a trial by jury.

The lawsuit follows a Financial Industry Regulatory Authority panel decision from August 2011 in which the arbitrators ruled in favor of Morgan Stanley and said that Mensack failed to repay money owed on a sign-on bonus after he left the firm.

A FINRA spokeswoman declined to comment.

Mensack, who worked for Morgan Stanley from August 2008 to November 2009, said he was forced to leave the firm after he discovered an illegal “pay-to-play” scheme involving 401(k) assets that the company administered. He filed a whistleblower suit against the firm in March 2010 in New Jersey Superior Court.

Morgan Stanley one month later filed a “breach of contract” arbitration claim against Mensack, which resulted in the $1.2 million award.

In the 31-page complaint, which included 16 counts and a jury demand, Mensack stated a lengthy list of accusations against Morgan Stanley and FINRA, from ethical violations to impartiality.

Mensack, who was forced to file for bankruptcy, said he suffered “severe emotional and physical distress,” as well as financial damage, including the $1.2 million award against him and “extensive” attorneys fees and costs during the proceedings.

Morgan Stanley called Mensack’s claims “baseless” and said in a statement that he “had a full opportunity to present (the claims), represented by counsel, in an extensive hearing.”

“The arbitration panel gave them fair consideration and rejected them in their entirety,” the company said in an emailed statement on Friday. “They correctly concluded that his claims did not excuse his loan obligation, and ordered Mr. Mensack to re-pay it, along with Morgan Stanley’s attorneys’ fees.”

Yeah, but. . . . . but what about the 8 hours of “lost” testimony?

How about if we determine “justice” in this case AFTER we allow Mensack and his attorneys to properly appeal — and rebuild those 8 hours of lost testimony — and cross-examine Morgan Stanley officials whom plaintiff alleges perjured themselves?

Who would have a problem with that? Anybody?

Or is justice defined on Wall Street as “we make the rules around here, so shut up and play by them, and too bad if testimony is lost or not properly recorded.”

Strange form of justice and little resemblance to what America might commonly define as the practice of the rule of law.

Navigate accordingly.

Larry Doyle

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I have no 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 so that investor confidence and investor protection can be achieved.


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