Securities Industry Commentator by Bill Singer Esq

January 24, 2019
Walgreen Co. agreed to pay $3.5 million to the United States and the State of Wisconsin to settle allegations that Walgreens violated the False Claims Act by submitting claims to Medicaid for stimulant medications without complying with Medicaid rules designed to ensure that stimulants are dispensed for appropriate medical treatment. From 2011 through 2014, Walgreens allegedly violated Wisconsin Medicaid rules by dispensing routinely stimulant medications to Wisconsin Medicaid beneficiaries without first verifying that the prescribing physician ordered the medication for medically appropriate treatment.  The United States and the State of Wisconsin further allege that, by failing to verify that medications were prescribed for appropriate treatment, Walgreens dispensed and billed Wisconsin Medicaid for medically unnecessary medications. The DOJ Release admonishes that:

Although the U.S. Attorney's Office generally is not issuing press releases during the current lapse in appropriations, this announcement is being made because the settlement falls under the same Corporate Integrity Agreement that was recently announced in relation to cases being settled in the Southern District of New York.  See   The investigation resulted from whistleblower lawsuits filed under the qui tam provisions of the False Claims Act.  Consequently, the whistleblowers will recover a share of the settlement amount.  As part of the settlement, the United States, the State of Wisconsin, and the whistleblowers asked the district court to dismiss the qui tam complaint.
Women are well-positioned to turn Wall Street on its head. Women investment styles lean towards solid and honest financial planning. It's no surprise, then, that almost a quarter of all CFP's are women, and growing. It's also no surprise that women investors prefer dealing with women advisers. Women investors find women advisers to be less patronizing, more empathetic to their individual needs and concerns, and generally more "in sync" with their unique financial goals than typical male advisers.

The Non-Participating-Participating Customer
In the Matter of the Arbitration Between Jason Michael Traino, Claimant, v. Morgan Stanley Smith Barney, LLC, Respondent (FINRA Arbitration Decision 18-02115 / January 18, 2019)
In a FINRA Arbitration Statement of Claim filed in June 2018, associated person Claimant Traino sought the expungement of a settled customer complaint from his Central Registration Depository record ("CRD"). Traino he did not financially contribute to the settlement. Respondent Morgan Stanley took no position on the requested relief,  Inexplicably, FINRA published its Arbitration Decision with the following statements:

The Arbitrator conducted a recorded telephonic hearing on December 3, 2018 so the parties could present oral argument and evidence on Claimant's request for expungement. 

The Respondent and the customer did not participate in the expungement hearing and did not contest the request for expungement. 

The customer participated in the expungement hearing, but did not contest the request for expungement.

The sole FINRA Arbitrator recommended expungement pursuant to a FINRA Rule 2080 finding that the customer's claim, allegation, or information is factually impossible and clearly erroneous; and false. The Arbitrator offered a thoughtful and thorough rationale in support of her recommendation:

The customer stated in writing and testified at the hearing that his 2009 filing was in error as it related to the broker. The customer testified that at all times, from 2006 to present, that he retained Claimant as his, his children and his in-laws' trusted financial advisor. 

The customer testified that in 2007 he discussed with Claimant the Lehman Brothers structured product that he ultimately purchased from his non-discretionary account at UBS. The customer stated that he was fully apprised of the risks involved in the investment and authorized and directed the trade. The customer testified that he "understood the investment and knew the potential risks." 

After Lehman Brothers failed and the investment became worthless, the customer was contacted by a Florida attorney who solicited the customer to "get in line to get some of his money back from Lehman Brothers." The customer made a claim in 2009, but he never meant to make a claim against the Claimant, only UBS, and did not know that the Claimant was named as a party. 

The customer stated that he wrote the letter and testified because he allegations of unsuitable and inappropriate recommendations are patently false and clearly erroneous as they relate to the Claimant. The customer stated that the Claimant never made unsuitable or inappropriate recommendations related to that structured product investment. The customer settled with UBS and the Claimant made no contribution to that settlement. 

At the hearing, the Claimant stated that he had an otherwise unblemished career and he would like to see the occurrence expungement from his CRD record. The Claimant never participated in the claim that the customer filed against UBS and was never asked to or made any contribution to the settlement. He reiterated that the customer has a non-discretionary account at UBS and that the customer, as he testified, understood the investment and knew the potential risk. The Claimant testified that the customers authorized and directed the trade with full knowledge of the nature of the investment. 

The Claimant stated that the customer has apologized to him numerous time for his error in naming him in the 2009 complaint, which was not meant to name Traino. 

After considering the testimony and pleadings, I find that occurrence number 1475537 was filed in error and that the claim, allegation or information contained therein, as it applied to the Claimant, is clearly erroneous. Additionally, I find and conclude that the claims of unsuitable and inappropriate recommendation made against the Claimant were false. 

Bill Singer's Comment: Not much evidence of quality-control from FINRA in this published Arbitration Decision. One sentence (quoted above) in the Decision states that the "customer did not participate in the expungement hearing . . ." but the very next sentence says that the "customer participated in the expungement hearing . . " Can't be both ways -- either the customer participated or didn't. Complicating matters even more, in her rationale, the Arbitrator states that "The customer stated in writing and testified at the hearing that his 2009 filing was in error as it related to the broker. The customer testified that at all times, from 2006 to present, that he retained Claimant as his, his children and his in-laws' trusted financial advisor." Clearly, it appears that the customer corroborated Claimant Traino's allegations "in writing" and also "testified at the hearing" in a supportive fashion.

U5 Revised to "Disagreement Over Duties and Instruction"
In the Matter of the Arbitration Between Debra Ann Degenshein, Claimant, v. Crest Capital LLC and John Duwayne Guderyon, Respondents (FINRA Arbitration Decision 18-02897 / January 18, 2019)
In a FINRA Arbitration Statement of Claim filed in August 2018, associated person Degenshein asserted wrongful termination; defamation; breach of contract; compensation owed to Claimant's solely owned non-FINRA member consulting firm, B/D Compliance Partners ("BDCP"); and failure to comply with FINRA Rule 3110. The claims arose from Claimant's alleged request to amend her Uniform Termination Notice for Securities Industry Registration ("Form U5"), and Respondents allegedly inaccurate disclosures on her Form U5. Claimant sought to revise her reported "Reason for Termination" to "voluntary," and remove the "Termination Explanation." Additionally, Claimant sought $2,308.31 in compensatory damages payable to BDCP and $75 for her FINRA filing fee. Finally, Claimant sought that Respondents Crest Capital and Guderyon:

i. refrain from any oral or written communication about Claimant or BDCP in the future other than to confirm Claimant was previously registered with Respondent; and 
ii. confirm in writing that neither has spoken nor written negatively about Claimant and/or BDCP to anyone else aside from her replacement. Or if they have, Respondents will provide proof of reputation restoration or pay for a professional service to repair. 

Respondents did not file a Submission Agreement or Statement of Answer but were bound by the sole FINRA Arbitrator's determination. 

The sole FINRA Arbitrator found Respondent jointly and severally liable and ordered them to pay to Claimant Degenshein $2,308.31 in compensatory damage plus interest until paid in full. Additionally, the Arbitrator recommended the expungement of the Reason for Termination and Termination Explanation via the revision of the "Reason for Termination" to "Other" and the "Termination Explanation" to "Disagreement over duties and instruction." Although the case was heard by a sole FINRA Arbitrator (not a Panel), the FINRA Arbitration Decision states that:

The Panel is making these recommendations based on the defamatory nature of the information.