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Arbitration panel orders Wells Fargo to pay investor $2.8 million

Tue, Jul 9 2013

By Suzanne Barlyn

(Reuters) - A securities regulator ordered Wells Fargo Advisors LLC to pay $2.8 million to an investor who said the firm failed to detect fraudulent transactions and theft in its account, according to a securities arbitration ruling.

College Health and Investment Ltd, a family limited partnership, filed the case in Boca Raton, Florida against the Wells Fargo & Co unit in 2010, according to a ruling posted on Tuesday on the Financial Industry Regulatory Authority's securities arbitration database.

The case stemmed from Wells' failure to detect alleged theft and unauthorized transactions by an employee of the partnership between 2006 and early 2008, according to Robert Wayne Pearce, a lawyer in Boca Raton, Florida, who represented the partnership. A family limited partnership is an estate planning tool used mainly by wealthy families to preserve their assets and minimize certain tax liabilities.

The three-person FINRA securities arbitration panel found Wells liable on July 3 and ordered it to pay $2.3 million in damages and interest to the partnership, College Health and Investment Ltd. Wells must also pay $419,000 in margin interest and $35,000 in costs. College Health had sought $4.4 million, according to the FINRA panel ruling.

"We're disappointed in the panel's decision and don't believe it was warranted by the facts presented during the hearing," a Wells Fargo spokeswoman said in a statement. "We are looking into next steps," she said.

A 2010 lawsuit filed by College Health against a former secretary, Esther Spero, in the U.S. District Court for the Southern District of Florida sheds light on the Miami-based partnership's troubles. It said Spero forged names of College Health employees who were authorized to transfer funds from its accounts, but transferred the funds for her personal use.

In October, 2010, U.S. District Court Judge K. Michael Moore of the Southern District of Florida, entered a $21 million judgment against Spero, who did not respond to the partnership's complaint. Spero allegedly operated the scheme through Wells Fargo and other entities, according to the complaint.

Spero could not be reached for comment.

Wells tried to seek damages from Spero and another College Health employee in the FINRA arbitration case, but the panel ruled it lacked jurisdiction over them because they were not FINRA-licensed securities brokers.

(Reporting by Suzanne Barlyn; Editing by Leslie Gevirtz)

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Robert Pearce is part of that unusual breed of lawyers that are able to create empathy with clients and thoroughly adopt their cause. No half efforts here. He and his group of professionals are outstanding strategists that can execute with precise fervor and unyielding determination. Theirs is a huge wave of facts, research, precedents and preparation, that has impressed me in its thoroughness and creativity, and most importantly with the results. No stone goes unturned and no effort is ever spared. In my book, he and they are those of a very rare kind that one wants to keep for a very long time. Ramon F.
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This law firm is the real deal. We were so lucky that they took our case as they have so much experience in securities and all the wrongdoing that happens in these investment companies where they mislead you and your money (as in our case) into schemes that are not what you think they are. Mr. Robert Pearce is one of the best lawyers around, a truly professional who will fight for you and will tell you as it is all the time. Astrid M.
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Mr. Pearce is a great professional and attorney. He led me through every step of the process in a clear, direct and straightforward manner. I highly recommend him as a securities attorney. Rey S.
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Just like the song from HAMILTON, it's so nice to have Bob Pearce on your side. He is the consumate plaintiff's lawyer: smart. dedicated, fully able to try a case but a great negotiator in a mediation. He did a wonderful job for us, fully supporting us through the process and more than holding his own against a large national law firm. Maurice Z.
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No lawyer except Bob said I had a chance of winning. When Ubs lawyers laughingly offered me zero to settle the dispute, Bob became even more determined to prove everybody wrong. Bob was extremely prepared, and always a step ahead of the opposing attorneys throughout the arbitration. In the end, Bob and I had the last laugh when the arbitrators awarded me almost 6 million dollars. J. Blanco