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| 2003
News and Press Releases |
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HEADLINE:
Attorneys Who Pursue Brokers Often Manage Their Own Money
By: Lynn Cowan
Dow Jones News Service. April 4, 2003
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EXCERPT: Attorney Mark Maddox makes his living pursuing stockbrokers who have done their clients wrong. So when he needs someone to manage his money, to whom does he turn? A Salomon Smith Barney stockbroker who believed every word that now-defrocked telecom analyst Jack Grubman uttered about the industry - including the fact that his clients should hold on to their Worldcom Inc. (WCOEQ) stock even as its stock price plunged. "I had a pretty common Grubman experience," said Maddox, an Indianapolis lawyer and a former Indiana securities commissioner. "I had a portfolio that was kind of heavy in technology, and it did really well for a while, then of course it came down. As I watched it go down, I talked to my broker, saying, shouldn't I unload this stuff?" His broker, an old high school friend, advised him not to, citing Grubman's predictions that the stocks would come back. Worldcom is now in Chapter 11 bankruptcy and Grubman, no longer at Salomon, is expected to pay $15 million and be barred from the securities industry for life as part of a settlement with regulators over his research practices. "I was one of those guys who held on to MCI Worldcom all the way down," said Maddox, who last year won a $250 million punitive damage award against Prudential Securities Inc. in a class action suit involving a broker who sold all his clients' holdings in 1998 without their consent. Attorneys who specialize in representing investors against brokerage firms spend their careers looking at the seamy side of Wall Street. Every month, they depose brokers who are accused of mismanaging their clients' money; talk to experts who calculate how often accounts have been churned to generate excess commissions; and spend countless hours badgering firms to produce documents showing that warning signs were ignored by supervisors. At the end of the day, how can a lawyer be comfortable leaving his money in the hands of a brokerage firm? The answer is: Many don't. Some of the most successful securities attorneys in the business say they don't have the nerve, after all they've seen, to trust their money to a brokerage firm. "I keep my money in a bank and a money market fund," said Seth Lipner, a
Garden City, N.Y. lawyer who won $3 million last year in an arbitration case that alleged a Merrill Lynch & Co. (MER) broker gave negligent stock options advice. "I work hard for my money, and I'd rather make sure I enjoy all the money I make than that it grow into something bigger - especially if I have to risk the fact that I may lose it all."
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