By Matthias Rieker
An arbitration panel ordered Wells Fargo & Co.'s (WFC)
retail brokerage unit to pay a retired real-estate broker $1.8
million for losses tied to investments in soda and pharmaceutical
companies.
Philip Lovell accused Wells Fargo Advisors and Wells Fargo
broker John Bulkley Meacham of having him invest his money in
thinly traded securities that left his portfolio with little
diversification and unsuitable for his retirement, said Mr.
Lovell's lawyer, Marc Seldin Rosen.
Mr. Lovell's claims against Well Fargo include violation of the
firm's fiduciary duty and negligence, according to the ruling from
the Financial Industry Regulatory Authority arbitration panel.
He had demanded compensation for $9 million in losses. "In the
world of Finra, this is a significant recovery," Mr. Rosen
said.
As is customary, the panel didn't provide details on the
reasoning for its decision, which was dated July 30. Mr. Meacham
and Wells Fargo denied the claims, according to the ruling.
Mr. Lovell's portfolio did well initially, Mr. Rosen said. But
the commercial-real-estate broker retired in 2004, and by then the
investments were too concentrated in "startup pharmaceuticals with
no earnings history," Mr. Rose said.
Mr. Rosen said Mr. Lovell wanted to sell shares in 2006 and 2007
because he was concerned about their value, but Mr. Meacham talked
him out of it. "The broker was trusted completely," Mr. Rosen
said.
The shares named in the arbitration case were Jones Soda Co.
(JSDA), Nektar Therapeutics (NKTR), Poniard Pharmaceuticals Inc.
(PARD), and Helicos BioSciences Corp. (HLCSQ). All four took a
sizable hit during the financial crisis: shares of Jones Soda and
Helicos, for example, fell from $28 and $13, respectively, to below
$1.
Mr. Rosen said there were ample red flags for Mr. Meacham's
supervisor, but nobody stepped in. "There need to be greater checks
and balances," he said. "The entire relationship was a
disaster."
Wells Fargo didn't have an immediate comment. A lawyer for Mr.
Meacham didn't immediately return a phone call to seek comment.
Mr. Meacham had also borrowed $50,000 from Mr. Lovell, interest
free and without Wells Fargo's approval. Wells Fargo prohibits such
loans from customers to their brokers, and Mr. Meacham was
suspended for three months, according to documents on Finra's
websites.
Wells Fargo discharged Mr. Meacham in 2010 for violations
related to the handling of records, according to Finra. He was
permitted to resign from Chapin Davis Investments in 2012.
Mr. Meacham filed for bankruptcy in 2013, according to the
arbitration ruling. "Therefore, the panel made no determination
with respect to the claims against Meacham," the ruling said.
Write to Matthias Rieker at matthias.rieker@wsj.com
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