A FINRA securities arbitration panel ordered Wells Fargo Advisors LLC to pay $2.8 million to a family limited partnership after finding that the firm failed to detect a fraudulent scheme being perpetrated by the partnership's former secretary. The $2.8 million order includes $2.3 million in damages plus $419,000 in margin interests and $35,000 in costs.
According to the complaint, Esther Spero aka Esther Burstyn—the former secretary—forged the names of multiple College Health and Investment Ltd employees authorized to transfer funds from its accounts with Wells Fargo.
A related 2010 lawsuit against Spero found that the secretary used these forged names and signatures to transfer funds for personal use. The outcome of that suit was a $21 million judgment against Spero.
College Health alleged Wells Fargo—as the entity hosting the accounts—failed to "detect alleged theft and unauthorized transactions" between 2006 and 2008, citing breach of fiduciary duty, negligence, negligent supervision and breach of contract.
The FINRA arbitration panel agreed, finding that Wells Fargo was liable for failing to detect the fraud.
If you have invested with or hold accounts at a FINRA-member firm and you believe the firm, through its breach of fiduciary duty, contract or negligence failed to detect and/or prevent a fraudulent event that has proven harmful to your investments or financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.