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Client Wins First Round Against Brokerage
By Meredith
Jordan Atlanta Business Chronicle
Financial Page
July 18-24, 2003
The arbitration panel that heard
the first of about 75 cases against the Augusta office of the brokerage firm A.G.
Edwards & Sons Inc. has awarded the former client in the case nearly $1 million.
Wendell A. Gresham, a factory worker
at the Proctor & Gamble Co. (NYSE: PG), was awarded $950,000 July 9 by a panel
of three arbiters appointed by the New York Stock Exchange Inc. Some $400,000
of the award was punitive, a rare finding for a securities arbitration panel.
The panel found fraud and breach
of fiduciary duty against A.G. Edwards and Gresham's former brokers, William Gibbs
and Susan Saccone. Gibbs has since retired on disability; Saccone remains in the
Augusta office of A.G. Edwards.
The attorney representing the brokerage,
Peter J. Anderson, a partner at Sutherland Asbill & Brennan LLP in Atlanta,
referred phone calls to A.G. Edwards' public relations office in St. Louis. "We
strongly disagree with the panel’s decision and are evaluating our options," said
Margaret Welch, a spokeswoman.
Gresham was represented by attorneys
Edward Dovin, Sandra Malkin and Brian Smiley of Gard Smiley Bishop & Dovin
LLP in Atlanta.
In addition to the punitive award,
the panel awarded Gresham the following: $284,908 in damages to replace the $260,000
he lost, plus interest, attorneys' fees of $239,718 and $25,000 in costs accrued
in the case.
The punitive award is what sets this
particular ruling apart. Punitive awards are found in less than 5 percent of all
arbitration cases, said Richard Ryder, editor of Securities Arbitration Commentator,
a newsletter based in Maplewood, N.J. "They are more common today than they used
to be but certainly very rare."
Gresham, who worked at P&G for
more than 30 years, was an unsophisticated investor and hadn’t invested in any
other equities besides the company stock he was given, said Brian Smiley, a partner
at Gard Smiley. Gresham had a portfolio of about $1.4 million, in large part due
to appreciation of P&G's stock price.
Then Gresham attended seminars put
on by Gibbs about an investment practice known as the "Dogs of the Dow." The seminars
showed returns in excess of 20 percent were being brought in using the theory,
which is a stock-picking strategy devoted to selecting high-dividend stocks.
Gresham had his entire plan transferred
to A.G. Edwards.
The problem, Gresham's attorneys
said, was Gibbs neither followed Dogs of the Dow nor diversified the portfolio.
Instead, he put them largely into technology stocks, which ultimately had very
poor results.
"It's fair to discern that [the arbiters]
were upset not just by the treatment of our client, but at the seeming lack of
remorse of the brokerage," said Ed Dovin, who also is a partner at Gard Smiley.
The next case is scheduled to begin
in August.
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