Citigroup Won Except the Finra Arbitrator Was a Phony
(Bloomberg) -- Citigroup Inc.’s victory in a securities arbitration case seven years ago had one flaw -- the head arbitrator was an impostor.
A federal appeals court said Friday it wasn’t fair that the chairman of the Financial Industry Regulatory Authority panel that ruled in favor of the bank in a case brought by real estate website operator Move Inc. was posing as a retired California attorney working as an arbitrator.
Now, Move may get a new chance to make its case that Citigroup mismanaged a $131 million investment in auction-rate securities dating back to the financial crisis.
“Move’s right to a fundamentally fair hearing was prejudiced by the fraudulent misrepresentations of the arbitration panel’s chairperson, resulting in proceedings led by an arbitrator who should have been disqualified from the dispute under the rules and regulations of the Financial Industry Regulatory Authority," the U.S. Court of Appeals in San Francisco ruled.
Citigroup spokeswoman Danielle Romero-Apsilos declined to comment on the ruling. Attempts to locate Frank for comment were unsuccessful.
It was Move, now owned by Rupert Murdoch’s News Corp., that selected an attorney who said he had a law degree from Southwestern University and was licensed to practice in California, New York and Florida to serve as chairman of a three-member Finra panel for a proceeding that started in September 2008 and concluded in December 2009. Move said it learned in March 2014 from an article in the legal press that the arbitrator had lied about being a licensed attorney.
“It is now undisputed that Mr. Frank, who is ‘James Hamilton Hardy Frank,’ was impersonating retired California attorney ‘James Hamilton Frank,’” the appeals court said. “Finra later confirmed that Mr. Frank lied about his qualifications in his ADR and subsequently removed him from all cases and from its roster.”
A lower court refused in 2014 to vacate the arbitration judgment -- even when presented with evidence of the impersonation -- saying Move had missed the three-month deadline to contest it.
The case is Move Inc. v. Citigroup Global Markets Inc., 14-56650, U.S. Court of Appeals for the Ninth Circuit (San Francisco).