Mammoth Award Addresses Citigroup's Failure To Supervise
Actor Larry Hagman, famous for portraying the fictitious oil tycoon, J.R. Ewing on the long running TV show “Dallas”, received a securities arbitration award for $11.5 million against Citigroup. He and his wife, Maj, were awarded $1.1 million in compensatory damages, plus $439,000 in attorney’s fees and expenses. The other $10 million awarded was in the form of punitive damages as a way of punishing Citigroup for its hand in the handling of the Hagman’s investments. According to a New York Times article, this award was the largest to an individual in 2010 and the ninth largest ever awarded. (FINRA# 09-03251; Larry Hagman, et al. v. Citigroup Global Markets, Inc.)
Apparently the panel became infuriated with the oral and documentary evidence presented during the hearing. The Times’ article stated that the Hagmans moved their account to Lisa Ann Detanna, a broker at Morgan Stanley Smith Barney who took over Citigroup in 2009. Documents introduced at the hearing revealed that Ms. Detanna immediately began reallocating their investments from a conservative mix of 75% fixed income and 25% stocks to the opposite mix of 75% stocks, which was considerably more aggressive. This contradicted Citigroup’s documents indicating they wanted to preserve their principal and receive income, as conservative investors. Additionally, the broker sold Mr. Hagman a $4 million life insurance policy that he didn’t need which had annual premiums of $168,000, plus ended up causing him to lose over $400,000. Firm documents apparently confirmed that the Hagmans repeatedly advised Detanna that they had a conservative risk tolerance and further confirmed that the portfolio mix of 75% stocks did not qualify as a conservative allocation of their investment portfolio.
The other focus of the case was whether her manager failed to adequately supervise Lisa Detanna, a big time Beverly Hills broker who was named to Barron’s “Top 100 Women Financial Advisors” for overseeing $1.14 billion in assets for clients with a typical net worth of $15 million. As such, she generated huge commissions for the firm and her manager’s income was directly related to his portion of the commissions from his star brokers. Additionally, the article stated that Ms. Detanna was never placed under increased supervision notwithstanding nine customer complaints between 2000 and 2010, in addition to the Hagman’s. According to the Branch Office Manager’s Compliance Handbook, the number of complaints against Ms. Detanna required increased supervision.