Some Insight Into the $12 Million J.R. Ewing Award

Last week, a FINRA arbitration panel awarded the fictitious oil tycoon, J.R. Ewing of the long running TV show “Dallas” nearly $12 million against Citigroup. The actor, Larry Hagman and his wife, Maj who has Alzheimer’s, were awarded $1.1 million in compensatory damages, plus $439,000 in attorney’s fees and costs. The shocker was the award of $10 million in punitive damages ordered to be paid by Citigroup to a charity of the Hagman’s choosing. 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.)

So why did the panel get so mad at Citigroup? The 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 and the rest in cash and fixed income. This contradicts 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 and 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 focus also turned on 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 his star brokers brought in. 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. This was in direct conflict with the Branch Office Manager Compliance Handbook requiring increased supervision for Ms. Detanna, under the circumstances.

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