FINRA removed Santa Barbara, California arbitrator James H. Frank from its list of arbitrators after discovering that Frank allegedly lied about being a lawyer and a member of the bar of several states. Regulators reported Frank's alleged misrepresentations to the Los Angeles County District Attorney in 2013.
According to the story, Frank heard 38 securities arbitration cases as a FINRA arbitrator from 1998 through 2011 with a record of anti-Claimant awards. His more recent records show that at the time of his dismissal, Frank was involved with seven active cases, some featuring well-known brokerages such as Wells Fargo Advisors, Citigroup Global Markets and Bank of America's Merrill Lynch.
The arbitration case that led to FINRA's investigation and discovery of Frank's alleged fabrication involved a brokerage that sold a life insurance product to a 72-year-old woman. After the hearing in Claimant's arbitration claim commenced, her counsel began an investigation into Frank's background and disclosures. His investigation eventually led to FINRA taking action, and replacing Frank on her arbitration panel.
Upon completing its investigation, FINRA reported that Frank claimed to be a graduate of Los Angeles, California's Southwestern Law School, but had not attended the school. Frank maintained that he was a lawyer and a member of the California bar but alleged the California bar lost his paperwork and records. Oddly, he admitted falsely stating to FINRA he was licensed to practice law in New York and Florida when he never was. In an interview with Reuters, Frank admitted that he was never licensed in New York or Florida, although he indicated to FINRA that he was. Asked by the Reuters reporter why he lied, Frank said: "It's a damn good question and one that I'm having trouble with."
Meanwhile, real-life lawyer James Hamilton Frank of Santa Monica, California believes he is being impersonated: "There is no question he is using my credentials. This is not accidental." The Santa Monica James Hamilton Frank graduated from Southwestern Law School in 1975, is licensed to practice law in the state of California, but never worked as a FINRA arbitrator.
Upon discovering the potential impersonation, James Hamilton Frank reported the events to the state bar association and California attorney general's office, though he thus far has not filed criminal charges against the alleged impersonator.
Many authors are opining on whether the arbitrator's disclosures may give rise to allowing unsuccessful Claimants to vacate his arbitration awards. The hard fact of arbitration is a motion to vacate an adverse arbitration award must be brought within a short time of the issuance of the award. The specific time periods to bring such motions depend on the applicable state and federal arbitration statutes, but generally tend to fall around a 90 to 100 day time period. While most motions to vacate, even those timely filed, are unsuccessful, issues involving the integrity of an arbitrator, including arbitrator bias and the adequacy of the arbitrator's disclosures made to the parties are sometimes viable routes to vacating an adverse award.
Another issue is whether FINRA may be held liable for failing to conduct its own due diligence on its arbitrator or whether it may attempt to claim sovereign immunity. As a self-regulatory entity, FINRA has alternately claimed both sovereign immunity and private corporation status, in lawsuits and actions brought against it.
One last consideration is whether aggrieved (and denied) Claimants may personally pursue Frank. That issue will turn on whether the generally broad grant of arbitral immunity will protect him despite his misrepresentations.
The Law Office of Jonathan W. Evans & Associates will continue to monitor this new saga in the long battle against mandatory arbitration.
News: Wall Street Arbitrator Booted For Fake Credentials Heard Dozens Of High-Profile Cases (Business Insider/Reuters)