Reuters: Regulatory News: UPDATE 1-Two investors must pay Goldman's legal fees -panel

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UPDATE 1-Two investors must pay Goldman's legal fees -panel Jun 4th 2012, 21:11 Mon Jun 4, 2012 5:11pm EDT By Suzanne Barlyn June 4 (Reuters) - Two investors who ignored their brokers' advice must pay $500,000 in legal fees to a Goldman Sachs unit after losing an arbitration case against the firm involving a risky options trading strategy, an arbitration panel has ruled. Eric Snyder, a former real estate investment trust executive, and his wife, Barbara, filed "clearly erroneous" claims against Goldman Sachs, according to a Financial Industry Regulatory Authority arbitration award posted Monday on FINRA's website. The Snyders, who filed the claim in late 2009, originally sought $10 million from Goldman for allegedly recommending unsuitable investments, misrepresenting information and breaching its duty of fair dealing to them, among other misdeeds. A FINRA panel in Atlanta, Georgia, not only rejected those claims, but ordered the Snyders to pay $500,000 to cover Goldman's legal fees and costs, according to the ruling dated May 30. A law in Tennessee, where the Snyders lived at the time of the dispute, authorized the panel to award legal fees to Goldman, according to the ruling. The panel also recommended removing a disclosure about the investors' complaint from two brokers who advised them, a process known as expungement. The outcome in the case is a rare instance in which an arbitration panel has ordered investors who lost the case to pay a brokerage firm's legal fees, say lawyers. "It's a head turner," said Andrew Stoltmann, a Chicago-based lawyer who represents investors in arbitration cases. The combination of the panel ordering the investors to pay legal fees and recommending to expunge the brokers' records "is about as harsh as a claimant ... can get," he said. A Goldman spokeswoman declined to immediately comment. Eric Snyder and a lawyer for the Snyders and did not immediately return calls requesting comment. The claim stemmed from a "concentrated position" of stock in CBL & Associates Properties Inc, a real estate investment trust in Chattanooga, Tennessee, according to the award. Eric Snyder worked for the company for nearly 35 years until 2008, most recently as its director of corporate leasing unit, according to his LinkedIn profile. Goldman, the Snyders alleged, did not recommend a certain hedging strategy to protect them against possible losses in their position, according to the ruling. The stock dropped significantly at the onset of the U.S. financial crisis in late 2008, and the Snyders suffered "a huge CBL stock loss," the FINRA panel wrote. The FINRA panel, however, did not agree that Goldman was to blame. The Snyders, in fact, ignored recommendations by Goldman's brokers to sell the stock, the panel ruled. Snyder "was an experienced stock trader who was aware of the risk of holding a concentrated position of CBL stock and is responsible for his own actions," the panel wrote. "(T)he loss was caused by (the Snyders') own actions and the stock market collapsing in the fall of 2008," the panel wrote. A spokeswoman for CBL & Associates declined to comment. Lawyers for Goldman asked the panel to dismiss the case and award legal fees to the brokerage after the Snyders presented their claims and evidence during nine days of hearings. The panel agreed, and also required the Snyders to pay all but $1,200 of nearly $25,000 in hearing fees that FINRA's dispute resolution unit charges for the service. Those fees are traditionally split between parties, say lawyers. Link this Share this Digg this Email Reprints

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