Securities Arbitration
Arbitration lawyers

Last September we wrote an article entitled: “Securities Regulators Caution Suckers to Avoid Fake Lawyers.”

As we stated, on September 19, 2016, FINRA issued an Investor Alert, entitled “It can be hard to recover from Recovery Scams.” According to the Investor Alert:

You hear from someone who claims to be able to help you recover money you lost from a previous investment. The information sounds credible and the organization sounds legitimate. Documents you receive also look authentic, and the money that’s promised is not only welcome, but seems well-deserved compensation for previous losses.”

The catch? They want you to pay money up front for the recovery “services,” which in some cases are purely fraudulent. In addition to the original money you lost, you now may lose more money at the hands of professional con artists.

A month before the FINRA Investor Alert, on August 9, 2016, the United States Securities & Exchange Commission issued a similar Investor Alert: “What You Should Know About Asset Recovery Companies,” observing that:

The SEC regularly receives questions and complaints from investors who have been contacted by asset recovery companies with promises to recover money lost to financial scams or investment frauds. The companies often charge a substantial fee – from hundreds to thousands of dollars – to provide these services. These companies typically find potential customers by pulling names and contact information of victims from court filings and other lists of investors.

Similarly, in December 2015, The North American Securities Administrators Association (“NASAA”) also issued a Bulletin regarding Third Party Asset Recovery Companies. According to NASAA:

Victims of investment scams are wise to use caution if approached by companies promising to help them recover their lost investment funds and bring the perpetrators to “justice.” A third-party asset recovery company is a company that charges a fee to assist individuals in recovering money lost in scams. The company claims to gather information on the scam and assist the individual in recovering lost investment dollars. Many of these self proclaimed recovery companies are not law firms, although they may advertise that they can provide legal assistance. Typically, the targeted investors have lost thousands of dollars, perhaps even their entire life’s savings, to fraudulent investment schemes.

Now, we have some proof about what FINRA, the SEC and NASAA were talking about.

Cold Spring Advisory Group

In March 2017, a Kansas City, Missouri FINRA Arbitration Panel rendered an Award in the matter of Halling v. Cape Securities, Inc., Arbitration No. 16-00519.

In that case, the Claimant, Tom Halling alleged unsuitability, or the sale of unsuitable investments, the failure to supervise, and breach of fiduciary duty, resulting in a lost of nearly $20,000 in only 13 months after opening his account at Cape Securities.

This case was not like most other cases.  In this case, Mr. Halling did not hire a lawyer, instead he hired a Jennifer Tarr, from the Cold Spring Advisory Group in New York.

Who is Cold Spring Advisory Group?  Well, at least according to court pleadings, it appears to be a company run by Louis Ottimo and his wife, Michelle Ottimo.

FINRA Public Disclosure shows that Louis Ottimo was barred by FINRA in 2013, as a result of a regulatory complaint filed in 2009, which on March 17, 2017 was upheld by an extended hearing panel and which now is supposedly on appeal to the United States Securities & Exchange Commission.  Since 1996, it appears that Ottimo has been associated with seven securities broker-dealers six of which have been expelled by FINRA or are otherwise defunct, including Avenir Financial Group, EKN Financial Services Inc., Tasin & Company, Inc.,  VTR Capital, Inc., A. R. Baron & Co., Inc. and Kensington Wells Incorporated.  From March 2008 to May 2011, Ottimo was the subject of six civil judgments.

In any event, again based upon court pleadings, which of course are only allegations, once having been booted from FINRA, Mr. Ottimo formed Cold Spring Advisory Group for the purposes of promoting the company as a stock loss recovery firm.  Cold Spring Advisory Group’s pitch to the leads that it cold calls offers relief in the form of loss recovery through the FINRA arbitration process.   Cold Spring Advisory Group first requires that its clients pay a substantial amount of money for what it describes as a forensic evaluation of the accounts that suffered the alleged losses. Towards that end, Cold Spring Advisory Group employs an outside forensics firm which reviews the account statements and trade confirmations, and performs a series of mathematical calculations that support various theories of redress against the broker-dealer firms.

Typically, Cold Spring Advisory Group charges anywhere from $10-25,000.00 for the forensics evaluation. The client is then told that he/she was the victim of misconduct and that their claims against the broker-dealer firm, its brokers and other associated persons have merit and should be pursued through the FINRA arbitration process.

Cold Spring Advisory Group. employs telemarketing/cold call tactics designed to induce customers who have lost money to enter into an agreement wherein Cold Spring Advisory Group agrees to review and analyze such customer’s portfolios for losses sustained due to broker neglect or misconduct.

As securities broker-dealers are closed by regulators, and their registered representatives “cockroach” from one firm to another, customer lists or lead lists are passed from rogue broker to rogue broker, from firm to firm.  As a result many of our investor victim clients of your typical bucket-shop, are on a “suckers list” and get inundated with cold calls from every Wall Street Firm on Long Island.

These same investor victims are also often “cold called” by Cold Spring Advisory Group, and interestingly enough, the cold-caller often knows exactly at what firm the investor had an account.

I always suspected they had a list, but at least according to a lawsuit filed in New York, “the means by which such customer information was obtained in the past is under scrutiny as Cold Spring, Louis Ottimo and Michelle Ottimo his wife are the primary parties to a lawsuit brought by a FINRA member firm for damages related to Cold Spring Advisory Group’s alleged stealing of confidential customer information from the member firm.”

Halling v. Cape Securities, Inc.,

Back to Halling v. Cape Securities, Inc.  As stated above, in March 2017, a Kansas City, Missouri FINRA Arbitration Panel rendered an Award in the matter of Halling v. Cape Securities, Inc.

Mr. Halling lost.  His claim was denied in its entirety.  But really everyone lost, including licensed practitioners engaged in the multi-jurisdictional practice of law.

The Halling panel issued an 11 page explained decision.   According to the Award, Claimant failed to meet his burden of proving that Cape Securities failed to supervise this brokerage account, that Claimant responded only with broad accusations, and offered no law or statutory authority, or common law authority explaining how Respondents violated the rules, sold Claimant unsuitable investments or even owed Claimant a fiduciary duty.

The panel however also observed that Claimant’s Statement of Claim was not properly signed or executed by a person lawfully representing Halling, a Kansas resident, or by Claimant as established by FINRA Rules because Claimant’s non-attorney representative, Cold Spring Advisory Group, is a non-attorney limited liability corporation. FINRA Rules do not permit a corporation to represent a party.

According to the Award, Claimant’s representative is identified as Jennifer Tarr, a non-lawyer employee of a company, not a law firm, which represents customers in FINRA arbitrations.  Ms. Tarr replied that her firm was “a new element in FINRA.”

However, the Panel was not impressed.  It wrote that “Jurisdictions prohibiting non-lawyers from representing parties provide the following reasons supporting their restriction: non-lawyers are not bound by the rules of professional conduct lawyers required by the jurisdiction, professional rules are designed to protect clients from abusive practices of regulated lawyers; representation by non-lawyers may promote frivolous litigation or litigation that should never have been filed.”

The Kansas Supreme Court and the Rules of Professional Conduct have consistently and firmly held non-attorney representatives are not authorized to practice law in its jurisdiction and individuals can only be represented by a lawyer, and that Kansas lawyers are given a special franchise to appear in Kansas Courts because of their education, standards of character and fitness, examination, and standards of ethics and professional conduct.

Kansas heavily regulates the unauthorized practice of law to prevent non-lawyers from representing a person in an arbitration to protect public interest and welfare.  It specifically prohibits non-lawyers from appearing on behalf of another person, drafting documents affecting the legal rights of another, representing others in binding arbitration proceedings where opening statements are made, documentary evidence and witness testimony is presented, and arguments aremade based upon violations of statutes or common law. In this case, these representatives totally disregarded and/or ignored Kansas law and FINRA Rules believing they were exempt because they were “a new element in FINRA.”

One may think this case was isolated, but unfortunately it was not.

Simon vs. Aegis Capital Corp.

In the Matter of the FINRA Arbitration Between Jay R. Simon, Claimant, vs. Aegis Capital Corp., Robert Jay Eide, Kevin C. Meade, Nicholas Francis Milano, Anthony Michael Monaco, Sr., Jonathan Edward Rago, George Gregory Kott, and Kevin Charles McKenna, Respondents (FINRA Arbitration 15-02865, October 13, 2016).

In October 2016, another FINRA Arbitration Panel was asked to decide whether or not Cold Spring Advisory Group and Ms. Tarr’s representation of a Claimant was authorized.

Cold Spring Advisory Group and its representative, Jennifer Tarr, admitted that they are not licensed to practice law in Arizona or any other State.

The FINRA Arbitration Panel, citing Rule 12208(c) of the FINRA Code of Arbitration Procedure held that provides that “[p]arties maybe represented in an arbitration by a person who is not an attorney, unless … state law prohibits such representation.” (Emphasis added). “The Arizona Supreme Court hasexclusive jurisdiction over the regulation of the practice of law in Arizona.”

Under the Arizona Supreme Court’s rules, the representation of a party in an arbitration by another person constitutes the “practice of law.” Ariz. Sup. Ct. R. 31(a)(2)(A)(3).  Again, dealing to actual securities lawyers engaged in the multi-jurisdictional practice of law, the Panel expressly found that “By this rule, the Arizona Supreme Court prohibits the representation of a party in an arbitration conducted in Arizona by anyone who is not admitted to practice law in Arizona. “

Both Claimant’s and Respondents’ representatives were ordered to submit briefs and authority by September 9, 2016 on the issue of whether or not Cold Spring Advisory Group and Ms. Tarr’s representation of Claimant was authorized.

However, instead of submitting a brief, Cold Spring Advisory Group and Ms. Tarr withdrew as Claimant’s representative on September 6, 2016 and two days later on September 8, 2016, Hilton M. Wiener, Esquire, who is admitted to practice law in the State of New York, filed his Notice of Appearance as Claimant’s representative.

Respondents asked that all of Claimant’s causes of action against Respondents be dismissed, which in light of Cold Spring Advisory Group and Ms. Tarr’s violations of Rule 12208(c) and Arizona law, would be appropriate. See, e.g., Sternberger v. Gilleland, No. CV-13-02370-PHX-JAT, 2014 WL 3809064, at *12 (D. Ariz. Aug. 1, 2014) (striking pleading because it was filed by a nonattorney); Villone v. United Parcel Services, Inc., No. CV-09-8213-PCT-LOA, 2009 WL 4824796, at *1 (D. Ariz. Dec. 9, 2009) (holding that if plaintiff, who had been represented by a non-lawyer, wanted to allege a claim, he would “need to sign an amended complaint and represent himself or [he would] be allowed a reasonable opportunity to retain a lawyer, appropriately licensed to practice law in Arizona . . . to file an Amended Complaint or [his] Complaint may be dismissed.” (Emphasis added)].

The Panel found that under the FINRA Code of Arbitration Procedure, as limited by Arizona law, Cold Spring Advisory Group  and Ms. Tarr cannot and could not represent Claimant in this arbitration.

The Panel also found that Claimant has not sustained his burden of proof on any of his claims.

Wiener v. Cold Spring Advisory Group

This brings us to Hilton M. Wiener.  According to documents filed before the New York Supreme Court, in early 2015, In early 2015, Cold Spring Advisory Group referred Frank and Marianne Mulligan to Hilton M. Wiener.

The Mulligans are retired and reside in Naples, Florida. Mr. Mulligan is a sophisticated businessman and a high net worth individual. Prior to his retirement, Mr. Mulligan owned a funeral home in New Jersey along with several parcels of real estate. Mrs. Mulligan was employed as a school teacher.

The Mulligans maintained brokerage accounts with the New York offices of National Securities Corporation and Aegis Capital Corp. During the period of time that the Mulligans maintained their accounts at these two broker-dealer firms, their accounts suffered combined net out of pocket losses that exceeded $441,000.00 with commissions alone totaling more than $114,000.00.

On June 5, 2015 the Mulligans and Hilton M. Wiener entered into a Legal Services Agreement. The Agreement states that Mr. Wiener would represent the Mulligans on a contingency basis of 30% of any money recovered from the Respondent parties in the above referenced arbitration proceedings.

Supposedly at the Mulligans’ direction, Mr. Weiner engaged in settlement negotiations one of the broker-dealers, Aegis Capital Corp., and Mr. Wiener and counsel for Aegis, Sam Rastogi, ultimately agreed to mediate the dispute whereby bothparties entered into a mediation agreement with Howard Eilen as mediator. The parties set the mediation conference for January 31, 2017 at the FINRA office in Boca Raton, Florida.

On December 12, 2016, Mr. Wiener informed the Mulligans that the mediation conference was confirmed for January 31, 2017. In fact, the services of a mediator had been reserved and the pre-mediation case summary and other registration papers required by the mediator had already been completed.

However, within hours of receiving the news that the mediation conference was scheduled for January 31, 2017, the Mulligans sent an email to the Plaintiff terminating their business

Mr. Wiener, as stated in his lawsuit against the Ottimos, Cold Spring Advisory Group and Ms. Tarr, believes actually occurred is that Louis Ottimo and Cold Spring Advisory Group contacted the Mulligans with the specific intention of taking over the case so that Ottimo and Cold Spring could obtain the contingency fee in addition to their upfront fee.

Mr. Ottimo and Cold Spring Advisory Group then convinced the Mulligans to terminate their Legal Services Agreement with the Plaintiff but only after they received confirmation from Plaintiff that the mediation conference had been confirmed for January 31, 2017. Mr. Ottimo and his associate, Jennifer Tarr, in fact attended the mediation with the Mulligans which had been scheduled by Plaintiff and opposing counsel at the FINRA office in Florida.

Upon information and belief, at least according to Mr. Wiener’s lawsuit, Mr. Ottimo acted as legal counsel to the Mulligans at the mediation conference, and the Mulligans’ $441,000 claim was settled for $26,410.

The moral of the story is:  if you want to sue your stockbroker, hire a lawyer.  If you cannot find a lawyer, visit the Public Investors Arbitration Bar Association, and you can find a lawyer close to you.

Nicholas J. Guiliano has over twenty years experience representing investors before the Financial Industry Regulatory Authority, the New York Stock Exchange and before the National Association of Securities Dealers, Office of Dispute Resolution. Over the last twenty years, he has represented more than a thousand investors from all across the United States and from several foreign countries, in claims against stockbroker and broker-dealers for fraud, breach of fiduciary duty, churning or excessive trading, the sale of unsuitable investments, the sale of defective investments, the sale of unregistered securities, and the failure to supervise. He is frequently quoted in the national media on securities and investment related issues, most recently on National Public Radio. He offers his services on purely a contingent fee basis, and is also a member of Public Investors Arbitration Bar Association.

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