The client was a colorful, high-profile billionaire on Forbes’ 400 List of richest Americans. In charge of his hefty investment portfolio at Morgan Stanley, in Palm Harbor, Florida, was a superstar financial advisor with $2 billion in assets under management. She was the first female FA to be named a managing director of the firm, a member of the Chairman’s Club for 15 consecutive years and No. 1 on Barron’s Top 100 Women Financial Advisors list two years in a row.
They were Home Shopping Network co-founder Roy M. Speer, married, and his divorced advisor, Ami K. Forte, lovers for nearly a decade. Surely neither expected that their personal relationship would result in ravaging consequences for Forte and her firm. After all, at Morgan Stanley and around town, they’d been a well-known item for years.
Speer’s account totaled $150 million to $200 million, about 10% of The Forte Group’s AUM. Ultimately, the fixed-income account, in which Speer vigorously traded, brought him a net gain of $24 million.
In 2012, Speer died at age 80. On March 21 of this year, a Financial Industry Regulatory Authority arbitration panel in Tampa, Florida, ordered Morgan Stanley, branch manager Terry McCoy and Forte to pay Speer’s widow, Lynnda L. Speer, and Roy Speer’s foundation more than $34 million on Ms. Speer’s claims of unauthorized trading, churning, breach of fiduciary duty, negligent supervision, elder exploitation and unjust enrichment related to the Roy Speer account.
Two days later Morgan fired Forte, arguably the firm’s most prominent and celebrated financial advisor.
Now a humiliated Forte, claiming that Morgan filed a “fabricated” Form U-5 about her discharge, making it unlikely that she’ll ever work as a financial advisor again, has brought a multimillion-dollar wrongful termination and defamation arbitration case against the firm.
The principal objectives of the action are to recoup her life savings, which Morgan refuses to release to her, correct the public record and restore her good name.
“Morgan Stanley treated me as an example of how women can succeed at the firm. I was the spokesperson to make them look good with women. I helped them recruit women. Now I’ve been discarded and treated like a commodity. They threw me under the bus. I’m 58 years old. How am I going to survive?” Forte said, tearfully, in an interview with ThinkAdvisor.
Her U-5 states that Forte was terminated because of “concerns relating to disclosed arbitration award involving former client and issues with conduct including … adherence to industry rules and/or firm policy regarding use of trading discretion, concealed personal relationship with client and timely reporting of liens.”
Speer’s arbitration focused on alleged churning in the Speer account; specifically, about 12,000 unauthorized trades generating nearly $40 million in commissions paid to Forte.
The former advisor contends there was no misconduct on her part that could have resulted in the FINRA panel’s decision: She had given up trading authority in the account in late 2007, two years before the period that those 12,000 trades were made.
Responding to Forte’s arbitration suit against the firm, Morgan said, in a statement: “Ms. Forte’s claims overlook the fact that she was already adjudicated as jointly liable for the award based on her conduct. Despite this, [she] has failed to contribute anything to the amount awarded, and has also failed to repay substantial sums loaned to her in connection with her employment. We categorically reject her claims against Morgan Stanley.” Forte’s filing suit was a good move, according to Erwin J. Shustak, managing partner, Shustak, Reynolds & Partners and for four decades a specialist in securities arbitrations.
“She did the smart tactical thing by suing first. She struck preemptively and said bad-faith termination because she knew that Morgan Stanley was going to come after her. But the firm rightly terminated her based on the arbitration panel’s findings. And the firm has a right to come after her for her pro rata share of the award.”
But Forte insists that Morgan, who has paid the total award, has never made a formal demand that she contribute.
As for the firm’s refusal to release her retirement savings — including 401(k) plan investments, vested and unvested benefits, deferred compensation, earned income and Morgan Stanley stock — it all boils down to a contract, legal experts say.
“If there’s a contract that gives the firm the right to hold back funds that she claims she’s owed, then the issue is simply contract-driven,” says a securities attorney whose practice focuses on BD and advisor litigation. He declined to be identified because his firm represents Morgan in other cases.
A Gender Issue
Forte, who lives near Tampa, Florida, claims that her firing smacks of sex discrimination.
“This is a case of disparate treatment of women, especially on the executive level. If Ami were a man, it wouldn’t have happened,” says Forte’s attorney Robert J. Pearl, whose eponymous law firm is based in Naples, Florida.
During her employment at Morgan, “all the men who were managing directors that were let go — who did things against the rules — weren’t ‘discharged,’” says Forte. “They were allowed to leave as a voluntary termination ‘for better opportunities.’ They left with clean U-4’s and received all their deferred compensation and, in many cases, a year’s salary.”
Morgan’s reference to Forte’s failure to repay loans addresses the sizable retention bonuses that she received. The ex-FA was with the firm for 16 years.
“They terminated her saying we’re not going to allow you to earn money in the future, and we demand that you pay us money. Our arbitration says this is a no-no. You don’t get away with depriving her of her livelihood and then demand money back,” Pearl says.
There’s more to this tangled web: FINRA is conducting a regulatory investigation of the Speer case. Such investigations are not unusual but could result in fines and penalties for Forte or Morgan, or both.
FINRA declined to comment on either of the arbitrations or the investigation.
Forte’s chief defense in the 142-sessions-long Speer arbitration was that though her name was on the account as the advisor of record, she was not managing the investments during the relevant period, 2009-2012. When she and Speer ended their affair in 2007, she turned over trading authority to broker Charles J. Lawrence and branch manager Terry McCoy. That way, she no longer would be required to have continual communication with the active trader over his investments.
Lawrence was discharged the same day Forte was dismissed. McCoy remains in his job.
“[McCoy] is a man, and he’s management,” Forte says, alluding to the gender discrimination issue.
Morgan declined to comment on whether McCoy and Lawrence have contributed payment to the Speer award. Forte’s position that “the things that went on in the account did not bear her fingerprints is a hollow defense,” says the lawyer whose firm works with Morgan. “When you’re being paid commissions, you can’t have it both ways.”
Shustak adds: “If your name is on the account as the broker of record, you’re responsible for what goes on in the account in a supervisory capacity.”
Forte tried to resign the account when she and Speer broke up. “But Roy wouldn’t agree for me to be off it completely. It was important to him that I be compensated because he was [at Morgan] because of me,” Forte recalls. “He said, ‘If you’re not compensated, I’m going to another firm.’ Clearly, the firm did not want that to happen. So this was a way to keep the firm happy, keep Roy happy and let me have some business. Until the arbitration was filed, everybody was happy.”
A Personal Relationship
Forte and Speer met at a party in 1999, when she was an FA with Banc of America Investment Services. After talking bonds, she offered to provide a second opinion on one of Speer’s accounts. The advisor landed that account and over the years, began managing an increasing number of Speer’s investments.
When he decided to move his account to Morgan, because of its active bond-trading desk, Speer asked Forte to join the firm and handle his portfolio there. By now, a personal relationship between advisor and client had developed.
Roy and Lynnda Speer were married for 52 years. They were estranged and led separate lives for 30 of them. Reportedly a controlling executive with an abrasive manner, Speer kept his financial life away from his wife. She “…was not allowed to have any information about his business affairs,” her attorney, Guy Burns, of Johnson Pope Bokor Ruppel & Burns, testified at the arbitration.
However, Lynnda Speer was all too aware of the relationship her husband was enjoying with Forte. And right after his death, Speer moved all his accounts out of Morgan, plus a separate one that Forte, oddly enough, had been managing for her.
“She didn’t reveal that she had any problems with the management of Roy’s account. It was only about the [personal] relationship” Forte recalls.
According to the ex-FA, Morgan knew about her romance with Speer long before his widow sued.
“In about 2002, Roy and I, and a few of the firm’s management people, including Terry McCoy, were on Roy’s boat at a boat show. He was pulling out my chair for me, and we were calling each other ‘Honey.’ I think it was pretty darn obvious that we had [a personal relationship]. In fact, it had been well known,” Forte says.
Though such liaisons were not prohibited by Morgan policy, when Speer filed for arbitration in 2013, the brokerage asked Forte to sign a letter acknowledging that issues had arisen regarding her romantic relationship with Roy Speer. The letter also covered a tax lien that, Pearl says, the IRS mistakenly filed against Forte and of which she and Morgan were informed simultaneously. The taxes had been paid, according to Pearl.“That letter was to be the resolution of the firm’s internal inquiry into the issues raised in connection with the arbitration,” Pearl says.
Speer’s action alleged that Forte and Morgan Stanley had taken advantage of Roy Speer, a man, his widow claimed, who had diminished mental capacity in his later years and was “wheelchair-bound and diapered … and attended to daily by a full-time caregiver.” During his final year, he was under a guardianship.
Says Forte: “Roy had a lot of physical health problems, but I didn’t see any mental problems. I just don’t buy that.” On friendly terms with Speer, obviously, Forte would chat with him when he visited the branch, which he did several times a week, prior to a major medical event in 2012, to direct and monitor his investments in discussions with McCoy and Lawrence.
‘A Grab for Money’
Originally, Lynnda Speer sued for $476 million; but Speer account records prior to 2009 were said to have been damaged or destroyed in storage, thus confining the relevant period to the three years before Speer’s death, 2009-2012. Forte made an attempt to settle but was told through lawyers that Lynnda Speer refused to settle for anything less than $100 million.
“That arbitration is emblematic of a woman’s vendetta and a grab for money,” Pearl says.
After the award was announced, Speer reportedly commented: “I’m very pleased the arbitration recognized that Ms. Forte and her colleagues breached their fiduciary duties to Roy and his foundation, and exploited him during a time of his continuing mental and physical decline … We’re hopeful the outcome of his case will prevent other elderly investors from being taken advantage of by their stockbrokers.”
As for Morgan Stanley, its statement said the firm did “not believe the award [was] justified” and that it was “inconsistent with the substantial evidence showing that the accounts were profitable for the client and managed in accordance with his wishes.”
Forty-eight hours after Speer’s victory, Forte was fired. “I became a hot potato,” she says. In preparing defense for the arbitration, Morgan had assured Forte that her job was not in jeopardy, she maintains.
“I have no doubt the firm told her that because you have to keep a united front when facing such a huge liability. But when you lose a case like that, everybody starts looking at each another other much differently,” says Shustak.
He continues, “Somebody had been looking at the money coming into the firm a lot more carefully than the supervisory aspect of what was going on. It worked for everybody: The manager got a nice override. She got commissions. The firm made money. People [at Morgan] probably weren’t asking too many questions. But when the dust settles, the branch manager may no longer be at the firm because all that happened on his watch.”
Loyalty in Financial Services
Forte began her career at Prudential Securities in 1994. Before moving to Morgan Stanley Dean Witter in 2000, she was with Banc of America Investment Services for two years.
During her lengthy run at Morgan, she was offered jobs at other firms “for a great deal of money and big bonuses. But I said no. I was loyal to Morgan Stanley. I did everything they asked of me, including being dragged through the mud and lied about in the arbitration. I want to move on,” Forte says, weeping, “but now I can’t because they’ve given me no choice. I feel completely betrayed. In the brokerage industry, loyalty isn’t a two-way street.”
Forte might be facing a tough battle to prove gender discrimination.
“She was one of the biggest producing brokers at the firm,” Shustak says. “They gave her all kinds of awards and recognition. She was their representation that ‘a woman can make it in this business.’ But then she lost a huge arbitration with findings that she had slept with the client, mismanaged the account, failed to disclose a tax lien. I don’t see any discrimination there. When a woman rises to the top of the nation’s producing registered representatives and is then let go for what seems like legitimate reasons, it’s very hard to argue discrimination.”
Right now, Forte is awaiting the return of antiques, artwork and award plaques that had decorated her office. The day she was terminated, she left with only her purse.
The formerly acclaimed FA, who never remarried, was curiously prescient about her own life when, in 2008, she told this reporter — in an interview for Research magazine about retirement planning — that single, widowed or divorced women should take great care to provide for their financial future. “You never know what might happen,” she said.
As for her present situation, Forte declares: “I planned well for my retirement. The one mistake I made was leaving my money at a firm that I trusted.”
— Related on ThinkAdvisor: