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Regulation and Compliance > Federal Regulation > FINRA

Oppenheimer Fights $37M Arb Ruling Tied to Ponzi Scheme

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What You Need to Know

  • A FINRA arb panel granted a $36.7 million award to a group of investors who said they were bilked in a scheme run by John Woods, a former Oppenheimer rep.
  • Oppenheimer says Woods and the four other brokers accused in the scheme are responsible for the losses.
  • The BD also says the arbitration panel made mistakes.

Oppenheimer & Co. is looking to file a motion to vacate a $36.7 million award that was granted by a three-person arbitration panel to a group of 11 investors allegedly bilked in a Ponzi scheme run by a former broker at the firm, a spokesman for the firm told ThinkAdvisor on Wednesday.

The investors, led by Donald Robinson, claimed Oppenheimer violated Financial Industry Regulatory Authority rules and the Georgia RICO statute, according to the award, which was posted on FINRA’s website Tuesday. They also claimed negligence and breach of contract and fiduciary duty by the firm.

Also named in the complaint, as third-party respondents, were John J. Woods, an ex-Oppenheimer broker who allegedly ran the scheme, and four other individual brokers.

In an amended statement of claim filed by the respondents in November 2021, they requested compensatory damages exceeding $6 million, punitive damages, RICO damages in an amount three times the actual damages sustained, and attorneys’ fees and costs.

After a FINRA Dispute Resolution Services hearing in Atlanta, the arbitration panel ruled in favor of the claimants, awarding them a total of $36.7 million, including compensatory, punitive and RICO damages, as well as legal fees.

Oppenheimer Fires Back

“While Oppenheimer regrets that any of the claimants may have suffered losses due to the actions of John Woods,” the firm believes that he and “the other defendants, who are currently covered by a judicial stay and did not appear at the hearing, are the parties responsible for any losses,” an Oppenheimer spokesman said Wednesday in a statement.

“Oppenheimer believes the panel erred in multiple ways, including but not limited to, allowing the hearing to proceed without Mr. Woods and other key parties and witnesses,” he told ThinkAdvisor.

The panel also “prematurely” rendered an award for damages “while a court-appointed Receiver continues to collect assets on behalf of all impacted investors, including the Robinson claimants, issuing an award where there was evident partiality against the Company by one of the arbitrators; and allowing the hearing to proceed when the claims were barred by relevant statutes of limitation,” he said.

“Oppenheimer intends to file a motion to vacate the award in its entirety,” he added.

The SEC’s Battle

The Securities and Exchange Commission obtained a temporary restraining order and asset freeze in August 2021 against Woods, an advisor based in Marietta, Georgia, and Horizon Private Equity III, an entity he controlled, to stop the $110 million Ponzi scheme that the SEC alleged they were operating, according to court documents.

The SEC was also granted its requests for expedited discovery and that Horizon and select assets owned by Woods, including his ownership stake in the RIA firm Livingston Group Asset Management, which operated as Southport Capital, be placed into receivership.

The SEC filed a complaint in U.S. District Court for the Northern District of Georgia against Woods, Horizon and Livingston/Southport, alleging the defendants raised more than $110 million from more than 400 investors in 20 states by offering and selling membership units in Horizon.

Woods, who was a broker at Oppenheimer & Co. from 2003 to 2016, according to his report on FINRA’s BrokerCheck website, was the principal officer at Livingston/Southport, serving as its CEO and president.

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