Wedbush and ex-broker ordered to pay investor $2.9 million
Wedbush Inc. and one of the company’s former brokers have been ordered to pay a Southern California investor nearly $2.9 million after an arbitration panel found that the broker looted the customer’s account.
The investor alleged that Debbie Saleh, a Wedbush broker from 2004 to 2009, bought and sold annuities without the client’s consent, a process known as churning, that generated huge commissions for her but drained his account.
The three-person arbitration panel concluded that Saleh lied to the investor, Rick Cooper, about the value of his investments, sent him false monthly statements and forged his signature on important documents.
“Saleh’s conduct was premeditated, egregious and unconscionable,” the panel concluded, adding that it “certainly borders on criminal misconduct, if not actually elevating her actions to actual criminal misconduct.”
Saleh, who was permanently barred from the securities industry in 2009, could not be reached for comment. Wedbush declined to comment.
Cooper, 74, a retired clothing manufacturer, said he considered suicide after losing his money and being unable to make mortgage payments on his Santa Monica condominium.
“I really wanted to curl up in a ball and die,” said Cooper, who now lives in a mobile-home park in Canyon Country in northern Los Angeles County.
Saleh handled the finances of Cooper’s mother before her death. His mother invited Saleh to brunch at her home and Cooper gave gifts to Saleh for Christmas and the births of her children, he said.
In a rare move, the panel ordered Saleh to pay a $500,000 penalty for emotional distress and an additional $1 million for elder abuse.
The penalties and harsh wording of the decision indicate the panel’s disgust, said Michael Blumenfeld, a securities litigation expert at Freeman, Freeman & Smiley in Los Angeles who was not involved in the case.
“That type of a write-up by the panel demonstrates how upset and angry they were,” Blumenfeld said.
Virtually all customer disputes with brokerage firms are required to go through arbitration.
Coming on the heels of another large arbitration loss two months ago, the ruling is a black eye for Wedbush and its chairman, Edward Wedbush.
The Los Angeles securities firm was ordered to pay Cooper a $300,000 penalty for emotional distress, while its chairman was ordered to pay $200,000 for emotional distress.
Saleh and Wedbush jointly have to pay $471,000 in compensatory damages and $390,000 in Cooper’s attorney fees.
The firm, which could have detected Saleh’s wrongdoing, failed to supervise her, said Cooper’s attorney, Robert Rosen. The investment firm also didn’t take action when customer complaints against Saleh began building, he said.
“They did absolutely nothing to stop this woman from continuing to take advantage of her customers,” Rosen said.
Citing “morally reprehensible” conduct, a separate arbitration panel two months ago ordered the firm to pay a former bond trader $3.5 million in withheld compensation.
In a story last November, The Times reported on Edward Wedbush’s frugal habits, including gathering paper clips left behind after meetings and personally signing employee expense checks to remind staff members that he monitors their spending.
He said in interviews last year that he merely followed cautious business practices in an industry known for overspending.
Ten customers have filed complaints against Saleh over the last decade, and regulators have investigated her four times, according to the Financial Industry Regulatory Authority, an industry watchdog.
Several customer complaints were settled out of court.
Saleh denied wrongdoing in an annuity-churning case that was later settled. “The client and I have always had a great relationship,” Saleh’s defense maintained in that earlier case. “Every year I would receive Christmas presents from her. She would discuss her personal life regarding her home in Seattle, her children and how she disliked her job.”
Saleh’s husband, Joseph Rubinstein, is a broker at Wedbush, Rosen said. Rubinstein declined to comment when contacted by a reporter. Saleh and Rubinstein live at the same Calabasas address, according to Los Angeles County voting records.
