Brion Randall Story
DALLAS -- When her husband died of a brain tumor in May 1999, Maria Walker, then 33 years old, was left with a two-year-old daughter, no job and few marketable skills.
But there was hope. The bull market of the 1990s was in full stampede. And Ms. Walker's money was in the hands of her late husband's friend, a Merrill Lynch & Co. broker named Brion Randall. Mr. Randall had promised his pal that he would take care of the widow.
The broker invited her to his office on the top floor of a glass tower in Dallas. He told her that the stock market would take care of her, just as it was taking care of his other clients. Through the magic of high-tech stocks Ms. Walker had never heard of -- Ciena Corp., Xilinx Inc. and ADC Telecommunications Inc. -- her inheritance soared by 50% in less than a year, exceeding half a million dollars. While the market roared, she racked up monthly Visa bills that averaged more than $4,000. "You rock!" she told Mr. Randall again and again.
Then stock prices imploded and so did their friendship. In the search for what went wrong in the stock boom-gone-bust, debates have focused on greedy executives, corrupt accountants and lax regulators. But the bubble never would have inflated without ordinary Americans -- like Mr. Randall and some of his clients: Ms. Walker, divorce lawyer Robert E. Holmes Jr., and contractor James Lundy Jr. and his son, J.R.
In the 1990s, the number of Americans owning stock swelled by 30 million to more than 80 million, a mania unseen since the 1920s. The new national passion suffused the circle of investors who revolved around Mr. Randall, 40. The native Texan was a bored banker who joined Merrill Lynch in 1995, just as the boom in tech and telecom stocks was gathering force. He persuaded friends and family to join him on the ride to riches.
His clients cheered as their accounts ballooned. They went on shopping sprees and planned for early retirements. But the bull market's end brought recriminations. Many investors aren't much worse off today than before the bubble. Yet everything has changed. They're bitter and vindictive about losing the future they thought was in their grasp. And they're grappling with where to lay the blame.
"He kept selling us more. And the more he gave us, the more we wanted. Then boom, crash," says Mr. Holmes of his former broker.
At least 10 former clients -- including Mr. Holmes and Ms. Walker -- have filed formal complaints against Merrill, alleging that Mr. Randall broke various rules in handling their accounts. He denies these charges. Merrill has so far settled four of the cases, paying about $1.5 million to the investors.
The firm fired Mr. Randall earlier this year, and Mr. Randall plans to file an against Merrill. A Merrill spokesman declines to comment on Mr. Randall's case, except to say, "We take all very seriously and, consistent with our policy, review each complaint thoroughly and take what we believe to be the appropriate action."
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THE STORY begins in 1995. The Dow Jones Industrial Average was surging past 5000 and the Nasdaq was breaking 1000. The initial public offering of Netscape Communications Corp. shot from $28 to a close of $58.25 on its first day. Americans who had considered Wall Street a spectator sport decided to join the action.
Rob Holmes wasn't one of them, at first. Eight years earlier, he'd given a few thousand dollars to a who insisted that the lawyer couldn't lose. Then came the Crash of '87.Mr. Holmes, 50, cashed out his shrunken account and spent it. At the time he was a bachelor with a taste for "nice cars and a nice time," and few worries about the future. But by 1995, he was starting his own law firm in Dallas and shopping for a retirement plan when Mr. Randall called. "He was pushy in his way, really aggressive, saying, 'I can do this, I can do that,' " Mr. Holmes recalls. Mr. Randall got the law firm's business, including Mr. Holmes's own $70,000 retirement account.
The Merrill broker was new to the stock market himself. He had grown up in Richardson, a thriving Dallas suburb where his father, an executive at a real-estate development company, had helped build Telecom Corridor, a stretch of office buildings occupied by Cisco, MCI, Nortel and other tech giants.
Mr. Randall had been a bank vice president when he decided he wanted bigger challenges and a chance to make a better life for his wife, Amy, and their young son. He joined Merrill in April 1995, completed a two-year training program in 13 months, and established himself as a whiz at assembling comprehensive financial plans. The selection of individual stocks played only a small part in these plans, he says.
Mr. Randall worked in a tidy cubicle surrounded by other Merrill brokers. Customers met an athletic man, unfailingly upbeat, who compared his philosophy of diversified investing to a highway. "I'm going to put you in five lanes," he would say. "If one lane is stopped, the others are moving."
A few of Mr. Randall's investors had Alcoholics Anonymous in common. He had been a recovering alcoholic since 1989. His wife, Ms. Walker and her husband were all recovering alcoholics. After AA meetings, Mr. Randall would occasionally pick up the tab for dinner. "Everybody would be howling" at his stories and jokes, Ms. Walker says.
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ONE DAY IN 1996, Mr. Randall parked his black Nissan Maxima at an office building on Black Gold Drive in Dallas.
He'd come to pick up a $1,000 check from his friend and newest client, 25-year-old construction-company employee J.R. Lundy. "I told him, 'Dude, I'm not worth your time,' " Mr. Lundy recalls. Mr. Randall not only took the check and the account, he took Mr. Lundy to lunch.
Mr. Randall wanted help landing a more promising client -- Mr. Lundy's father, James Lundy Jr. The elder Mr. Lundy owned a drywall and millwork firm that was flourishing thanks to a tech-driven construction surge.
James Lundy wasn't an easy sell, though. He had left high school after 11th grade and followed his father and grandfather into construction work. To the extent he discussed investing with his family, it was about how Wall Street was rigged against the little guy. The elder Mr. Lundy declined to be interviewed for this story.
His son had no such fear of the market. He was comfortable with the Internet and had come to see it as an equalizer, a powerful tool to put detailed financial information in the hands of regular people. When he received a bonus at work, he called Mr. Randall and said he was ready to start investing. Soon after that, he introduced the broker to his father. At 45, the elder Mr. Lundy opened his first brokerage account.
Some experts, meanwhile, were growing uneasy. At the end of 1996, Federal Reserve Chairman Alan Greenspan famously questioned whether "irrational exuberance" was Stocks briefly swooned, but rebounded almost immediately. In 1997 and in 1998, the bull market stumbled under pressure from the Asia crisis, the Russian debt default, and the collapse of a big hedge fund. Each time, the bull roared back. At the end of 1998, the Dow Jones Industrial Average was near 9200 and the Nasdaq was near 2200.
MR. RANDALL HAD BEEN with Merrill three years when he took a call from an assistant to Dwight Emanuelson Jr., a senior Merrill broker in Dallas.
Mr. Randall knew of him from the daily "goalpost" listings on his office bulletin board. They listed individual brokers' "production," or how much they generated in commissions and fees. Mr. Emanuelson always seemed to be at the top of the list.Mr. Emanuelson had noticed Mr. Randall, too. The younger broker was winning new clients and awards, including a statue of a cowboy riding a bull; it had been given him by then-Merrill.
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DID YOU KNOW AND SECURITIES IN THE NEWS!
Since Nebraska borders Colorado and I live in Colorado, I am more familiar with its securities laws and regulations and Nebraska arbitrators. Because arbitrators are from the state or region where the investor resides, my familiarity with the arbitrator roster and individual arbitrators in Nebraska and surrounding states is a significant benefit. And remember that I do not need to be licensed in the state of Nebraska in order to represent Nebraska investors in securities arbitrations. I don’t even need to affiliate with local counsel. I also have the benefit of the knowledge of my husband Douglas Schulz (www.securitiesexpert.com), who has been hired in over 1,140 securities related matters and testified in over 637 FINRA arbitrations and civil cases regarding investment and brokerage disputes. Because the majority of his expert work is also in Colorado and surrounding states, he too is very familiar with Nebraska securities arbitrators and arbitrations.
It is very important if you think you have a securities case to find a lawyer who is skilled in FINRA arbitrations, since your case will be required to be filed there. There are not that many lawyers in the country who specialize in this area, like myself. But one of the benefits of this area of law is that I do not have to be licensed in the states where my clients live. I have represented clients and arbitrated cases all over the country. Therefore, you can concentrate on hiring the best lawyer who specializes in this area wherever they may be located.
Investors in Nebraska are protected by legislative laws and statutes together with industry rules that prohibit brokers from engaging in fraud, unsuitable sales, churning, unauthorized trading, failure to supervise, breach of fiduciary duty, or negligence. Below are useful links and resources covering some of the investor protections available in the State of Nebraska:
- The Nebraska Department of Banking and Finance (NDBF) (link is https://ndbf.nebraska.gov/ ) regulates securities in Nebraska. Specifically, Nebraska legislators created the Department of Banking to regulate state-chartered banks and other financial industries within the state. In 1939, regulation of state securities laws was also placed under the jurisdiction of the Department of Banking. Today, the Nebraska Department of Banking and Finance regulates and supervises various financial industries on behalf of the State of Nebraska and its residents.
- The Securities Act of Nebraska (link is https://ndbf.nebraska.gov/about/legal/securities-act-nebraska) governs the registration, offer or sale of securities within or from Nebraska.
- FINRA (link is http://www.finra.org/) is an independent regulatory agency that regulates all broker-dealers in the United States.
- Securities and Exchange Commission (SEC)(link is https://www.sec.gov/) also creates and enforces the securities laws.
Stoneman Law represents investors in all major Nebraska cities including Omaha, Lincoln, Bellevue, Grand Island, and Kearney. Our consultations are free of charge and the firm is only compensated if you recover.
Where Do FINRA Arbitrations Take Place in Nebraska?
All arbitrations for Nebraska residents take place in Omaha.
And remember that arbitrations take place in the state where the investor resides, NOT where the brokerage firm or stockbroker office!!
Nebraska Securities News
December 27, 2017. The NDBF announced its top threats for investors. The top threats were determined by surveying members of the North American Securities Administrators Association, of which NDBF is a member, to identify the most frequently identified source of current investor complaints or investigations. The following were cited most often:
- PROMISSORY NOTES: A promissory note is a written promise to pay (or repay) a specified sum of money at a stated time in the future or upon demand. Companies may sell promissory notes to raise capital, and usually offer them only to sophisticated or institutional investors. But not all promissory notes are sold in this way. Promissory notes from legitimate issuers can provide reasonable investment returns at an acceptable level of risk, although state securities regulators have identified an unfortunately high number of promissory note frauds. Investors should be cautious about promissory notes with durations of nine months or less, as these notes generally do not require federal or state securities registration. Such short-term notes have been the source of most (though not all) of the fraudulent activity involving promissory notes identified by securities regulators.
- REAL ESTATE INVESTMENTS: The promise of earning quick money through investments related to real estate continues to lure investors. Investors should be cautious about real estate investment seminars, especially those marketed aggressively as an alternative to more traditional retirement planning strategies involving stocks, bonds and mutual funds. Two of the most popular current investment pitches at these seminars involve so-called “hard-money lending” and “property flipping.” Hard-money lending is a term used to refer to real estate investments financed through means other than traditional bank borrowing. Investors may be tempted by the opportunity to earn greater rates of return by participating on a hard-money loan and may (or may not) appreciate the potential risks. Property flipping is the practice of purchasing distressed real estate, refurbishing it, and then immediately re-selling it in hopes of earning a profit. Property flipping financed through borrowed funds or outside investments can be done entirely lawfully, but it can also be a source for fraud. A scammer may, for example, defraud potential investors in the flip by misrepresenting the value of the underlying property or its profit potential.
- PONZI/PYRAMID SCHEMES: A Ponzi scheme (named after 1920’s swindler Charles Ponzi) is a ploy wherein earlier investors are repaid through the funds deposited by subsequent investors. In a Ponzi scheme, the underlying investment claims are usually entirely fictional; very few, if any, actual physical assets or investments generally exist. As the number of total investors grows and the supply of potential new investors dwindles, there is not enough money to pay off promised returns and cover investors who try to cash out. Similarly, a pyramid scheme is a fraudulent multi-level marketing strategy whereby investors earn potential returns by recruiting more and more other investors. Multi-level marketing strategies are not intrinsically fraudulent, and there are many legitimate multi-level marketing companies offering various consumer products and services. What makes a multi-level marketing strategy into a fraudulent pyramid scheme is the lack of a genuine underlying investment enterprise or product upon which the strategy can hope to be sustained.
- OIL & GAS INVESTMENTS: Many oil and gas investment opportunities, while involving varying degrees of risks to the investor, are legitimate in their marketing and responsible in their operations. However, as in many other investment opportunities, it is not unusual for unscrupulous promoters to attempt to take advantage of investors by engaging in fraudulent practices. These investments may be marketed as safe and secure, high-yield investments and therefore attract investors, such as seniors, who are interested in safety of principal with some income-producing potential. Oil and gas ventures are typically highly speculative, though, and may not be suitable for many investors. Because these ventures are so speculative, the potential for fraud is rife. Scammers may misrepresent the likelihood that an oil or gas well will be successful – or may not even ultimately drill a well at all. Fraudulent oil and gas schemes frequently take the form of Ponzi schemes, with investors’ funds being “recycled” to keep the scheme going.
- AFFINITY FRAUD: In an affinity fraud, a con artist uses some sort of connection with the victim as the basis for the fraud. Affinity frauds may involve people who attend the same church, belong to the same club or association, or share a common hobby. The con artist knows it is often easier for victims to trust someone who seems to be like them. And once trust is gained, it is easier to exploit that trust to perpetrate a scam. Once a victim realizes that he or she has been scammed, too often the response is not to notify the authorities but instead to try (usually unsuccessfully) to solve problems within the group. Affinity fraud can not only be financially devastating to the victims, but often has the perverse effect of causing victims to lose trust in the group or affiliation that was previously a source of comfort or support. The psychological damage can be just as harmful as the financial damage.
The unfortunate problem is that only those who have already experienced an investment problem will be likely reading the above warnings. Too late for those who have already fallen victim to any of the above schemes. The misconduct above can be committed by the scamster who just hangs a “Financial Advice” sign on his door or stockbrokers at brick and mortar brokerage firms. There are wrongdoers in all aspects of the securities business.