Misc: It's Not Nice to Mess with J.R.

A securities arbitration panel awarded Mr. Hagman and his wife Maj, 82, a big victory against Citigroup, which had overseen some of the couple's investment accounts. The three arbitrators who heard the case ordered Citigroup to pay the Hagmans $1.1 million in compensatory damages — slightly less than the $1.345 million they had requested — as well as $439,000 in legal fees.

But the kicker was the punitive damages award in the case, which accused Citigroup's brokerage unit, Smith Barney, of fraud, breach of fiduciary duty and failure to supervise the broker overseeing the Hagmans' funds. The panel ordered Citigroup to pay $10 million to charities chosen by Mr. Hagman.

So here's what happened to the Hagmans: In 2005, they moved their account from a registered investment adviser to Lisa Ann Detanna, a broker at what is now Morgan Stanley Smith Barney. (When the couple first invested with Smith Barney, Citigroup still owned it; Citigroup sold a controlling stake in the brokerage to Morgan Stanley in 2009.)

According to documents produced in the Hagmans' case, Ms. Detanna quickly began upending the couple's portfolio, taking it from a conservative blend of 25 percent stocks and 75 percent fixed income and cash to the opposite: 75 percent stocks and the rest cash and bonds.

Never mind that when the Hagmans first sat down with Ms. Detanna, they told her they needed income-producing investments that would preserve their principal, according to the documents.

Ms. Detanna also sold Mr. Hagman a $4 million life insurance policy that required onerous annual premium payments of $168,000.

A broker who generates significant commissions for her firm, Ms. Detanna was named in June by Barron's as one of the top 100 Women Financial Advisers in America.

[Emphasis added].

A look at Ms. Detanna's full regulatory record, however, shows nine customer complaints in addition to Mr. Hagman's between 2000 and 2010. Of these 10 complaints, four resulted in awards or settlements, four were dismissed, one was withdrawn and one is pending. Regardless of their disposition, the sheer number of complaints should have raised flags for Ms. Detanna's manager if he had followed his firm's compliance rules, Mr. Aidikoff told the arbitrators.

For more, see It's Not Nice to Mess with J.R. by Gretchen Morgenson, October 9, 2010 at The New York Times.