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Wall St. arbitrator booted for fake credentials heard nearly 40 cases

A daytime view of a Wall Street, street sign. The image has graphic composition.

(Reuters) - The outcomes of nearly 40 securities arbitration cases dating back more than 15 years and involving some of Wall Street's most well-known brokerages could be compromised because one of the arbitrators who heard them allegedly lied about being a lawyer.

The Financial Industry Regulatory Authority on Monday confirmed that it removed the arbitrator, James H. Frank, of Santa Barbara, California, from its roster of arbitrators last year.

Frank said he was a lawyer and a member of the bar in several states, when in fact, he was not, a FINRA spokeswoman said.

The dismissed arbitrator said via email that he was unaware of FINRA's reasons for removing him, other than that it received a complaint about him from a lawyer involved in a case he had arbitrated. The allegations that he lied about being an attorney and bar member are "inaccurate at best," he wrote.

Frank claims that he was a "lawyer" - putting the word in quotes - and that the California bar must have lost his records.

The case comes to light as advocates for consumers and investors are calling for an end to mandatory arbitration. FINRA, Wall Street's industry-funded watchdog, runs the arbitration forum where brokerages and investors must resolve their disputes.

FINRA has been taking steps to improve perceptions of fairness to investors in its arbitration system. It also recently beefed up measures to police its arbitrators. Nonetheless, the latest revelation is likely to be more ammunition for mandatory arbitration critics.

It is unclear whether FINRA is required to disclose the alleged misrepresentation to parties involved in the dozens of cases that Frank heard, or whether it has made those disclosures. FINRA declined to comment on that issue.

The revelation also raises questions about whether the parties could attempt to overturn some of those decisions in court, lawyers said.

An arbitrator who misrepresents himself as being a lawyer is an "obvious serious concern," said Terry Weiss, a lawyer with Greenberg Traurig, LLP in Atlanta, who typically represents brokerages. "That sort of misconduct could be a basis to vacate the final arbitration award if it was brought in a timely manner."

But timeliness could be a problem. Parties who want to try to overturn arbitration awards in federal court must typically make the request within 90 days of receiving the arbitration order. It is unclear whether an arbitrator's fraudulent misrepresentations could give petitioners' leeway to take action under federal or state laws.

The San Francisco Daily Journal reported Frank's dismissal on Friday. Reuters has since learned that Frank served on securities arbitration panels in 38 cases between 1998 and 2011, according to a disclosure report he filed with FINRA. He was also involved in seven cases at the time of his dismissal. Many of them involved well-known brokerages, including Citigroup Global Markets Inc., a unit of Citigroup, Wells Fargo Advisors, LLC, a unit of Wells Fargo Corp., and Bank of America's Merrill Lynch, according to the report.

FINRA reported Frank's alleged misrepresentations to the Los Angeles County District Attorney last year, a spokeswoman said.

It is the second serious allegation involving an arbitrator's background to surface in less than a year. FINRA beefed up measures last year to check out arbitrators' backgrounds after it came to light that an arbitrator who heard a case involving Goldman Sachs had been indicted.


Frank's situation first came to light in August, 2013, during a hearing in a case against a brokerage involving a variable life insurance policy sold to a 72-year-old woman, according to Benjamin Blakeman, her Los Angeles-based lawyer.

Blakeman looked into Frank's background after the hearing. A private investigator he hired concluded that only one person named James Frank was licensed to practice law in California, but he was not the same person as the FINRA arbitrator, according to the investigator's report.

FINRA ultimately removed Frank from its roster and appointed another arbitrator to make a decision by reviewing tapes of the proceedings, Blakeman said. The investor lost the case.

Frank admitted to Reuters that he was never licensed in New York or Florida, although he indicated to FINRA that he was. Asked why he lied about the Florida license, Frank said: "It's a damn good question and one that I'm having trouble with."

He also did not graduate from Los Angeles-based Southwestern Law School, as his FINRA report shows, but instead, "took a bar refresher course there," he said. There was, however, another James H. Frank who did graduate from Southwestern Law School in 1975.

"There is no question he is using my credentials. This is not accidental," said James Hamilton Frank of Santa Monica, who graduated from Southwestern Law School in 1975 and has never worked as an arbitrator. He is licensed to practice law, but is now inactive, according to a California bar database.

Frank learned of the situation from Blakeman, the lawyer. He has not filed criminal charges against his alleged impersonator, but told the state bar association and the California attorney general's office about the matter, he said.

Frank, the former arbitrator, said he was "taken back" by the allegation that he had appropriated the other Frank's background as his own.

(Additional reporting by Brian Grow and Todd Wolfe; Editing by Linda Stern and Dan Grebler)

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Gregory March 25 2014 at 10:57 PM

Too much info missing in this story.

Flag Reply +3 rate up
Carolyn March 26 2014 at 11:15 AM

Real life vs fiction. Is this the real "Suits"?

Flag Reply +5 rate up
1 reply
Alexis Elizabeth Carolyn March 26 2014 at 12:31 PM

LOL, I was thinking the very same thing. I love that show!!!

Flag Reply 0 rate up
mouse March 26 2014 at 8:17 AM

This certainly makes me feel a lot better about our safety in the stock market. They are so well regulated?

Flag Reply +2 rate up
troglodyte March 26 2014 at 11:01 AM

Very Entertaining!

Flag Reply +1 rate up
excontroller March 26 2014 at 11:00 AM

LOL! Just goes to SHOW, unequivocally, that it doesn't take a LAW degree to understand and function in the legal profession. There USED to be a myriad of "engineers" in the auto industry, that functioned perfectly well, that had not set FOOT in a college classroom. But they learned the job ON THE JOB and functioned well in the system.

Flag Reply +7 rate up
1 reply
mbrheljr excontroller March 26 2014 at 11:42 AM

You are right, "excontroller."

Been a trial lawyer since 1977.

Won't bore you with all the details, other than to say, "...been there, done that..." in both state and federal courts.

All law school does is prepare each student to GRADUATE.

It doesn't even prepare graduates to pass the bar exam.

That's why there are so many bar review courses.

Two visible examples of law school grads who DIDN'T pass the bar the first time?

Try CA Gov. Jerry Brown and John F. Kennedy, Jr.

It's the day to day experience of lawyering that teaches a lawyer how to be one.

That may also explain the age old expression "...practicing law..."

The joke among lawyers is that we practice until we learn how.

Frankly, I can attest to it being a lifelong pursuit...

Flag Reply +7 rate up
llozano March 26 2014 at 9:19 AM

Wall Street must have thought they could get away with this. Mandatory Arbitration is how WS has corrupted our legal system by allowing them to by-pass the legal system and forcing people to go to industry funded arbitrators.

Flag Reply +1 rate up
fitzrbl March 26 2014 at 9:25 AM

wow...what a shock a person acting as a lawyer. WHAT about the people that act like DOCTOR's or the ones that say they are NURSE's....that emply's caring.

Flag Reply +1 rate up
Escalonz March 26 2014 at 11:00 AM

So FINRA is now liable for not checking the background of this phony lawyer and all past legal decisions made in cases he was involved in as they say are "null & void"?

Flag Reply +4 rate up
jcollina March 26 2014 at 10:41 AM

Is anyone honest these days? Maybe it has always been this corrupt, but I cannot remember it being so.

Flag Reply +5 rate up
2 replies
lili jcollina March 26 2014 at 12:16 PM

The foxes are guarding the henhouse. And the result is what you notice in our financial /political/corporate institutions

Flag Reply +1 rate up
TTigerLilyx2 jcollina March 26 2014 at 1:25 PM

Law schools teach 'corporate' rules of law, now, which is gearing the law to protect big money at the expense of the people. It also starts with big bucks paying for huge ad campaigns to elect Judges, who are then obligated to rule favorably towards corporate cases.
Imagine a person terribly injured by a say...semi truck accident. Life is ruined, health destroyed.
After SEVEN looong years of pain, physical and financial stress, 3 surgeries, tens of thousands of dollars racked up in professional fee's as you finally make it to the hearing to have your jury trial set...the Judge suddenly, after all that time, decides your case has no merit to sue the owners of the semi.
In spite of clear legal precedents.
The persons attorney is a good guy, clearly frustrated because he's worked his rear off on this case, knows whats happened but also knows its a career killer to say the Judge was bought off.
True story. Trying to get the guy to write a book about it, it is a horrifying eye-opener. Another case: a bank illegally changed locks on a not yet foreclosed on home. The attorney says 'your going to own most of this bank before I'm finished with them!'
He calls THEIR attorneys. Oh snap! They are old frat buddies!
And suddenly, your offed a flat $500.00 bucks and advised to feel lucky your getting that!
People LOVE that feeling of power, being one of those who can change/destroy lives with just one phone call.
Used to be, we had more people who would stand up against this corrupt system, but sadly, most of those guys are stomped out of existence before they get enough experience to be able to do what we need. Mostly because WE are willing to believe whoever is on tv the most, or mounts the best smear campaign. We had a real perv on the Bench for YEARS, everyone knew he was messed up, but until he was caught using a sex toy (while presiding over a case!) he was untouchable because of his money/power connections. All true events.

Flag Reply +1 rate up
rndcer March 26 2014 at 9:50 AM

It's the American way! LOL!! Focus on the minor like "welfare recipients" rather than the major - the biggest cheaters on the planet.

Flag Reply +3 rate up
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