Actor Settles Securities Claim against Citigroup

Los Angeles, CAInvestors who file securities fraud claims against financial firms do so with the hope that they will recover money that was lost because of securities or stock fraud. In some cases, the Financial Industry Regulatory Authority (FINRA) arbitration panel will also award punitive damages in cases of stock investment fraud. One investor was awarded $10 million in punitive damages, only to have the award thrown out in court. The story has a happy ending, however, because the investor and the financial firm reached a settlement in the securities fraud case.

That investor is actor Larry Hagman, of Dallas fame. In October 2010, Hagman was awarded $11.6 million in his claim against Citigroup, which was filed in 2009. Hagman's claim involved securities and a life insurance policy, and reportedly alleged breach of fiduciary duty, breach of contract, failure to supervise and fraud by misrepresentation. According to The Wall Street Journal, Hagman's award included $10 million in punitive damages. In all, the $11.6 million was the largest arbitration award given to an individual investor in 2010.

The award was thrown out in court, however, because one of the arbitrators did not disclose that he had an interest in a similar case. Specifically, the arbitrator was reportedly a plaintiff in a claim that made similar allegations.

Despite the award being thrown out, Hagman and Citigroup were able to reach a settlement, although the settlement was for an undisclosed amount.

It is unusual for FINRA panel decisions to be appealed in court, but it can occur in some circumstances. In addition to Larry Hagman, former basketball player Horace Grant has faced a court appeal of a FINRA ruling in his favor.

In Grant's case, he was awarded $1.5 million by arbitrators in September 2009 in his FINRA arbitration against Morgan Keegan. Morgan Keegan appealed that decision, arguing that statements from arbitrators indicated they had predetermined the outcome of the arbitrations. Despite losing the appeal, Morgan Keegan still has not paid any money to Grant. The financial firm has said it will appeal the court's ruling against it.

In a different FINRA arbitration that was recently resolved, Citigroup was ordered to pay more than $50 million to a group of investors who said they were misled about the risks associated with Citigroup's MAT and ASTA municipal bond hedge funds. That ruling included $17 million punitive damages.