Law360

May 11, 2017

Broker Gets $68 Million Defense Award In FINRA Arbitration

Broker-dealer C.L. King & Associates Inc. defeated a claim for $68 million in damages brought by several trusts that suffered deep losses on trades the financial firm cleared, according to a recent decision by arbitrators at FINRA. C.L. King and its president Candace King Weir were accused by trusts linked to the Gorguze family of “enabling” the defunct investment firm NSB Advisors LLC to pursue risky investment strategies “through excessive margin lending and other wrongful practices,” according to the award, which is dated May 8.

A three-person arbitral panel rejected the trusts’ claim, its counsel stated the case involved more than 15 witnesses and 39 days of hearings. The trusts bear the names of the deceased industrialist and donor Vincent T. Gorguze, his wife Gloria and his daughter Lynn, who leads the family’s investment firm Cameron Holdings Corp., along with two grandchildren.

Counsel said the trusts had a strategy that was long on stocks in the energy industry and short on securities that represented a broad swath of the market. In 2012 the strategy did disastrously, and the trusts took legal action against NSB, the advisory firm, and eventually C.L. King. The trusts recovered $5 million from NSB, according to the FINRA award and Robertson, but still sought $68 million from C.L. King even after reducing their damages by that amount.

FINRA arbitration records also show that C.L. King has prevailed in a $13 million claim it brought against William Nicklin, NSB’s manager. Another claim brought against C.L. King by members of the Nicklin family and related entities for $12.8 million was rejected earlier this year.

C.L. King and Weir are represented by Richard A. Roth of The Roth Law Firm PLLC and Christopher F. Robertson of Seyfarth Shaw LLP.

Distinctions