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Dean Witter Faces Judgment, Probe : Ethics: A fired branch manager is awarded $1.5 million. Arbitrators seek an investigation of his forgery allegations.

October 12, 1993|SCOT J. PALTROW | TIMES STAFF WRITER

NEW YORK — A former Dean Witter Reynolds branch manager who claimed the brokerage firm demoted and defamed him after he tried to stop employees from forging customers' signatures won a $1.5-million arbitration award against the firm, including $750,000 in punitive damages.

A National Assn. of Securities Dealers panel of arbitrators also took the extremely unusual step of referring the case to the association's enforcement arm for a disciplinary investigation of Dean Witter, which is Wall Street's third-largest retail brokerage firm.

The case involves John J. Glennon Jr., a former Dean Witter branch manager whom the firm had advanced rapidly and given several internal awards. Glennon's lawyers contended that when he transferred to take over Dean Witter's Nashville, Tenn., office in 1989, he immediately discovered that many of the 37 brokers and sales assistants there were routinely forging their customers' signatures, and he ordered them to stop the practice.

The employees allegedly complained about Glennon's attempts to force them to comply with the law. They appealed to two Dean Witter regional managers, one of whom demoted Glennon in 1990. Glennon later was fired, and his U5 Form (a standard form brokerage firms are required to file with the NASD whenever a broker leaves) stated that he was dismissed because he was suspected of fraud. The arbitrators upheld Glennon's objection that the statement was false and defamatory. They ordered Dean Witter to expunge it.

Dean Witter spokesman James Flynn said: "We are very disappointed with the decision, and we will immediately move to vacate (it)." He would not say on what grounds Dean Witter would appeal.

Arbitration awards are rarely overturned on appeal. Flynn also declined to say whether documents had been forged, but he acknowledged "some discrepancies in the office" and that "they were corrected." He said no one at the Nashville office was fired.

Glennon's lawyer, Jeffrey L. Liddle, said two employees in the branch had been suspended in the incident.

In a 1992 series of investigative articles on major Wall Street brokerage firms, The Times reported that forgery by brokers is commonplace but is seldom prosecuted even though it is a violation of criminal law.

The arbitrators' decision in Glennon's case is dated Oct. 8, but it was not made public until Monday. Liddle said evidence presented in the arbitration hearing showed that signatures had been forged on at least 700 documents. The papers allegedly included agreements of many types, including ones authorizing the brokers to trade risky options for customers.

According to papers filed in the case, when Glennon tried to stop the forgeries, one senior broker in the office responded by saying: "What's the big deal? That's the way things have always been done around here."

The arbitrators, in another unusual step, awarded Glennon $214,000 to pay attorneys' fees. However, they also ordered Glennon to repay Dean Witter $22,500, plus interest, as a result of an erroneous overpayment of Glennon's annual expense allotment.

Glennon currently is a broker with Smith Barney Shearson in Nashville, Liddle said.

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