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Wall Street Banker's Travel Expenses Send Career Into Ditch
April 6, 2016In confronting a temptation, the analysis doesn't always start with determining whether something is wrong and, if so, that's the end of it. No, the thing about we humans is how we ponder the moral and ethical pros and cons and then weigh them against whether we may get caught and what the consequences might be. The old cost-benefits analysis. Take the whole deal with reimbursable employee expenses. Do you add in that extra meal for your friend who isn't a customer? Is there a way you can charge off some of that personal vacation to the firm? If it's holiday time and you could use a few extra bucks, what's the big deal if you add a zero or toss in some fictitious charges? Consider a recent Wall Street regulatory settlement in which a career was seemingly blown apart over travel expenses.
Case In Point For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Henry Porter submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Henry Porter, Respondent (AWC 2015046816601, March 29, 2016).According to the AWC So, play along with me and answer a few questions by solely resorting to the above fact pattern in the Porter AWC. For what specific reason was Porter terminated according to the AWC? Your answer should be for "allegedly submitting personal travel expenses as business expenses." What was the specific nature of the travel expenses? We are not told in the AWC. What was the dollar amount of the allegedly personal travel expenses that Goldman paid to Porter? We are not told in the AWC. Did Porter repay any of the reimbursed expenses at issue? We are not told in the AWC. According to BrokerCheck Now consider some additional information uncovered by the BrokeAndBroker.com Blog.According to online FINRA BrokerCheck records as of April 4, 2016, on August 3, 2015, Goldman Sachs "Discharged" Porter based upon allegations that he had:FACTS AND VIOLATIVE CONDUCT
On September 1, 2015, Goldman filed a Form U5 reporting that Porter was terminated from the firm for allegedly submitting personal travel expenses as business expenses. FINRA thereafter began an investigation into the purported misconduct reported in the Form U5. On February 25, 2016, FINRA staff sent Porter a written request for information and a written request to appear on April 15, 2016 for on-the-record testimony. Both requests were made pursuant to FINRA Rule 8210. On March 2, 2016, Porter's counsel confirmed receipt of the written requests and informed FINRA staff that Porter would not respond to the staff' s request for information and would not appear to provide sworn testimony. As stated to FINRA staff, and by this agreement, Porter acknowledges that he received FINRA's requests to provide information and to appear for testimony and that he will not provide the requested information or appear for on-the-record testimony at any time. By refusing to provide information and appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Porter violated FINRA Rules 8210 and 2010. .
SUBMITTED PERSONAL CAR TRAVEL EXPENSES FOR PAYMENT BY THE FIRM AS IF THEY WERE BUSINESS EXPENSES. THE REPRESENTATIVE SUBSEQUENTLY PAID THE COSTS OF THE PERSONAL TRAVEL.
Frankly,
I was a bit surprised by the revelation that the "personal travel
expenses" so broadly referenced in the AWC were characterized in Goldman's
regulatory filing as "personal car travel expenses." In light of
Porter's refusal to cooperate in FINRA investigation, I had imagined that the
"travel expenses" included airflights, hotels, restaurants, and the
full panoply of some out-of-town jaunts. I was a bit shocked to see that
Goldman was merely referencing "car" expenses, which strongly
suggests charges for gas and not much else.
Additionally, I raised an eyebrow when I read on BrokerCheck that Porter had repaid to Goldman the disputed travel costs. Sure, he repaid his employer after the firm had begun its investigation but, hey, at least Porter showed some remorse or, at worse, a recognition that he would come off better after-the-fact if he coughed up what he wrongly took in the first place. In the end, it all ends badly and you're reminded of the lyrics from "Fast Car":
You got a fast carWe go cruising to entertain ourselvesYou still ain't got a job
What's the Difference?
Why do I highlight
the characterization of the travel expense set forth in the AWC as
a "car travel payments" in BrokerCheck, and call attention to the the acknowledgment (not set forth in the
AWC) by Goldman in its BrokerCheck filing
that Porter repaid the disputed travel payments? I think it is important to
clearly disclose that Porter submitted personal expenses in the form of
"car travel" and that he did not go beyond that, as in
waaaay beyond that, as in rippng off his employer for
four-star hotel and dining accommodations plus first-class air travel plus
deluxe limo service. Moreover, many of you were likely surprised surprised to
learn from BrokerCheck that Porter had repaid the entire
disputed amount. As such, the repayment is also an important point.
If I were negotiating the AWC
with FINRA, I would have heavily lobbied the regulator to avoid the usual less-is-more
disclosure (from the perspective of a likely guilty industry
respondent) and to seek the inclusion of references to the
car travel and
repayment aspects of this matter. If
nothing else, down the road, even if only in years to come, the fuller
explanation of the issues might put Porter in a better
light.
To be clear -- TO BE VERY CLEAR
-- there may well have been reasons, excellent ones at that, for not including
the two additional facts in the AWC. For one thing, there may simply have been
no opportunity to expand upon the AWC disclosure because FINRA may have been
pissed off at Porter's refusal to cooperate and told his lawyer that the AWC,
as the Staff had written it, was a take-it-or-leave-it proposition. In a fit of
regulatory pique, the Staff may simply have informed Porter that if he didn't
want to answer questions, he wasn't going to get any input in the settlement
document.
In a similar vein, having
decided not to cooperate, Porter may not have cared about the AWC language and
simply instructed his lawyer to close the matter up quickly and cheaply and to
move forward with the Staff's draft. Finally, there may have been other
non-disclosures that, as such, we are not privy too and for reasons that we are
unable to fathom, this AWC placed the entire matter in the very best light
Porter should have expected
SIDE BAR: If you are negotiating an AWC with FINRA, give careful consideration as to how you are presented in the document and how the underlying issues are framed. It may not matter to you today as to what was put in or left out of the regulatory settlement, but years from now, you may wish you had fought over the language.