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Premature Withdrawal Ends In $445,000 Award Against Wells Fargo Rep
February 4, 2019
Wells Fargo Clearing Services sued a former associated person for just shy of $300,000 on a promissory note securing a so-called bonus loan. The former rep fought counterclaimed and filed his own separate lawsuit against the firm. At some point, the rep tried to withdraw without prejudice some of his claims, but the FINRA arbitrators nixed the attempt. Then the rep withdrew -- or tried to -- some of his claims with prejudice. Regardless, the case moved forward to verdict. Sometimes it's about the trip. Sometimes its about the destination. Sometimes it's about detours. In today's featured case, Wells Fargo gets to where it wanted to go, even if the route seems a bit off the chart.Case In PointBefore we all pack up and get into the family car, let me give you a head's up. We got two -- count 'em: two -- different arbitration cases. In the first, which is FINRA 17-02700, the Claimant is Wells Fargo Clearing Services, LLC; and in the second, 18-00602, we got a bunch of Claimants all related in one fashion or another to Matthew Maczko. At some point, the two different cases are consolidated and presented to the same FINRA Arbitration Panel for adjudication:
In the Matter of the Arbitration BetweenWells Fargo Clearing Services, LLC f/k/a Wells Fargo Advisors LLC, Claimant, v. Matthew Maczko, Respondent (FINRA Arbitration 17-02700)-- consolidated with --Matthew Maczko, Matthew Maczko Dec of Trust, Loretta Maczko Dec of Trust, Matthew Maczko and Loretta Maczko JTWROS, and Matthew Maczko IRA, Claimants, v. Wells Fargo Clearing Services, LLC f/k/a Wells Fargo Advisors LLC, Respondent (FINRA Arbitration 18-00602)http://www.finra.org/sites/default/files/aao_documents/17-02700.pdf
FINRA Arbitration 17-02700 (Wells Fargo Claimant)
In a FINRA Arbitration Statement of Claim filed in October 2017, FINRA member firm Claimant Wells Fargo asserted breach of contract arising from associated person Respondent Maczko's alleged receipt of two bonus loans from Wells Fargo pursuant to two promissory notes ("Notes"). Claimant Wells Fargo alleged that upon Respondent Mackzko's termination, the remaining balance due on the Notes became due and owing. Claimant sought $298,371.01 for the principal balance due and owing under the Notes plus interest, costs, and fees.
Respondent Maczko generally denied the allegations, asserted various affirmative defenses, and filed a Counterclaim and Amended Counterclaim asserting, respectively, that:
Wells Fargo: by terminating him, obtained his book of clients; confiscated and froze bank accounts; and seriously tarnished Maczko's reputation, causing him irreparable and irreversible financial harm.. . .unjust enrichment and restitution, breach of implied covenants of good faith and fairdealing/breach of compensation agreements, unclean hands, and breach of the termsof employment relationship/wrongful termination. The causes of action related toMaczko's allegations that the Notes were unenforceable and he was terminated withoutcause.
Wells Fargo generally denied the allegations and asserted various affirmative defenses.
FINRA Arbitration 18-00602 (The Maczko Claimants)
In a Statement of Claim filed by associated person Maczko and public customers (referred herein as the "The Maczko Claimants") in February 2018, the Maczko Claimants asserted failure to supervise, suitability, wrongful termination of employment, defamation, and breach of fiduciary duty. The causes of action related to Maczko's allegations that Wells Fargo violated FINRA Rules and wrongfully terminated Maczko without cause.
Wells Fargo generally denied the allegations and asserted various affirmative defenses.
Consolidated Damages
In viewing the consolidated matters, the parties' demands for damages consisted of the following:
Wells Fargo requested at the close of the hearing, $488,789.73 in compensatory damages.
The Maczko Claimants sought an order that Wells Fargo revise its records for Maczko's income from 2011 through 2016; and order Wells Fargo to pay all federal taxes, state taxes, FICA taxes, and other employment-related taxes due, in connection with the Maczkos' income tax revisions; and further requested that $606,263.20 in compensatory damages and other restitution due to lost wages, hardship, and distress; $150,000.00 in punitive damages; $21,800.00 for all legal fees, all forum fees, interest, and other charges; and grant Maczko access to the two accounts frozen by Wells Fargo. The FINRA Arbitration Decision states that:
[A]t the close of the hearing, Maczko confirmed that the claims he asserted in the Statement of Claim for case number 18-00602 were withdrawn with prejudice.
Motions
By Order dated June 4, 2018, the FINRA Arbitration Panel denied Wells Fargo's Motion to Initiate Default Proceedings, Bar Defenses, and to Dismiss Counterclaims; and also denied The Maczko Claimants' Motion to Dismiss.
The Panel granted Wells Fargo's Motion to Combine and Motion to Disqualify (barring Maczko from representing anyone other than himself).
The FINRA Arbitration Decision asserts in part that:
On or about July 19, 2018, Maczko filed a Motion for Withdrawal of Claim Pursuant to 12702(b) ("Request for Withdrawal"), without prejudice. On or about July 27, 2018, Wells Fargo filed its Opposition to Maczko's Request for Withdrawal. In its Order dated August 6, 2018, the Panel denied Maczko's Request for Withdrawal.On or about September 28, 2018, Maczko filed a Withdrawal of Claim with Prejudice.
Award
The FINRA Arbitration Panel found Maczko liable and ordered him to pay to Wells Fargo $298,371.01 in compensatory damages with interest; $682.22 in costs; $145,595.00 in attorneys' fees; and $1,000.00 reimbursement for FINRA filing fee.
The Panel denied Maczko's counterclaim is denied in its entirety.
Bill Singer's Comment
Premature Withdrawal?
The presentation of Maczko's various attempts to withdraw some of his claims is not handled particularly well in the FINRA Arbitration Decision. Frankly, the explanation depends upon too much implication and inference. Apparently, in July 2018, Maczko attempted to withdraw a claim (or claims) "without prejudice," which was opposed by Wells Fargo and denied in August 2018 by the Panel. Then in September 2018, Maczko seems to have filed a "Withdrawal of Claim with Prejudice," which may or may not have been in the form of a motion. As to that September 2018 withdrawal, the FINRA Arbitration Decision states that at the close of the October 2018 hearings "Maczko confirmed" that the claims he asserted in Arbitration #18-00602 were "withdrawn with prejudice." There is no assertion in the Decision that the Panel granted any motion by Maczko to withdraw to 18-00602 claims or that they were deemed withdrawn at the inception of the hearings. All we know is that by the end of the proceedings, the Panel asked Maczko to confirm that he had withdrawn those claims with prejudice. As best I can figure it out, only Maczko's counterclaims in 17-02700 were adjudicated by the Panel, and, ultimately denied.
I'm guessing that once Wells Fargo convinced the Panel to consolidate its claims with Maczko's counterclaims and the Maczko Claimants' claims, that the brokerage firm was not about to allow Maczko thereafter to litigate in piecemeal fashion. In an effort to prevent Maczko from essentially severing the Maczko Claimants' claims from the consolidated case via a withdrawal without prejudice, Wells Fargo opposed that motion. Understandably, Wells Fargo may have wanted everything litigated once and for all at the same time. Having lost his ability to withdraw without prejudice the claims of his various accounts, Maczko seems to have thrown in the towel for whatever reason and simply withdrawn the Maczko Claimants' claims with prejudice.
Although the Decision asserts that "on or about September 28, 2018, Maczko filed a Withdrawal of Claim with Prejudice," there is no statement that the filing was a motion or that the Panel granted or denied same. In fact, even as of the close of the hearing, those claims appear to have been something of an unresolved issue (at least in terms of any denial or granting by the Panel) because the Decision states that "at the close of the hearing, Maczko confirmed that the claims he asserted in the Statement of Claim for case number 18-00602 were withdrawn with prejudice." All in all, not a big deal given Wells Fargo's clean sweep of a victory but, still, not the picture of clarity.
BrokerCheck
Online FINRA BrokerCheck records as of February 4, 2019, disclose that Maczko was first registered in 1988, and was registered with Wells Fargo Advisors, LLC from 2008 to September 2016. Under the BrokerCheck heading "Employment Separation After Allegations," Wells Fargo disclosed that it had discharged Maczko on September 2, 2016, based upon allegations that:
Mr. Maczko is under internal review for adherence to industry standards of conduct based on concerns about the level of trading in a customer account.
Under the same Employment heading, Wells Fargo noted in a "Firm Statement" that:
FINRA permanently barred registered representative in connection with his conduct on February 9, 2017. The firm thereafter closed its investigation, noting that the individual consented to a permanent bar from the industry.
BrokerCheck records disclose one pending customer complaint alleging that Maczko made unsuitable recommendation, and seeking over $500,000 in damages pursuant to a FINRA Arbitration filed on February 26, 2018.
BrokerCheck records disclose under the heading "Customer Dispute - Settled" five disclosures dating from 1995 to 2017; and two customer complaints that were denied in 2006 and 2003.
2017 FINRA AWC
In the Matter of Matthew C. Maczko, Respondent (FINRA AWC 2016050430201 / February 9, 2017)
https://www.finra.org/sites/default/files/fda_documents/2016050430201_FDA_RB7X3295.pdf, FINRA imposed upon Maczko a Bar from associating with any FINRA member in any capacity. As set forth in the "Overview" to the AWC:
Between January 2009 and April 2016, Maczko engaged in excessive trading in four accounts of a senior customer in violation of NASD Rule 2310 (before July 9, 2012), FINRA Rule 2111 (on and after July 9, 2012) and FINRA Rule 2010. Additionally, on September 28, 2016, Maczko provided inaccurate and misleading testimony to FINIRA staff during on-the-record testimony in violation of FINRA Rules 8210 and 2010.