An $11 million FINRA arbitration award against Citigroup and its employee, Edward James Mulcahy, has been vacated by a New York judge. Judge Charles Ramos of the Supreme Court of the State of New York entered an Order on January 2, 2014 vacating the July 2013 arbitration award issued by a panel of three FINRA arbitrators.
The FINRA arbitration was initially brought in August 2010 by John Leopoldo Fiorilla, a legal adviser to the Holy See Mission to the United Nations, according to Bloomberg. The Statement of Claim alleged that Citigroup and Mulcahy breached their fiduciary duties, committed negligence and gross negligence, breached the contract, violated federal and state securities laws, and claimed that Citigroup failed to supervise its employees. The causes of action relate to Royal Bank of Scotland (“RBS”) stock.
Bloomberg reported that Fiorilla transferred approximately $16 million worth of RBS stock that he had inherited to Citigroup after meeting a Citigroup broker at St. Patrick’s Cathedral in New York. According to Fiorilla, Citigroup said it would hedge the stock to protect against losses without selling the stock, but it failed to do so.
The FINRA arbitrators found in favor of Fiorilla and issued an Award on July 30, 2013 ordering Citigroup to pay $10.75 million plus interest, and Mulcahy to pay $250,000.00, plus interest. Citigroup filed a Petition to Vacate the Award in New York State Supreme Court the following month.
According to court documents, Citigroup argued that the parties had agreed to settle the matter for $800,000 prior to the issuance of the FINRA Award. Citigroup produced a copy of an e-mail from Fiorilla to his attorney in April 2012 authorizing the settlement. In addition, counsel for both parties sent an e-mail to FINRA notifying it of the settlement and asking that the arbitration hearing be canceled. Citigroup asserted that Fiorilla had settlement remorse and hired a new attorney to proceed with the arbitration against Citigroup.
In addition, in its Petition to Vacate, Citigroup accused the FINRA arbitrators of failing to disclose material facts in the arbitration proceeding.
In his Order vacating the Award, Judge Ramos held that the matter had been settled for $800,000 in April 2012, and found no need to address the allegations of arbitrator misconduct.