Allied Beacon Partners, Inc. v. Bosco

Filing 8

MOTION by Defendants Mary Borowiak, Michael Borowiak, Annette Bosco, Louis Bosco, Diane Rubel, Richard Rubel for judgment Application and Motion to Confirm Arbitration Award (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Greco, William)

AWARD
FINRA Dispute Resolution
In the Matter of the Arbitration Between:
Names of Claimants
Louis Bosco, Annette Bosco, The Bosco Family
Trust DTD 7/31/96, by its Trustees Louis and Annette
Bosco, The Bosco Family Trust DTD 6/25/96, by
its Trustees Louis and Annette Bosco, Mary Borowiak,
The Mary Borowiak Trust, by its Trustee, Mary Borowiak,
Michael Borowiak, Richard Rubel, and Diane Rubel

vs.

Case Number: 10-01778
Hearing Site: Chicago, Illinois

Names of Respondents
Community Bankers Securities, LLC,
Waterford Investor Services, Inc., George J. Gilbert,
AlC, Inc., Nicholas D. Skaltsounis, and
James Marvin Mitchell

NATURE OF THE DISPUTE
Customers vs. Member, Terminated Member, Non-Member, and Associated Persons
REPRESENTATION OF PARTIES
Louis Bosco, Annette Bosco, The Bosco Family Trust DTD 7/31/96, by its Trustees Louis
and Annette Bosco, The Bosco Family Trust DTD 6/25/96, by its Trustees Louis and
Annette Bosco, Mary Borowiak, The Mary Borowiak Trust, by its Trustee, Mary Borowiak,
Michael Borowiak, Richard Rubel, and Diane Rubel, hereinafter collectively referred to as
"Claimants," were represented by W. Scott Greco, Esq., Greco & Greco, P.C., McLean,
Virginia.
Community Bankers Securities, LLC ("CBS") was represented by Steven 8. Biss, Esq.,
Charlottesville, Virginia.
Waterford Investor Services, Inc. ("Waterford") was represented by Dennis J. Kelly, Esq.,
and Hsiao C. (Mark) Mao, Esq., Dillingham & Murphy, LLP, San Francisco, California until
on or about January 17, 2011. After that date, Waterford was represented by Steven 8.
Biss, Esq., Charlottesville, Virginia.

FINRA Dispute Resolution
Arbitration No 10-01778
Award Page 2 of 9

AlC, Inc. ("AlC") did not appear.
Nicholas D. Skaltsounis ("Skaltsounis") was represented by Dennis J. Kelly, Esq., and
Hsiao C. (Mark) Mao, Esq., Dillingham & Murphy, LLP, San Francisco, California until on or
about January 17, 2011. After that date, Skaltsounis appeared pro se.
George J. Gilbert ("Gilbert") initially appeared pro se. At the hearing, Gilbert was
represented by Steven 8. Biss, Esq., Charlottesville, Virginia.
James Marvin Mitchell did not appear.
CASE INFORMATION
The Statement of Claim was filed on or about April 14,2010. The Submission Agreement
of Claimant, Louis Bosco, was signed on or about March 30, 2010. The Submission
Agreement of Claimant, Annette Bosco, was signed on or about March 30, 2010. The
Submission Agreement of Claimant, The Bosco Family Trust DTD 7/31/96, was signed on
or about March 30, 2010 by Louis Bosco, Trustee and Annette Bosco, Trustee. The
Submission Agreement of Claimant, The Bosco Family Trust DTD 6/25/96, was signed on
or about March 30, 2010 by Louis Bosco, Trustee and Annette Bosco, Trustee. The
Submission Agreement of Claimant, Mary Borowiak, was signed on or about March 31,
2010. The Submission Agreement of Claimant, The Mary Borowiak Trust, was signed on
or about March 31, 2010 by Mary Borowiak, Trustee. The Submission Agreement of
Claimant, Michael Borowiak, was signed on or about March 31, 2010. The Submission
Agreement of Claimant, Richard Rubel, was signed on or about March 31, 2010. The
Submission Agreement of Claimant, Diane Rubel, was signed on or about March 31,2010.
On or about April 25, 2011, Claimants filed a Response to CBS's Motion for Sanctions.
The Statement of Answer and Motion for Sanctions was filed by CBS on or about April 4,
2011. The Submission Agreement of CBS was signed on or about November 11, 2010.
TheStatementof Answer was filed by Waterford onorabout June 15,2010. Waterford is
the successor in interest to CBS. Waterford Investor Services, Inc. changed its name to
Allied Beacon Partners, Inc. The Submission Agreement of Allied Beacon Partners, Inc.
f/k/a Waterford Investor Services, Inc. was signed on or about May 15, 2013.
CASE SUMMARY
Claimants asserted the following causes of action: securities fraud and common law fraud;
securities recommended and purchased were unsuitable under Illinois law. Federal law,
and FINRA conduct rules; failure to conduct proper due diligence on recommended
product; negligence; breach of fiduciary duty; violation of the Illinois Consumer Fraud and
Deceptive Practices Act; breach of contract; and firm and controlling person liability. The

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 3 of 9

causes of action related to the recommendation, purchase and investment in private
placements in Medical Capital, LLC and Shale Royalties. Claimants alleged that the
investments were fraudulent Ponzi schemes and that Respondents failed to conduct
proper due diligence, which would have uncovered facts about the true nature of the
investments.
Unless specifically admitted in its Answer, CBS denied the allegations made in the
Statement of Claim and asserted affirmative defenses.
Unless specifically admitted in its Answer, Waterford denied the allegations made in the
Statement of Claim and asserted affirmative defenses.
RELIEF REQUESTED
Claimants requested an award in the amount of:
Actual/Compensatory Damages
Exemplary/Punitive Damages
Interest
Attorneys' Fees
Other Costs
Other Monetary Relief

$1,107,000.00
Unspecified
Unspecified
Unspecified
Unspecified
Unspecified

At the close of the hearing. Claimants requested:
Compensatory Damages
Exemplary/Punitive Damages
Interest
Attorneys' Fees
Other Costs
Other Monetary Relief

$1,227,638.22
Unspecified
Unspecified
Unspecified
Unspecified
Unspecified

CBS requested that the claims asserted against it be dismissed in their entirety and that it
be awarded its costs and attorneys' fees.
Waterford requested that the claims asserted against it be denied in their entirety and that
it be awarded its costs and attorneys' fees.
OTHER ISSUES CONSIDERED & DECIDED
The Arbitrators acknowledge that they have each read the pleadings and other materials
filed by the parties.

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 4 of 9

On or about September 2,2010, Respondent, Nicholas D. Skaltsounis, filed for bankruptcy
under the United States Bankruptcy Code. In accordance with these filings, all claims
against Respondent, Nicholas D. Skaltsounis, are indefinitely stayed. Therefore, the Panel
made no determination with respect to the claims against Respondent Nicholas D.
Skaltsounis.
Respondents, George J. Gilbert and James Marvin Mitchell, did not file with FINRA Dispute
Resolution properly executed Submission Agreements but are required to submit to
arbitration pursuant to the Code and, having appeared and testified at the hearing are
bound by the determination of the Panel on all issues submitted.
Respondent AlC, Inc., is not a member or associated person of FINRA and did not
voluntarily submit to arbitration. Therefore, the Panel made no determination with respect
to Claimants' claims against Respondent, AlC, Inc.
On or about November 30, 2010, Waterford filed a Motion to Dismiss. On or about
December 22, 2010, Claimants filed a Response in Opposition to Waterford's Motion to
Dismiss.
On or about January 24, 2011, the Panel conducted a pre-hearing telephone conference
regarding Waterford's Motion to Dismiss. During the pre-hearing, Waterford made an oral
Motion to Withdraw its Motion to Dismiss. In its Order dated January 24, 2011, the Panel
granted Waterford's oral Motion to Withdraw its Motion to Dismiss.
On or about February 5, 2013, Claimant filed a Motion to Amend the Pleadings to Reflect
Waterford's Name Change to Allied Beacon Partners, Inc. No responses were filed.
In its Order dated February 27, 2013, the Panel granted Claimants' Motion to Amend the
Pleadings to Reflect Waterford's Name Change to Allied Beacon Partners, Inc.
Upon review of the file and the representations made by/on behalf of the Claimants, the
undersigned Panel determined that Respondent, James Marvin Mitchell, has been properly
served with the Statement of Claim and received due notice of the hearing, and that
arbitration of the matter would proceed without said Respondent, James Marvin Mitchell,
present, in accordance with the Code of Arbitration Procedure (the "Code").
At the hearing. Service for Default was proven against James Marvin Mitchell who testified
via telephone pursuant to subpoena and indicated his knowledge of the proceedings and
hearing and waived participation in the hearing other than to testify.
The parties have agreed that the Award in this matter may be executed in counterpart
copies or that a handwritten, signed Award may be entered.

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 5 of 9

AWARD
After considering the pleadings, the testimony, and the evidence presented at the hearing
the Panel has decided in full and final resolution of the issues submitted for determination
as follows:
1. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, The Bosco Family Trust DTD 6/25/96, the sum of
$600,000.00 in compensatory damages;

2. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, The Bosco Family Trust DTD 6/25/96, interest on the
above-stated sum at the rate of 10% per annum from and including April
14, 2010 through and including the date this Award is paid in full;

3. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J . Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, Michael Borowiak, the sum of $28,000.00 in
compensatory damages;

4. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, Michael Borowiak, interest on the above-stated sum at
the rate of 10% per annum from and including April 14,2010 through and
including the date this Award is paid in full;

5. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, Mary Borowiak, the sum of $376,000.00 in
compensatory damages;

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 6 of 9

6. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimant, Mary Borowiak, interest on the above-stated sum at the
rate of 10% per annum from and Including April 14, 2010 through and
including the date this Award is paid in full;

7. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimants, Richard Rubel and Diane Rubel, the sum of
$196,000.00 in compensatory damages;

8. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimants, Richard Rubel and Diane Rubel, interest on the abovestated sum at the rate of 10% per annum from and including April 14,
2010 through and including the date this Award is paid in full;

9. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimants, The Bosco Family Trust DTD 6/25/96, Michael
Borowiak, Mary Borowiak, Richard Rubel, and Diane Rubel, the sum of
$7,500.00 in costs;

10. )

Respondents, Allied Beacon Partners, Inc. f/k/a Waterford Investor
Services, Inc., Community Bankers Securities, LLC, George J. Gilbert,
and James Marvin Mitchell, are jointly and severally liable for and shall
pay to Claimants, The Bosco Family Trust DTD 6/25/96, Michael
Borowiak, Mary Borowiak, Richard Rubel, and Diane Rubel, the sum of
$400,000.00 in attorneys' fees pursuant to the Illinois Securities Act; and

11. )

Any relief not specifically enumerated, including punitive damages and
sanctions, is hereby denied with prejudice.

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 7 of 9

FEES
Pursuant to the Code, the following fees are assessed:
Filing Fees
FINRA Dispute Resolution will retain the non-refundable filing fee* for each claim:
Initial Claim filing fee

=$

1,800.00

*The filing fee is made up of a non-refundable and a refundable portion.
Member Fees
Member fees are assessed to each member firm that is a party in these proceedings or to
the member firm that employed the associated persons at the time of the events giving rise
to the dispute. Accordingly, as parties. Community Bankers Securities, LLC and Allied
Beacon Partners, Inc. f/k/a Waterford Investor Services, Inc. are assessed the following:
Member surcharge
Pre-hearing process fee
Hearing process fee

=$ 2,800.00
=$
750.00
= $ 5,000.00

Adjournment Fees
Adjournments granted during these proceedings:
June 20-24. 2011. adjournment by agreement of the parties
Total Adjournment Fees

=$ 1.200.00
= $ 1,200.00

The Panel has assessed $1,200.00 of the adjournment fees jointly and severally to Allied
Beacon Partners, Inc. f/k/a Waterford Investor Services, Inc., Community Bankers
Securities, LLC, George J. Gilbert, and James Marvin Mitchell.
Hearing Session Fees and Assessments
The Panel has assessed hearing session fees for each hearing session conducted. A
session is any meeting between the parties and the arbitrators, including a pre-hearing
conference with the arbitrators, that lasts four (4) hours or less. Fees associated with
these proceedings are:

FINRA Dispute Resolution
Arbitration No. 10-01778
Award Page 8 of 9

Three (3) Pre-hearing sessions with a single arbitrator x $450.00
Pre-hearing conferences: September 2, 2010
1 session
April 29, 2011
1 session
May 4, 2011
1 session

= $ 1,350.00

Five (5) Pre-hearing sessions with Panel x $1,200.00
Pre-hearing conferences: January 24, 2011
1 session
July 6, 2011
1 session
August 29, 2011
1 session
June 6, 2012
1 session
November 14, 2012
1 session

= $ 6,000.00

Seven (7) Hearing sessions x $1,200.00
Hearing Dates:
May 13, 2013
May 14, 2013
May 15,2013
May 16. 2013
Total Hearing Session Fees

= $ 8,400.00
2 sessions
2 sessions
2 sessions
1 session
= $ 15,750.00

The Panel has assessed $15,750.00 of the hearing session fees jointly and severally to
Allied Beacon Partners, Inc. f/k/a Waterford Investor Services, Inc., Community Bankers
Securities, LLC, George J. Gilbert, and James Marvin Mitchell.
All balances are payable to FINRA Dispute Resolution and are due upon receipt

FINRA Dispute Resolution
Arbitration No 10-01778
Award Page 9 of 9

ARBITRATION PANEL
Michael S. Jordan - Public Arbitrator, Presiding Chair
James F. Carlson - Public Arbitrator
Steven P. Gomberg - Non-Public Arbitrator
I, the undersigned Arbitrator, do hereby affirm that I am the individual described herein
and who executed this instrument which is my award.
Concurring Arbitrators' Signatures:
/s/ Michael 8. Jordan
Michael 8. Jordan
Public Arbitrator, Presiding Chair

May 20. 2013
Signature Date

/si James F. Carlson
James F. Carlson
Public Arbitrator

May 20. 2013
Signature Date

Is/ Steven P. Gomberg
Steven P. Gomberg
Non-Public Arbitrator

May 20. 2013
Signature Date

May 21. 2013
Date of Service (For FINRA office use only)

FINRA Dispute Resolution
Aitiltration No. 1001778
Award Pane 9 of 9

ARBITRATION PANEL
Michael S. Jordan - Public Arbitrator, Presiding Chair
James F. Carlson - Public Arbitrator
Steven P. Gomberg - Non-Public Arbitrator
I, the undersigned Arbitrator, do hereby afnmi that I am the Individual described herein
and who executed this Instrument which is my award.
Concurring Arbitrdy^rs' Signatures:

\ o //3

4^

Michael S. Jordarif
Public Arbitrator, Pl^skJing Chair

Signature Date
Signs

James F. Carlson
Public Art)itrator

Signature Date

Steven P. Gomberg
Non-Public Arbitrator

Signature Date

Date of Service (For FINRA office use only)

RNRA Dispute Resolution
Arfoltratian No. 10.01778
Award
Page 9 of 9

ARBITRATION PANEL
Michael S. Jordan - Public Arbitrator, Presiding Chair
James F. Carlson - Public Arbitrator
Steven P. Gomberg - Non-Public Arbitrator
I, the undersigned Arbitrator, do hereby afflnn that I am the individual described herein
and who executed this instnjment which is my award.
Concurring Arbitrators' Signatures:
Michael S. Jordan
Public Arbitrator Presiding Chair

Signature Date

s ^ e esFF. : Carison
s J

Signature Date

Public Arbitrator
Steven P. Gomberg
Non-Public Arbitrator

Date of Service (For FINRA office use only)

Signature Date

FINRA Dispute Resolution
Arbitration No. 10-01778
Award
Page 9 of 9

ARBITRATION PANEL
Michael S. Jordan - Public Arbitrator, Presiding Chair
James F. Carlson - Public Arbitrator
Steven P. Gomberg - Non-Public Arbitrator
I, the undersigned Arbitrator, do hereby affirm that I am the individual described herein
and who executed this instrument which is my award.
Concuning Arbitrators' Signatures:
Michael 8. Jordan
Public AriDitrator, Presiding Chair

Signature Date

James F. Carison
Public Arbitrator

Signature Date

May 20, 2013
Steven P. Gomberg
Non-Public Arbitrator

Date of Service (For FINRA office use only)

Signature Date