Six years after his death, there’s no end in sight to the finger-pointing over some late-in-life decisions made about the fortune of Home Shopping Network co-founder Roy Speer.
Speer, who was 80 when he died on Aug. 19, 2012, had about $192 million in six Morgan Stanley accounts during the last year of his life.
Now financial regulators say two investment brokers who then worked in Morgan Stanley’s Palm Harbor office churned those accounts, generating more than $9 million in commissions in 10 months.
Ami Forte and Charles Joseph Lawrence are accused of making or benefiting from thousands of trades, which often involved repeatedly buying and selling long-term bonds, as Speer, confused and forgetful, was admitted to the hospital twice with diagnoses of dementia, according to a complaint filed last month by the enforcement arm of the Financial Industry Regulatory Authority.
The authority, known within the securities industry as FINRA, is a non-government, not-for-profit organization authorized by Congress to protect investors by writing and enforcing rules governing the activities of thousands of broker-dealers and more than 600,000 brokers nationwide. Enforcement officials are asking a regulatory panel to order Forte and Lawrence to “disgorge fully any and all ill-gotten gains” and make restitution with interest.
“Forte was aware that her role was part of an overall activity that was improper,” the authority said.
No, it wasn’t, says Forte, 61, who is not currently registered as a broker. Among other things, she and her lawyer say she had stopped doing any trading in Speer's accounts years earlier.
“I intend to fully defend myself against these baseless charges,” Forte said in a response released through her attorney. “I am confident that my conduct will be shown to be beyond reproach.
“It’s amazing the desperate lengths that have been taken to prove misconduct against me where none occurred,” she said. “I engaged in no improper behavior and fully followed all FINRA and Morgan Stanley rules and standards of conduct. I intend to fight these inaccurate and unfair charges in every way possible, and I refuse to be bullied by false accusations.”
This is not the first case the authority has brought over what it describes as excessive and low-quality trades in Speer’s accounts.
In 2016, a three-member Financial Industry Regulatory Authority arbitration panel awarded Speer’s widow, Lynnda Speer, $32.8 million, plus costs and fees, from Morgan Stanley, Forte and former Morgan Stanley Palm Harbor branch manager Terry McCoy. Morgan Stanley paid and has said Forte contributed nothing toward the award.
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In its new 21-page complaint, the authority outlines personal and financial ties between Speer, identified simply as RS, and Forte going back to the late 1990s when he was her customer at Bank of America and the two began an affair.
In early 2000, Forte went to Morgan Stanley and Speer opened multiple accounts there, all of which listed Forte as broker of record. In 2001, Forte established the Forte Group at Morgan Stanley, which she headed as senior vice president. By 2009, Forte had tasked Lawrence with entering most of the Forte Group’s day-to-day trades on the Speer accounts.
Still, regulators said, “Forte remained in near daily contact with RS, was the broker of record on the RS accounts and had overall responsibility for the trading strategy and day-to-day trading in the RS accounts.”
Most of the $9 million in commissions was paid to Forte, the authority said. Speer’s accounts generated about 94 percent of her commission revenues, propelling her to the top of Barron’s Top 100 Women Financial Advisors list for 2010, 2011 and 2012, and to the No. 25 ranking on Barron’s Top 100 Financial Advisors list for 2012.
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In contrast, regulators said Lawrence received no commissions from the trades on Speer’s accounts. Instead, they said he was paid an annual salary of $100,000 to $150,000, plus a bonus of $75,000 to $200,000 that he negotiated with Forte every year. Lawrence did not respond to a voicemail message that the Tampa Bay Times left with a colleague at the Oldsmar office of R.F. Lafferty & Co., where he is currently registered as a broker, or to a voicemail and three-paragraph text message to a mobile phone.
Speer’s doctors charted his mental decline as early as 2008, regulators said, and recommended that he no longer drive in 2009. Starting in September 2011, at least four doctors determined that his short-term memory was poor, leaving him “vulnerable to exploitation” and “unable to manage his finances,” the authority said.
Speer couldn’t do simple arithmetic. He couldn’t tell a circle from a triangle. He couldn’t name more than five animals in a minute or a vegetable in 15 seconds. He said he had five children when he only had three.
Less than a month before Speer's death, a Pasco circuit court judge found Speer “totally without capacity” to care for himself or his property because of Alzheimer’s disease, dementia or both.
“He suffers from nearly constant confusion and his memory is impaired,” the court concluded, according to the authority’s charges. “He is highly susceptible to exploitation and undue influence. His judgment is impaired. He lacks insight into his current health problems and limitations.”
Yet during Speer’s final year of life, Forte and Lawrence were in frequent contact with the mogul, with Lawrence meeting or speaking with Speer virtually every day, regulators said.
Forte, they said, talked to Speer by telephone almost every day, went to many meetings with him, remained “deeply involved” in most of his finances and had a personal relationship that continued until he was hospitalized for the last time about two months before his death.
But enforcement officials with the Financial Industry Regulatory Authority say that neither Forte nor Lawrence reported what they knew about Speer’s mental decline to Morgan Stanley. Instead, regulators say, they increased their trading, making 2,800 trades over 10 months. In a two-month period early in 2012, the year Speer died, they traded roughly twice the average volume as in the preceding five years.
Nearly all of those trades, regulators say, were marked “solicited,” and Speer did not reject any of them. In some instances, officials say he was in no position to have a say:
• During a four-day hospital stay in which Speer was diagnosed with dementia, Lawrence put through 13 trades that generated $38,067 in commissions and sales credits.
• The next month, Speer returned to the hospital for surgery and another four-day stay. During that time, Lawrence made 32 trades — 13 of them on the day of the operation — generating $177,007 in gross commissions.
• Two months before he died, Speer went back in the hospital, and his discharge summary said he was “severely demented and required a lot of care at the bedside.” Regulators say neither Forte nor Lawrence was in contact with him then, but Lawrence made 86 trades over 10 days that generated nearly $138,000 in commissions and sales credits.
Once Speer was hospitalized for the last time on June 20, 2012, he had no further contact with anyone from the Forte Group. Even so, officials say, trading in his accounts continued until that June 29 and involved more than $14 million in transactions.
More than half of the 2,800 trades involved long-maturity bonds, including municipal bonds.
“All of these bonds were income-producing products intended for customers with long-term investment time horizons and carried substantial commissions,” the Financial Industry Regulatory Authority’s four-member enforcement team said in the complaint. “Nevertheless, Forte and Lawrence routinely sold these products after holding them for just weeks or months.”
The authority cited four times when it said Forte and Lawrence repeatedly bought and sold millions of dollars worth of the same bonds from American International Group (AIG) and others, generating four, six, seven and 11 times more commissions than if the bonds had just been traded once.
During this time, regulators contend, the investment objectives listed on Speer’s accounts also were changed, without his direction or consent, from “income,” the least aggressive of four Morgan Stanley categories, to more risky and aggressive objectives, including “speculation.”
Forte and her attorney, Robert J. Pearl of Naples, counter that the charges are absurd, that the Financial Industry Regulatory Authority is using “strong-arm and coercive tactics,” and that Morgan Stanley once defended her conduct, but fired her after the $32.8 million award, then did an about-face after she began pursuing a complaint for wrongful termination against the company.
“This is a complaint that should have never have been filed against her,” Pearl said. “We intend to defend this to the hilt and fully believe it is without merit.”
Some of their key points:
• Forte engaged in no trading of any kind in Speer’s accounts during the time in question. “You can’t be responsible in the brokerage industry for what somebody else does unless you’re in a supervisory capacity,” Pearl said. “She was not a supervisor.”
• Yes, Forte and Speer had a romantic relationship, "a long and loving relationship," Pearl said, but it ended in late 2007 or early 2008. It wasn’t improper, he said, and Forte wasn’t required to report it to her employer. After it was over, she decided that she didn’t want to continue to trade Speer’s accounts. But Speer, Pearl said, insisted that Forte continue to receive the lion’s share of the commissions on his trades.
• Forte and her colleagues did not believe Speer was impaired, Pearl said, and others have shared similar conclusions. Rather, he said, Speer used a wheelchair, had diabetes and could get woozy if his blood sugar level dropped.
• Speer’s accounts continued to make money until the end of his life.
Pearl contends that financial regulators are being a "lap dog" for Morgan Stanley.
In contrast, he said, Morgan Stanley branch manager Terry McCoy was not fired, but allowed to retire. (McCoy was barred from acting in principal or supervisory activities by the Financial Industry Regulatory Authority and fined $75,000 after he consented, without admitting to or denying the accusations, to findings that he failed to properly supervise brokers engaged in “excessive and unsuitable trading” on Speer’s accounts.)
Pearl said Forte’s case is an example of a double standard, recently reported in a Harvard Business School study, that female financial advisors are statistically more likely to face harsher outcomes for misconduct than their male counterparts.
“They wanted to have someone they could point the finger at, and they thought she would not fight back because she was a woman,” Pearl said. “And Morgan Stanley has been for decades an old boys’ club. What happened to Ami Forte would not have happened if she had simply been a man.”
Morgan Stanley responded to Forte and Pearl’s claims with a two-sentence statement.
“FINRA’s enforcement proceeding speaks for itself,” Morgan Stanley spokeswoman Christine Jockle said in an email to the Tampa Bay Times. “Morgan Stanley looks forward to addressing Ms. Forte’s conduct and her baseless claims in its upcoming arbitration with her.”
Contact Richard Danielson at firstname.lastname@example.org or (813) 226-3403. Follow @Danielson_Times