(Reuters) — A California wealth adviser must pay two ex-employees almost $3.7 million for allegedly defaming them, a securities arbitration panel found.
The Financial Industry Regulatory Authority arbitration panel ruled in favor of Corey Casilio and William Leitch, who claimed that John Valentine, their former boss, made defamatory accusations against them after they left Valentine Capital Asset Management Inc, in Danville, California, in 2011 to start their own advisory firm.
The three arbitrators in the case, all of whom are considered “public arbitrators” because they are not tied to the securities industry, took the unusual step of awarding Mr. Casilio and Mr. Leitch punitive damages of $2.5 million, in addition to compensatory damages of $800,000, according to the case’s award document. The arbitrators also ruled that Valentine must pay Mr. Casilio and Mr. Leitch’s attorneys’ fees, totalling almost $340,000.
The panel concluded that Mr. Valentine instigated customer claims against Casilio Leitch Investments in Walnut Creek, California, collaborated to plant accusations of fraud, created false evidence and coerced one of the firm’s clients to manipulate Google’s search results to show defamatory accusations with the purpose of deterring clients from doing business with the two advisers, according to the ruling posted on Finra’s website.
Mr. Valentine alleged Messrs. Casilio and Leitch were both dismissed from his firm, while his former employees said they left voluntarily, according to the case file.
This case came before the panel after some of Valentine Capital’s clients filed a complaint against Messrs. Casilio and Leitch, blaming them for alleged losses from real-estate investment trust investments. The clients withdrew their case prior to the hearings, which occurred in April, but the arbitrators proceeded to rule on counterclaims presented by Messrs. Casilio and Leitch against Mr. Valentine, the award statement said.
Mr. Valentine denied the charges and said he will seek to get the award vacated in court. Mr. Valentine told Reuters the arbitrators, whom he referred to as “three jokers,” did not have sufficient knowledge of the industry to make a ruling.
“It was a mockery of the justice system,” Mr. Valentine said. “This case was decided by three panelists with zero experience in the investment world.”
Mr. Valentine also maintained that Messrs. Casilio and Leitch misled clients about their investments while the two were working at his firm.
Mr. Casilio declined to talk about the decision when reached for comment and Mr. Leitch could not be reached for comment.