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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Anthony@Pacific who wrote (56471)	5/17/2000 12:46:00 AM
From: Bear Down	Respond to of 122087

Bear Stearns Ordered to Pay Investor $111.5 Million New York, May 16 (Bloomberg) -- Bear Stearns Cos. must pay Canadian investor Henryk de Kwiatkowski $111.5 million for failing to warn him of the risks of foreign currency speculation, a federal jury found. De Kwiatkowski sued the New York investment bank in 1996, claiming that the firm's investment advisers, including managing director Albert Sabini, were negligent for allowing him to buy $6.5 billion worth of foreign currency futures in 1994. The jury agreed that the firm was negligent, but did not make a similar finding with respect to Sabini, who was also a defendant in the case. The jury had been deliberating since yesterday afternoon. John Coffee, a professor of securities law at Columbia University Law School, said he had never heard of a securities firm losing as large a verdict to an investor. ``This is a number that is off the charts,'' he said. ``It will raise eyebrows all over Wall Street.'' Coffee noted that it was ``almost without precedent in a futures transaction case that a customer has been able to hold a broker liable. It's a field that is known to be highly speculative. When it gets this high, you usually have investors who are thought to be fairly sophisticated.'' A Bear Stearns spokeswoman, Hannah Burns, said the firm will appeal. ``We believe the verdict was against the weight of the evidence,'' she said. ``We are confident we will be vindicated upon appeal.'' De Kwiatkowski, a Canadian citizen who now lives in Nassau, Bahamas, said he was ``very happy'' with the verdict. Arbitration Most similar suits never make it to court because securities firms require that customers agree to arbitrate disputes as part of their standard client contracts. However, a federal judge in January ruled that de Kwiatkowski could take his claim to a jury, relying on a recent appeals court decision that concluded that brokers, in some instances, are obligated to warn customers of risks. Sabini and other Bear Stearns investment bankers urged de Kwiatkowski to place massive bets in 1994 that the dollar would rise, the Canadian investor testified. De Kwiatkowski lost nearly $300 million in early 1995 when the dollar fell unexpectedly. De Kwiatkowski, 76, said he relied heavily on the advice of Sabini, who was his broker, and others at Bear Stearns before buying on margin 65,000 foreign currency futures contracts, worth about $6.5 billion. ``Every day, he used to call me up advising me about this or that,'' de Kwiatkowski said when he testified May 3. ``He said I believe the dollar will do what you always believed it would do,'' which was rise. Bear Stearns said de Kwiatkowski knew of the risks of speculating in foreign currency and had earlier earned millions of dollars doing so. He was also well aware of the potential to lose money on such investments, having twice before lost $100 million in one day on erroneous foreign currency bets, Bear Stearns attorney James Linn said in his opening statement May 1. ``He's a player,'' Linn said, noting that de Kwiatkowski once lost $1 million at a Paradise Island casino ``before dinner.'' Linn said that de Kwiatkowski made all his own investment decisions. De Kwiatkowski made his fortune in the aircraft-leasing business after fleeing Nazi soldiers who overran his native Poland. After his capture by the Russians, he spent years in a prison camp before escaping to England, where he served in the Royal Air Force during World War II. De Kwiatkowski also claimed the investment bank collected inflated commissions on his trades.