Kaysville carpet layer Harv Jeppsen landed the dream contract: laying carpet for the Motel 6 motel chain, a coup that led him to cover Motel 6 floors across the western United States.
A few years and dozens of motels later, Jeppsen found himself in a financial nightmare. He had saved up $250,000 from the Motel 6 contracts. But a stockbroker in the Salt Lake office of Piper, Jaffrey & Hopwood Inc. lost all of Jeppsen's money and more.Last week, the National Association of Securities Dealers has issued an arbitration award of more than $1,788,000 against Piper Jaffrey, Salt Lake branch manager Don Larkin and former stockbroker George Barker for illegally trading on Jeppsen's account in order to earn commission for themselves and the company.
Jeppsen was pleased with the decision. "Justice has been done," he said. "I just hope nobody ever has to go through what I've gone through at Piper Jaffrey."
But Piper Jaffrey officials will likely appeal the decision. "We think the size of the award was clearly unwarranted. We don't think there was any liability on Piper Jaffrey's part," said Marie Uhrich, director of public relations for Piper Jaffrey.
Jeppsen began investing in March 1986. He was 26 years old, had a high school education and was self-employed. He had been keeping his money in a checking account but was weary of family members asking for loans. After hearing about "Dow Jones" on the radio, Jeppsen decided to try investing his money, putting it out of the reach of his relatives, according to Jeppsen's complaint.
Jeppsen's sister put him in touch with Barker, a stockbroker for E.F. Hutton and Co. Jeppsen learned of Hutton from the company's TV ads. He gave Barker $250,000 to invest.
The securities dealers association concluded in its arbitration ruling that Barker cost Jeppsen $270,514 by illegally "churning" Jeppsen's account, that is, causing a rapid turnover of investments so that the broker could claim commissions.
The association also ruled that Larkin knew of the illegal activity and allowed it to happen. The association ordered Larkin and Barker to each pay Jeppsen $250,000.
Piper Jaffrey has been ordered to pay Jeppsen $603,000 plus interest of more than $300,000. The company must also pay Jeppsen $388,541.55 in attorney fees and costs.
Jeppsen's troubles started while Barker still worked for Hutton. Barker immediately began doing unauthorized trading on Jeppsen's account, the complaint stated. Jeppsen's account was a nondiscretionary account that didn't allow Barker to trade without first consulting Jeppsen, according to Jeppsen's arbitration complaint.
During the 11 months Jeppsen's money was with Hutton, his investment shrank by $8,101 because of Barker's trading. Barker and Hutton made $12,875 in commissions off Barker's account during that time.
At Piper Jaffrey, Barker began churning Jeppsen's account more vigorously, according to the complaint. In a year at Piper Jaffrey, Jeppsen's account shrank by $270,514. Barker and Piper Jaffrey earned $24,913 in commissions.
Piper Jaffrey said Jeppsen's loss was caused by the stock market crash of Oct. 19, 1987, according to the securities asso-cia-tion ruling.
The company also said Jeppsen told Barker he wanted to trade aggressively, could afford to lose the $250,000 and was willing to risk all his money to get a greater return, the ruling says.
Jeppsen filed a federal lawsuit against Barker and Piper Jaffrey in March 1988. A few weeks later, Piper Jaffrey fired Barker.
A federal judge referred the matter to arbitration before the securities dealers association. If Piper Jaffrey decides to challenge the arbitration award, they must take the matter back into federal court, said Ronald Price, attorney for Jeppsen.
Jeppsen had sought $811,000 in damages, more than $500,000 in interest and punitive damages of $5 million against Piper Jaffrey and $250,000 each against Barker and Larkin.
The securities association assessed the punitive damages only against Barker and Larkin.