A hard lesson on
the hard sell

Former Big Island chef Michael
Goodman was pressured into
buying stock in a company owned
by another of his broker's clients

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By Rick Daysog
rdaysog@starbulletin.com

Michael Goodman blew his life savings. And that was just the beginning of his financial nightmare.

The former Big Island resident said he lost a total of $184,000 several years ago after his broker advised him to buy shares in Complete Management Inc., a medical management company which is now under federal bankruptcy protection and is the target of several class-action lawsuits by investors.

Goodman sued his broker, Mirco Teta, for unauthorized trading and breach of fiduciary duty. In August 2000 an arbitration panel found Teta defrauded his former client and ordered him to pay back $74,031.

But to this day, Goodman -- who ran up more than $50,000 in legal bills to argue his case -- has yet to get back any of his money from Teta or from Teta's former employer, CIBC Oppenheimer & Co.

"It's been a living hell," said Goodman. "I was ready to have a nervous breakdown ... It almost destroyed my life."

In many ways, Goodman's plight serves as a cautionary tale for investors who would seek to use the securities industry-mandated arbitration system to go after bad brokers.

Some attorneys believe the arbitration process -- which is mandatory in legal disputes between individual investors and brokerages -- favors the big stock houses at the expense of the small investor.

Goodman's financial nightmare began 1997 when he working as the head chef of a Kailua-Kona resort.

A mainland couple who were vacationing on the Big Island introduced Goodman to Teta, who had handled investments for the couple.

Goodman said Teta talked him into transferring his account from Salomon Smith Barney Inc. to Oppenheimer.

From there, Teta repeatedly pressured him to buy shares of Complete Management on margin, often calling him during the lunch period when he was busy preparing meals for scores of hotel guests, Goodman said.

On at least one occasion, Teta was able to get Complete Management's then-Chief Executive Officer Steven Rabinovici to take part in a three-way conference call, Goodman said.

"He made me feel very secure. He had me brainwashed," said Goodman, who now lives in the San Francisco Bay Area where he is a top chef at a five-star hotel.

"I was living in the middle of the Pacific Ocean and he would call me and tell me: You have to buy, you have to buy, you have to buy."

Unknown to Goodman and other investors was that Rabinovici also was a client of Teta's.

Subsequent class-action lawsuits filed in federal court in New York later disclosed Rabinovici and other Complete Management insiders were dumping stock they owned in the company.

The suits, which also target Complete Management's outside auditors and stock underwriters, allege Complete Management executives played games with the company's books.

Complete Management's largest customer was a company called Greater Metropolitan Medical Services, which handled claims for accident victims and workers' compensation injuries. Greater Metropolitan, which was owned by a Complete Management co-founder Lawrence Shield, paid for Complete Management's service not with cash but with its own receivables.

Complete Management was forced to write off nearly $30 million of those receivables as uncollectable. In October 1999, Complete Management filed for Chapter 11 reorganization.

After a one-week hearing, an arbitration panel with National Association of Securities Dealers ruled in August 2000 that Teta was liable for Goodman's losses and ordered the broker to pay $74,031.

But the panel did not take any action against Oppenheimer, which, according to Goodman's official complaint, failed to supervise Teta's activities.

Teta -- who left Oppenheimer in September 1999 -- hasn't paid up. The NASD has since suspended his broker's license.

Goodman said he has tried to filed liens against Teta but the former broker has no listed property under his name.

Teta could not be reached for comment.

As for Oppenheimer, the arbitration panel did not order the firm to pay Goodman a cent, despite suggestions that Teta's alleged improper trading at Oppenheimer was extensive.

Since 1999, nine clients have filed formal complaints against Teta, according to a recent article in Forbes magazine.

An Oppenheimer spokesman declined comment, citing the pending litigation.

Goodman believes the arbitration panel -- which conducted a one-week hearing -- was stacked in favor of the brokerage community.

Jim Bickerton, a Honolulu lawyer who has handled a number of legal disputes between investors and brokerages, said that Goodman's case is rare because brokerages are often ordered to pay back investors who are defrauded by their brokers.

Bickerton said he was not aware of the particular details involved in Goodman's arbitration case. But typically, a brokerage could escape liability if it were able to prove that it was defrauded by the broker and had no opportunity to police the broker's behavior.

In Goodman's case, the problem is that the ruling cannot be appealed. Unlike decisions made by judges in a courtroom proceeding, an arbitration panel's decision is final. There is no opportunity to take a case to a higher court.

"One thing I tell clients is that the root of the word arbitration is 'arbitrary,' " Bickerton said.

Here are some useful tips to protect yourself when investing: >> Know what you are buying. Too many investors buy stocks they don't understand or are inappropriate for their financial goals. >> Make sure financial advice is consistent with your objectives. >> Make sure you understand the terms and conditions of any transaction, including information about the risks, obligations and costs involved. >> Get complete information about commissions, sales charges, maintenance fees, service charges and penalties. >> Obtain a complete set of all account forms, agreements and account statements. >> Make sure your account statements are accurate. If you have any problems with these statements, discuss them with your branch manager or the firm's compliance department. >> Check out your broker's background, including work history and records of any complaints. You can do this by contacting the state Office of the Commissioner of Securities at (808) 586-3976. You can also check a broker's record by going to the National Association of Securities Dealers Web site at www.nasdr.com/1000.asp. Source: state Office of the Commissioner of Securities.