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Piper Jaffray: A History Of Investor Complaints, Legal Battles

Stockbroker misconduct and acts of misrepresentation or breach of fiduciary duty are nothing new to the securities industry, but they may be far more pervasive than the public realizes. Case in point: Piper Jaffray & Co. Based in Minneapolis, Minnesota, the investment firm has a long and varied history of black marks on its CRD report, with the approximate number of arbitration/investor complaints for possible securities fraud listed at an astonishing 123.

The alleged causes of actions stated in the complaints and lawsuits have been filed by both regulators and investors, and cover a gamut of serious of charges - from failure to properly supervise agents, to mutual fund switching, to unauthorized trading of customers' accounts, to misrepresentation, negligence and breach of fiduciary duty, to inflating stock ratings as a way to gain investment banking business.

Piper Jaffray is the same company whose former stockbroker, Thomas J. O'Neill, was accused in 2002 of performing more than 6,000 unauthorized trades for customers over the course of a four-year period. Most of O'Neill's victims were elderly, widowed or disabled. One of his victims, a 92-year-old man, had seven speculative trades in his account while he was in a coma, with a final trade made in his account hours after he had died. Essentially, O'Neill transformed what were supposed to be conservative retirement accounts containing low-risk investments into high-risk portfolios loaded with speculative investments. Meanwhile, the unauthorized trades generated huge commissions for O'Neill and profits for Piper Jaffray via banking fees.

In October 2003, Piper Jaffray agreed to pay nearly $3 million in restitution to investors and more than $1 million in penalties to Montana state regulators to settle charges that it knowingly allowed O'Neill to make the unauthorized trades in customer accounts.

Fast forward six years later. In February 2009, O'Neill, who spent two years in federal prison after pleading guilty to defrauding clients, files a lawsuit against Piper Jaffray, alleging that his former employer made him a scapegoat for its own improper business practices. According to the civil lawsuit, O'Neill accuses Piper Jaffrey officials of destroying hand-written records while he worked for the firm and that the records clearly show O'Neill was following Piper Jaffray's business plan. O'Neill further alleges that Piper Jaffray reviewed and approved all of the transactions in question.

The complaint goes on to state that while working for Piper Jaffray, O'Neill did not know that the transactions he made were, in fact, illegal. At the same time, however, O'Neill accuses Piper Jaffray of knowing that its business plan was fraudulent but nonetheless allowing him to continue implementing it.

Just prior to the O'Neill fiasco, Piper Jaffray spent $67.5 million cleaning up the fallout from lawsuits brought by investors who alleged they were misled about the true risks of the fund, the Institutional Government Income Portfolio. Specifically, investors alleged that Piper Jaffray marketed the government bond fund as safe, stable and secure, when in actuality it contained volatile mortgage-backed derivatives.

Piper Jaffray incurred yet another huge legal bill in 2005 when it agreed to settle with the SEC, NASD, NYSE, NASAA, and the New York Attorney General in a landmark securities fraud case known as the Global Research Analyst Settlement. In total, Piper Jaffray paid a $32.5 million fine to settle charges that it released biased research designed to benefit its own business. Eleven other investment firms also were charged in the Global Research Analyst Settlement and paid $1.5 billion in restitution to investors for the damages caused by their deceitful research.

If you are a client of Piper Jaffray, we want to hear your story. Tell us about your situation by leaving a message in the Comment Box below or via the contact form.

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