Former powerhouse Merrill Lynch broker Thomas Buck, who was released from prison in January after serving time for securities fraud, has been ordered to pay $7.5 million in damages to a former client who says Buck mismanaged her investments.
A three-person arbitration panel issued the order Friday, and the document was made publicly available by the Financial Industry Regulatory Authority, or FINRA.
Investor Janice Compton of Memphis, Tennessee, who filed her original complaint against both Buck and Merrill Lynch in July 2020, accused Buck of overtrading securities in her Merrill Lynch investment accounts and overcharging her for sales commissions. Compton accused Merrill Lynch of failing to supervise Buck’s activities.
In December, Compton dismissed her complaint against Merrill Lynch. Compton’s attorney, Niel Prosser of Memphis firm Prosser, Clapper & Johnson Law PLC, said Merrill Lynch chose to settle the case with Compton for $5.5 million. Prosser said his client also received $946,868 from a Securities and Exchange Commission fund set up for victim of Buck’s fraud. All told, Prosser said, Compton recovered nearly $14 million related to her losses.
Bank of America, which owns Merrill Lynch, declined to comment and would not confirm to IBJ that it had settled the case.
Buck’s attorney, David Robbins of the New York City firm Kaufmann Gildin & Robbins LLP, declined to comment on the case other than to say, “we are exploring all our options.”
Prosser said Buck has 90 days to decide whether he wants to appeal. If he chooses not to appeal, the arbitration award becomes final at the end of those 90 days.
The award consists of several components. The arbitration panel ordered Buck to pay Compton $770,269 in compensatory damages. It also found Buck liable under the Racketeer Influenced Corrupt Organizations Act, or RICO, plus its state equivalent, the Indiana Corrupt Business Influence Act. Because of this, the panel also ordered Buck to pay $2.3 million in triple damages, plus attorneys’ fees and costs totaling $2.6 million. The panel also ordered Buck to pay $1.9 million, which represents a calculation of the amount of interest Compton would have earned on her investments if they had been well-managed.
The accusations of overtrading, and racking up excess commissions, are similar to the activities that led to a prison sentence for Buck, who is now 68.
Buck, who now lives in Florida, had worked as a broker for Merrill Lynch in Carmel for 34 years and built a reputation as one of the state’s highest-producing brokers. Barron’s, which ranked Buck as the top financial adviser in Indiana every year from 2009 to 2014, said he had $1.5 billion in client assets under management at the time of his firing. Buck had about 500 clients with a typical net worth of $10 million, Barron’s reported.
But Merrill Lynch terminated Buck in March 2015, saying it had lost confidence in him. FINRA barred Buck from the securities industry in July of that year, saying he had kept his clients in commission-based accounts rather shifting them to fee-based accounts, which would have been less costly for the clients. About 80% of Buck’s revenue came from commission-based activity, FINRA said, while about 70% of his firm’s Indiana revenue came from fee-based accounts.
After Buck’s termination from Merrill Lynch, dozens of his former clients filed complaints with FINRA. According to FINRA records, those complaints have resulted in 33 settlements totaling $10.95 million to date.
In October 2017 Buck pleaded guilty to one count of securities fraud, agreeing to pay a $5 million civil penalty. In his guilty plea, Buck admitted that he had lied to Merrill Lynch by saying that he had discussed account options with certain clients when he had not. He also admitted to, on occasion, making trades for his clients without obtaining their approval.
In February 2019, Buck was sentenced to 40 months in prison followed by two years of supervised release, along with 200 hours of community service. According to the Federal Bureau of Prisons, Buck was released from prison on Jan. 13.