Salomon Smith Barney Gone Bad

Outcome: Settlement of $8.275 million

Description: Really a simple case. Large family sold a company they owned and in return got stock in a publicly trade company. Family gave all the shares to a 'family friend' who was a broker at Citigroup, Harvard educated, etc. Instead of recommending a diversified portfolio the broker directed the clients to retain virtually all of their shares and to margin their accounts for any cash needs. The stock the family had received in the family business sale suffered huge declines in value resulting in significant margin calls and principal erosion due to sales to meet margin calls and the downward spiral of the stock.