NEW YORK, Aug. 29, 2004 LAWFUEL – Best for law, law news, legal new…

NEW YORK, Aug. 29, 2004 LAWFUEL – Best for law, law news, legal news, law research In two Wall Street arbitration cases
reviewed by Newsweek, the panelists who’ll render the awards have industry
ties that outsiders say constitute a clear conflict, Senior Writer Charles
Gasparino reports in the September 6 issue (on newsstands Monday, August 30).
The New York Stock Exchange says it’s examining whether the conflicts in one
case involving Salomon Smith Barney were disclosed in a timely fashion.
Arbitration claims, where industry-appointed “arbitrators” hear the facts and
quickly render verdicts, are surging in the wake of the tech bubble and
accounting scandals. Investors filed nearly 9,000 cases last year, up from
6,500 in 1993.

In one case Newsweek reviewed, investor Henry Hochman lost more than
$13 million after WorldCom plunged into bankruptcy. Like many aggrieved
investors, Hochman wanted to sue his brokerage account firm Salomon Smith
Barney, where star analyst Jack Grubman had relentlessly touted WorldCom.
According to his brokerage agreement, his complaint must go to arbitration.

As Gasparino reports, the chairman of the arbitration panel for his case,
Robert Herschman, is also working with Salomon’s lawyers as a “mediator” on
other cases involving Grubman. “There’s no way [he] will hand a big award to
an investor,” Jacob Zamansky, a lawyer who represents investors but isn’t
involved in this case, tells Newsweek. “He’s not going to bite the hand that
feeds him.” Hochman’s attorney, Jeffrey Liddle, calculates that Herschman has
heard cases in which investors claimed $117 million in losses-and awarded just
$7 million in damages.

In the second case Newsweek reviewed, attorney Thomas Ajamie has filed a
lawsuit claiming that arbitrator Robin Henry is conflicted because she failed
to disclose that she heads a charity that accepts large donations from the
securities industry.

Herschman, Henry and Salomon declined to comment; both cases are still
pending. NYSE spokesman Richard Adamonis says there are no hard and fast rules
prohibiting these types of conflicts, as long as they’re disclosed to all

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