A former Morgan Stanley broker likely will defend himself against charges by several pro athletes that he ripped them off by citing investment returns.
A current NBA player, his wife and two former NBA players allege that Darryl Matthew Cohen improperly diverted a total of about $10 million from their accounts, according to a recent story in the New York Times. The athletes have filed claims in the Finra arbitration system.
The lawyer representing Cohen said he was not available to comment on pending litigation, but he indicated how Cohen is likely to defend himself.
“The record shows that these complaining clients didn’t lose money in the investments managed by Darryl Cohen,” said Brandon Reif, managing partner at Reif Law Group.
The lawyer for the athletes said their claims don’t center on the overall profitability of their accounts.
“That’s not what the case is about,” said Philip Aidikoff, a partner at Aidikoff Uhl & Bakhtiari. “These cases are quite unusual because millions of dollars have been taken out of these accounts and directed at dubious places by the broker. There was a complete failure of supervision by the branch and the firm.”
A spokesperson for Morgan Stanley was not immediately available for comment. Cohen worked at a firm branch in Westlake Village, California.
The athletes who allege Cohen stole from them are Jrue Holiday, who plays in the NBA for the Milwaukee Bucks, his wife Lauren Holiday, a former professional soccer player, and two former NBA players, Chandler Parsons and Courtney Lee. Parsons most recently played for the Atlanta Hawks, while Lee was a member of the Dallas Mavericks before he retired.
Aidikoff said he filed three claims last year in the arbitration forum run by the Financial Industry Regulatory Authority Inc., the brokerage industry self-regulator. Hearings are likely later this year.
Earlier this week, Finra barred Cohen for failing to cooperate in an investigation that appears to be related to the athletes’ allegations. The organization conducted an expedited proceeding, according to Cohen’s BrokerCheck profile.
“The sanctions were based on findings that Cohen failed to respond fully and completely to FINRA requests seeking documents and information in connection with an investigation into possible conversion and improper use of customer funds,” Finra said in a statement on BrokerCheck.
Morgan Stanley fired Cohen last March, according to BrokerCheck, for “allegations relating to the representative’s facilitation of outside client business and transactions not disclosed to or approved by Morgan Stanley and use of an unapproved platform to engage in inappropriate communications with clients.”
The case highlights the dangers professional athletes face when seeking investment advice, even when they turn to a well-known wirehouse.
“Athletes are the prime target for both scrupulous and unscrupulous advisers and are often a financial pinata for bad financial advisers,” said Andrew Stoltmann, a Chicago securities attorney.
Stoltmann represented Horace Grant, a former player for the Chicago Bulls, a decade ago in a case against Morgan Keegan in which Grant won $1.5 million.
Highly paid athletes can be vulnerable wherever they turn for advice, said Ashton Lawrence, a partner at Goldfinch Wealth Management.
“You have bad actors all over the place in every industry,” said Lawrence, who is a former basketball player at Coastal Carolina.
Both Stoltmann and Lawrence suggested athletes hire a team of advisers to manage their money.
“If you’re working with one adviser, it’s prudent to hire another one who is looking over the shoulder of the other adviser,” Lawrence said.
Stoltmann suggested bringing an accountant, lawyer or agent into the mix.
“Someone else has to be looking at these statements to make sure there’s no chicanery involved,” he said.