Two former brokers for USAA Financial Services, which primarily serves military service members and their families, have won an arbitration against their former employer seeking damages related to a defamatory U5 disclosure.
USAA Financial Services terminated Christopher R. Johnson, of the Addison, Texas branch, and Lee Anne Przybyla, of the San Antonio, Texas branch and disclosed on their U5s that there were “allegedly seeking compensation to which they were not entitled,” according to an Investment News article citing their former BrokerCheck reports. Johnson and Przybyla claimed that the U5 disclosure was defamatory.
Johnson worked for USAA from May 2011 to May 2017, while Przybyla was employed there from April 2010 to May 2017. Johnson received $500,000 in compensatory damages, while Przybyla received $350,000 for their respective U5 defamation lawsuit. The pair also received $250,000 in attorneys’ fees.
Per the terms of the arbitration, USAA was forced to delete the defamatory statements from the plaintiffs’ U5 forms, which brokerage firms must file when a broker leaves a firm. The disclosure was also expunged, or removed, from their securities licenses.
This case is one in a series of recent, high profile, U5 defamation awards. Brokers who won U5defamation lawsuits against their former employers can receive large payouts, as in the following cases:
- Thomas J. Gorter, formerly of Quester Capital Corp., received over $3 million in compensatory damages (FINRA Case No. 08-03514) in January 2012 related to a defamatory U5 disclosure. He alleged that the firm “defamed him to his customers and submitted false reports to regulator’s regarding Gorter’s employment,” according to a Law360 article.
- In October 2017, James L. Springer won a $3 million U5 defamation suit against UBS Financial Services (FINRA Case No. 17-03279). UBS fired Springer for allegedly using his corporate credit card for personal expenses. Springer claimed that UBS retained most of Springer’s clients by telling them that he had overcharged them. Springer, who had been managing portfolios worth more than $350 million, was able to retain only 25% of these assets while complaints flooded his BrokerCheck report.
Whenever a registered representative leaves a brokerage firm, the firm must fill out a Form U5, the Uniform Termination Notice for Securities Industry Registration. and submit it to FINRA within 30 days of the broker’s departure. If information on the U5 is inaccurate or defamatory, it can have a detrimental effect on brokers. If you would like more information about U5 defamation lawsuits, please contact either Marc Fitapelli or Jonathan Kurta at 212-658-1500 or firstname.lastname@example.org