N.A.S.D. Stipulated AWARD

NATIONAL ASSOOAHON OF SECURITIES DEALERS, INC.

In die Matter of die AriMtration Between

Kenny Berman

93-02245

and

ft ft nf Re8i n«|gr'. CoumnrClaimants. Thint-Panv CtetaM

Citicoip Invesnaeat Services, Steven Sershen, and James PodoWnski

^j^^ «f Thfad-Partv RespQiMtett

P^r Jaf&ay, Inc.

Odmaat, Kemiy B«maa and Thini-Party Respondem, «P«j f^y« J^. were repnaemed by Michael J. McAUisttr, Esq. of Lane & Mitteadraf, New Yorie, New Yorie.

nemondents Qticoro Im«sstmem Services. Steven Sersl«>a, and James PodoWnsld weio ^ ^ y S d i S t o r t ^ h , Esq. andE. Michad Bmdley, Esq.. of B«iwa & Wood, New Yoric, New Yoik.

The Statem«it of Cldm was filed oa June 4, 1993. Submisston Agreement of Cldmam was signed on June 3,1993.

Johit Statomeat of Aaswer, Coumeichdm, aad Thirti.PmQ;ddm ^ ^ ^ ^ ^ ^ ^ i ^ ^ ' c X r p mvesmiem services, Stevea Serdiea. ami James Podobmski ^ ^ ^ ^ ^ ^ ^ ^ J ^ ^

Citicoip lavestmem Services'SdmnsdoaAp^

Respondem Citicoip Investment Seivices on January Z7, iw*.

N.A.S.D. Stipulated Award 93-02245 Page 2 of 5

^ ApTT> fi INFORMATION

Hie heariag was scheduled to be heard oa February 16, 1994 to MameapoUs, Minnesota. Hbwever die parties entered Uito die attached Stipdated Settiement Agreement and diereftne ao heariag was held.

CASE SUMMARY

rtflitnant Keaay Beimaa ("Bermaa") previously aa accouat executive for OS, aUeged that Respcmdeats Citicoip Investtnent Services ("CIS"), Stevea Sershea ("Sershen") and James Podobuiski ("PodoWnski") filed a defematory amended U-5 stating diat Bemum "took confidentid...brokerage and bank records m violation of 18 USC 2113 and cUents for his new firm...". This statemem, Bennan aUeged, is untme. As his first cause of action against CIS aad Sershea, Boman alleged his reputatioa has beea severely iajured because of die uatrue language coatatoed ia die ameaded U-5 fiUag. As his second cause of action against CIS, Berman dl ed CIS acted widi acmd maUce for the crimiad refmeace CIS made to the FBI. charging Beimaa widi a violation of federd badeiag law. As his third cause of action against Podobuiski, Bermaa aUeged he viohited Caaoa 7 of die Code of Professioad RespoadUUty leganUng threats contaiaed in a letter to Piper Jaffiay's counsel on April 4,1994. Respondents dS, Sershea, and Podobiaski stated in dieir Joim Statemem of Answer tiiat the ammided U-S is not defamatory, but is trae. OS, Sershea. and Podobiaski stated diat Bennan took confidentid brokerage and bank records from CIS m violation of confidentiaUty agreements Beimaa had with CIS. Respondents stated timt Berman's actions were a vtolation of die N. A.S.D. Rides of Fair Practice aad state Ucensh laws.

In its counterclaim filed agaiast Bermaa, CIS aU ed that Benaaa: 1. Breached tiie Patem and Confidentid^ Agreement and the Distribution Services Diviston Computing Resources Seciuity PoUcy; 2. Took records and confidentid informatiicm knprop y; 3. Breached his fidudary relationship widi (38; 4. Engaged in Unfoir Competition; and 5. Vtolated Article HI, Section I of the N. A.S.D. Itoles of Fair Practice as weU as state securities laws. In its thhd-i»rty claim agaiast Respoadem Piper Jafftay, Inc. ("Piper"), OS aUeged dim Piper induced Bennan to resign, by paying him a bonus and actively soliciting customers from CIS, take confidentid information from CIS in violatton of Berman's agreements widi OS, and conspire widi Piper to ddiver CIS cUents to Piper. As its first dnntpaity clahn, Respondent, diird-party clahnam aUeged Piper wrongfiiUy mterfercd widi its bushiess relationship witii Berman; secondly, Piper viohded just and eqdtabte prhidples of trade; and thhxl, Piper improperiy took recoids and confidmitid infinmatton.

Beraum, to his Reply to CIS'scouaterclahas, stated that the ameaded U-5 is defeuaatoty. lahia Ameadmem to the Claim, Bermaa named Stqilien Storen as a Respondem hi the First Cause of

N.A.S.D. Stipulated Award 93-02245 Page 3 of 5

Action, and stated that aU altogattons made against St^liffli Sershen shaU be deemed made a tost Sti hea Storen and di»x)mmued his claim agdnst Stevea Sershra. In its Answer to the third-party chum, Piper stated th^ did not wroi fidly hidiK» or advise Bermaa.

piCT.Ti?.F wrnTTirj^T^

Claimant requested for the first cause of action against CIS aid Serdien conqxaisatoty damages of $1,000,000.00; pumtive damages of $10,000,000.00; an award directing CIS to file aa i^ropriate ^xnimeat detotis its statements to paragraphs four thiough nine of the ameacted U-5. Claimant requested for die secoad cause of actioa agdnst CCS compensatory damages of $1,000,000.00; punitive damages of $10,000,000.00; and an award directing CIS to file an appropriate document deleting its statcanem m paragraphs four through dne of the ameaided U-5; Clahnam requested for tiie tiurd cause of action against Podobinsid compensatory damages to be detemuned by the arbitrators; Claimam ahKi reqmssted an award directmg the N.A.S.D. to remove the Amended U-5 from its files aid fiiitter dhectiag the N.A.S.D. to coaipel hs veodoris) to remove the amoaded U-5 from its (thdr) files; togedier with mterest, costs aad sia:h odier and ftirther relief as the paitel deans appropriate. Respcmdeats, counterelahnant, ddid-I»rty claimant, OS, Sershen and Podobtoski requested:

a. That the arbitrators dismiss Berman's Statement of Claim with prejudice;

b. Hut the arbitimors sustam CIS's Counterdahns and issue a Permanent Injunction Order etyoinxD^ B«rman ftom:

(i) soUdting or acceptmg any busmess from any cUem of CIS whom Berman served or whose name became Icnown to Bennan while m the emptoy of CIS and ftom soUcidng ch&ats whom Bennan serviced at any time while in die employ of (HS, for die puipose of dcnng busmess widi Piper Jaffray (excludmg rdati nss who have a rehttonship of cousm or closer);

00 usmg, disclosmg, transmittmg (1) information contahied to tilie records of CIS, (2) financid information, objectives, or accmat informaticm of ai^ c axt described m paxagr^h (i) dx}ve; and (3) otiter confidmthd infonnation, tiade seocms. and conunerddly saasitiye materials;

(lii) domg any of die above, whedier directiy or indhectiy, for a period of oao year from the t miaatioa of Bermaa's enqdoymem with CIS; aad

(iv) aay and aU otfa^ such acts as the arisitration pand deems ^rqpriato for tojunctiiw reU^;

N.A.S.D. Stipdated Award 93-02245 Page4 of 5

c. That the aibitiators kme an award compeUtog specafic peifbimance by Berman to accordam e widi the tenns of die agreements he had entered toto whUe emptoyed by OS;

d. Thm die aihitiatois grant CIS's mottoa for an accoumtog to determhiB die consequentid dam es resulting from Barman's breach of contract and wrongM conduct;

e. That die arintiators issue an awaid to favor of CIS and agahiA Bennan for acttial, coBsequeatkl, and punitive damages to an amoum to excess of $11,000,000.00; and

f. Thm dteariihiatonsttstato OS's drirtliaityddm and; (i) issue an m j u ^ Pipm- Jafftay, restiahung it fiom engaging to fimher wrongftil conduct, (U) issue an hijunctton prohibiting Hper Jafftay from aidtag Berman to engagtog to flmher wrongful conduct or breach of die agrtsemems entered toto by Berman whllo at C3S or assisttog Berman to violating das pand's ortier, (Ui) recpiue Piper Jaf&ay to provide CIS widi a pKJper accounting to detemnne die consequentid damages nadtiag from its conduct, aad (iv) awanUag OS acmd, coasequmitid aad pumtive damages to an amount to ei ess of $11,000,000.00;

g. For such odier and fhither rdief as die arbitration pand deems fdr aad just.

Berman aad P^r requested diat die counterclahns and tinid-party clahns be dismissed.

^THER ISSUES CONSTDKREaP & DKODgP

Prior to die Settiemem Agreemem eot ed mto between the parties, Clahnam, K«amy Bennan withdrew his cidms whfch were imtiatty filed agdnst Respondents James Podobtoski, Steven Sershen, and Stqiiien Stcuen.

STTPULATBD AWARD

The underdgiKd ariiitrators have not made any detenntoatimis of foct or concdudcms of kw. The Stipulated Settifflnem Agreement, ("The Agiemnem") whtoh is tocorporattd here by lefonmce. as The Stipulated Awani and attached hmeto. was entered toto by AcconUngly.dtepmties are dhected to comply widi d» tenns (rf die a smem. N.A.S.D. is directed to conqily widi die temis of tite Agre«n«mt j l f ^ J ^ substitution of certdn language as to tiie fomi U-5 and any amendmfflit(s) tiierBto fited oy us.

Pjmuant to §43(c) of the N A S.D Code <rf Artiitiation Fn)cedure, die Kattomd A ^ ^ ! ^ ^

of $500.00 aad sfaaUre^ as fomm fees tiie heariag sesdoa depodt to^^omit«rfSSoO previously deposited widi the N.A.S.D, by tiie Chrfmaat. " • M W . W

The N.A.S.D. shdl dso retato tiie non-refimdable fiUng fee to die amoum of $500 and die hearmg sesdoa deposit to die amoum of $1500 for dw couoteiddm which was depodted by Citicoip lavestm it Services.

By The Arbitratton P^nd:

Dated:

Edward C. OUver. Esq. " Presidmg, Inohistry Aibitrator

Edward J. Htmtges Industry Arbitrator

Harold E. Gieriee Industry Arbitrator

Date Award Served By The NASD:H- 2.i

N.A.S.D. Stipulated Award 93-02245 Pages of 5

FORTJM yi^-^

Pursuant to §43(c) of the N.A.S.D. Code of Aibitration Procectore, die Nmioad Assodattoa of Securities Dealms, Inc. ("N.A.S.D.") shaU retain the non-refhndable fUtog fee to the amoum of $500.00 and shaU rmdn as forum fees the hearing sesston d osit to die amoum of $LK)0.00 prevtousiy ( posited with the N.A.S.D. by the Claimant.

The N.A.S.D. sbaU dso r ak tite non-refundable filk^ fee to die amcmm of $500 and die hearing sesdon dqposit to the amoum of $1500 for the counterclaim which was •effsittid by dticorp Investmem Seivices.

By The Arbitration Pandt

lotted:

Edward C. OUver, Esq. Presiding, Industry Aibitrator

Edward J." Industiy Arbitrator

Harold B. Qlerice Industry Arintrator

Date Award Served By The NASD:.

N.A.S.D. Stipulated Award 93-02245 P^e 5 of 5

FQRPMMS

Paisuant to §43(c) of the N.A.S.D. Code of Aibitration Procedure, die Nationd Assodattoa of Securities Dealers, Inc. ("N.A.S.D.") shaU retato the non-refundable flUi^ fee to the anumm of $500.00 and shaU r^am as fomm fees the hearing sesston d^sit to the amount of $1500.00 previottdy dqpodted with tlie N.A.S.D. by tbe Claimant.

Ihe N.A.S.D. shdl also retato die non-rdtoidable fiUng fee to the amount of $500 and dte hearing session deposit to the amoum of $1500 for the counterclaim which was dqiosited by Citicorp Investment Service.

By Hie Arbitration Pand:

Dated:

Edward C. OUver, Esq. Preddtog, Indu iy Arbitrator

Edward J. Hnitges Industry Arbitiator

Harold E. Oierice ladustry Arbitimor

Date Award Served By The NASD:.