Rodman & Renshaw and other Claimants filed a FINRA Arbitration Statement of Claim (initially in October 2006 and thereafter as amended) against Respondent Matthew N. Murray. Among other claims, Claimants alleged defamation, tortious interference with business relations, breach of fiduciary duty, conversion, breach of contract, and prima facie tort, trademark infringement, and cybersquatting. In the Matter of the Arbitration Between Rodman & Renshaw, LLC, John Borer, Edward Rubin, Michael Vasinkevich, and Wesley K. Clark, Claimants, vs. Matthew N. Murray, Respondent (FINRA Arbitration 06-04643, August 26, 2010).
The relief and damages sought by Claimants in the original Statement of Claim included:
In two additional Amended Statements of Claim, Claimants further sought an order pemnanently enjoying Respondent from:
Respondent Murray generally denied the allegations and asserted various affirmative defenses.
In his Counterclaim, Respondent Murray asserted breach of contract and defamation and sought the following relief and damages:
Arbitration Panel Ruling
The FINRA Arbitrators found Respondent Murray liable for and ordered him to pay to Rodman & Renshaw, LLC, compensatory damages in the amount of $10,700,000.00 plus interest at 9% per annum from August 9, 2006 until August 12, 2010. Respondent's Counterclaim request for expungement were denied.
Bill Singer's Comment: According to press accounts, in 2005, Murray had recommended Halozyme Therapeutics, a biopharmaceutical company, when its shares were trading at $1.86, with a $2.88 price target. Rodman & Renshaw was part of a banking group that raised $17.5 million for the company in a public stock offering. After the publication of Murray's buy recommendation, Halozyme rose over to over $3.
Subsequent to Halozyme reaching his price target, Murray attempted to downgrade his recommendation. Thereafter, Rodman & Renshaw's Director of Research sent an email to Murray that included a suggestion that the analyst "finesse his target price." Although Rodman & Renshaw agreed in subsequent legal filings that the finesse suggestion was an awkward request, the firm characterized the language as little more than an attempt to improve the precision of the rating. Murray disputed that explanation and cited to more heavy-handed actions by the firm, which he claimed were intended to supress his independece. Murray noted that after Rodman & Renshaw denied his request for the downgrade, that on two occasions the firm refused his request to have his name removed from coverage of Halozyme.
In February 2006, John J. Borer, III, President of Rodman & Renshaw Holding, LLC announced the appointment of General Wesley K. Clark (ret.) as Chairman of the Board and Head of the Advisory Board. Clark was a thirty-four year United States Army veteran, who rose to the rank of 4-star general and NATO Supreme Allied Commander. He was also a candidate for President of the United States in 2003.
Rodman & Renshaw's 2009 10-Q (May) states in part under Item 1. Legal Proceedings (see, at http://www.wikinvest.com/stock/Rodman_&_Renshaw_Capital_(RODM)/Legal_Proceedings)
[A]s a result of allegations by Mr. Murray that we terminated him in violation of NASD Rule 2711 ("Rule 2711") and SEC Regulation AC ("Reg AC") in retaliation for his desire to downgrade an issuer that he provided research coverage on, the Committee on Finance of the U.S. Senate ("SFC") and the SEC commenced inquiries, the AG issued a subpoena and FINRA initiated an investigation.
The SFC, by letter dated May 25, 2006 from its former chairman, Senator Charles E. Grassley ("Grassley"), requested that our Chairman make himself available for an interview with Grassley's staff and respond to certain questions in connection with Murray's termination. By letter of the same date, Grassley, along with Senator Max Baucus, who was at that time the ranking member of the SFC, wrote to Christopher Cox, then chairman of the SEC, asking the SEC to conduct a "comprehensive and thorough examination" into our termination of Murray. Both the letter to us and the letter to Cox reference possible violations of Rule 2711 and Reg AC. We responded to the letter from Grassley and our Chairman voluntarily appeared for an interview by Grassley's staff in July 2006. The last written correspondence from Grassley's offices to us with respect to this matter occurred in September 2006. Neither former chairman Grassley nor the SFC has contacted us since that date, and the SFC has not, to our knowledge, issued any subpoena in connection with its inquiry.
By letter dated March 27, 2006, the SEC advised us that it was undertaking an inquiry of us and it requested that we produce documents in connection with that inquiry. Although the letter from the SEC does not specifically reference either Rule 2711 or Reg AC, the documents they requested and our counsel's conversation with the SEC staff indicated that the focus of the inquiry was Murray's allegations. We responded to the SECinquiry and produced responsive documents to the SEC. In addition, we produced our chief compliance officer for an interview at the SEC.
By letter dated April 18, 2007, the SEC advised us that its inquiry had been terminated and that no enforcement action had been recommended.
On or about July 7, 2006, the AG served us with a subpoena containing a number of requests for information and documents concerning, among other things, the termination of Murray. The subpoena does not specifically reference either Rule 2711 or Reg AC. We produced documents and information responsive to the subpoena (including all of the documents that we also had previously provided to the SEC). To our knowledge, the AG has not interviewed any of our employees and we have not received any communication from the AG since the end of August 2006.
By letter dated April 10, 2006, FINRA advised us that it was reviewing matters related to the circumstances surrounding the termination of the former employee and requested that we produce documents in connection with that review. By letter dated April 11, 2006, FINRA withdrew its request, to avoid regulatory duplication, upon learning that the SEC was also reviewing the same events. However, in 2007 we received certain letters from FINRA requesting certain information, documentation and interviews. We produced all information and documentation requested, complied with the request for interviews and continue to cooperate fully with FINRA's investigation. We have not received any further communication from FINRA since December 2007.
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