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April 1, 2002

M.H. Meyerson Fights Back: Did NASD Go Too Far in Stock Dispute?

By Gregory Bresiger

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  • M.H. Meyerson Fights Back: Did NASD Go Too Far in Stock Dispute?

If a recent $5 million judgement by an NASD arbitration panel stands against M. H. Meyerson & Co. and Bear Stearns & Co. for a supposedly botched stock transfer, then every financial institution that relies on power of attorney agreements will be endangered.

That's the contention of officials of Meyerson, a small Jersey City-based bulletin board market maker founded in 1960 by a former car salesman Martin H. Meyerson.

Meyerson officials contend they were put in an impossible position when they were given written instructions to transfer the shares of bulletin board stock Whitehall Enterprises in December 1999. That's because these instructions, Meyerson officials contend, were later contradicted by oral instructions not to go through with the transfer.

"The bottom line is, this is a plain language power of attorney contract and if we lose everyone who uses it will be in trouble," according to Anthony Dudzinski, president and chief operating officer of Meyerson. Meyerson is appealing the $5 million judgement in state Superior Court in Hackensack, New Jersey. However, representatives of the other side said any appeal would have to be heard in federal district court in New York because the case involves several foreign entities.

Meyerson officials said the appeal could take years and, in the meantime, the firm's financial condition could be hurt. Nevertheless, they say they will survive no matter what happens.

"The future of the firm is not in question. We've taken every step to get through this," Martin H. Meyerson, chairman of the firm, said in an interview with Traders Magazine.

The judgement against Meyerson and Bear Stearns was awarded to CVI Group, a Toronto Ontario-Canada based business consisting in part of Emes Foundation and SLR Trust. They charged that Meyerson breached a contract, processed a trade without proper authorization, violated its fiduciary duty and was negligent, according to the NASD arbitration decision.

Attorneys for CVI Group said Meyerson failed to follow their client's orders. The NASD didn't respond to repeated requests for comment. The arbitration decision itself contains the facts of the case but didn't list any reasons for the decision.

"We have no idea why the decision was made. On top of that, part of the tape recording of the hearing is missing," Dudzinski charged. Meyerson produced a power of attorney agreement signed by an SRL official that stated that, "to revoke this power of attorney, SRL hereby agree to submit a written notice addressed to and delivered to Global, but such revocation shall not affect any liability in any way resulting from transactions initiated prior to such revocation." Global Financial Investments was one of SRL's agents.

Custodian Duty

Officials of the Canadian firm delivered some 20 million shares of the stock to Meyerson in July 1999, with the firm directed to act as a custodian. This is where the stories of the various parties to the arbitration start to conflict.

According to Meyerson officials, in December 1999, with the Whitehall Enterprises stock valued at about $1.5 million, CVI's agent provided a written order to transfer the shares to Pershing (Bear Stearns was clearing for Meyerson). They were following this order, they say.