Oppenheimer to pay $14 million award in latest Ponzi fallout

Oppenheimer & Co. will have to pay nearly $14 million for an alleged Ponzi scheme that some of its representatives ran out of an Atlanta branch office in the latest fallout from the ongoing scandal.

A Financial Industry Regulatory Authority arbitration panel ordered Oppenheimer to pay $6,989,702 in compensatory damages to five Florida residents and two trusts alleged to be victims of the Ponzi scheme, which was run through a fund called Horizon Private Equity III. The arbitrators also ordered Oppenheimer to pay the same amount in punitive damages.

Oppenheimer has been dogged for nearly two years by the actions of its former broker John J. Woods, who is alleged to have started his Ponzi scheme in 2008. In August 2021, the Securities and Exchange Commission charged Woods with running a $110 million Ponzi that defrauded 400 investors in 20 states. Woods is accused of continuing the scheme after he left Oppenheimer in 2016.

FINRA's arbitration panel found on May 3 that Oppenheimer was liable to the Florida victims because of its failure to monitor employees in the Atlanta branch office.

"The failure to supervise consisted of, among other things, failing to investigate or inadequately investigating multiple red flags that should have alerted (Oppenheimer) to the Ponzi scheme, relying on the self-serving statements of employees concerning the red flags and facilitating Horizon's accounting, investing and payments of dividends to investors," according to the arbitration award.

Michael Dugan, the president and managing partner of Haven Tower Group, a marketing firm representing Oppenheimer, said that Oppenheimer "is extremely disappointed in the award" and "intends to file in court to vacate the award."

This isn't the first time Oppenheimer has been hit with a large penalty for its failure to detect Woods' Ponzi scheme. In September 2022, it was ordered by a separate FINRA arbitration panel to pay $36.7 million, in part to compensate eight alleged victims of the scheme.

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ChapmanAlbin, the law firm bringing many of these cases, contends on its website that the award in that case was the largest in FINRA history. The firm noted that part of the award amount was trebled to roughly $14.2 million under Georgia's Racketeer Influenced and Corrupt Organization act, or RICO, which is often used to combat organized crime.

The award also included roughly $11.4 million punitive damages, $5.7 million in compensatory damages, $5.3 million to cover attorneys fees and nearly $1 million for case expenses and fees. ChapmanAlbin's website says many of the victims of the alleged Ponzi scheme were senior citizens and U.S. Air Force veterans. 

"Oppenheimer had eight years to stop its predatory brokers from launching their Horizon Private Equity scheme," John Chapman, the founder of ChapmanAlbin, contends on the site. "Instead of shutting them down, it chose to enable their illicit activities."