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Errict Rhett’s athletic career was more than he had ever imagined. A star football player, first at McArthur High School in Hollywood, Fla., and then at the University of Florida, Rhett broke many of legend Emmitt Smith’s records. The Tampa Bay Buccaneers drafted him in 1994, trading him to the Baltimore Ravens in 1999. Finally a free agent in 2000, he got a $1.7 million signing bonus from the Cleveland Browns — the pinnacle of his career. Now, almost all of the money is gone and he has filed an arbitration suit with the National Association of Securities Dealers in Rockville, Md., against his brokerage firm, Tampa, Fla.-based Gunn Allen Financial. He accuses the national firm of sticking his money in high-tech, speculative stocks against his wishes and buying and selling stocks without his permission, reaping commissions as high as $10,000. The loss is compounded by the fact that Rhett suffered a career-ending foot injury shortly after he made the investment. But the 31-year-old is now trying for a comeback. Rhett claims Gunn Allen Financial lost all but $98,000 of his after-tax bonus plus $300,000 more that he’d invested earlier — a total of about $1.2 million. His suit charges Reginald Robinson, Richard Frueh, Donald Gunn, Bradley Fay and Robert Savage — all managers or principals with the company — with negligent supervision under Florida statutes that state “controlling persons” can be held liable. “Respondents failed to properly diversify Errict’s account, overconcentrated his account in speculative and unsuitable securities, placed him in unsuitable investments, failed to have exit strategies or stop orders in order to mitigate and limit losses,” states the suit. “Gunn Allen failed to properly supervise their agents and/or employees, failed to supervise the financial adviser, and were negligent in their hiring, supervision and retention of their employees and agents responsible for handling Errict’s account.” Rhett, a Plantation, Fla., resident, called the experience “the most emotional thing I’ve been through in my life. The pain is indescribable. I called up my broker when I found out how much I had lost and he said, ‘You better get a job.’” The suit seeks compensatory damages of $1.2 million plus interest, punitive damages of $3.6 million, and attorney fees. Gunn Allen has 45 days to respond to the allegations. The NASD may or may not then choose to launch a criminal investigation. Robert Savage, general counsel for Gunn Allen, does not deny that Rhett’s money is almost gone but says it is not the company’s fault. He says Rhett himself took the high-risk approach. Furthermore, Savage contends, Rhett is no different than millions who have lost a bundle in the stock market. “Mr. Rhett is a sophisticated investor,” said Savage. “If a client chooses aggressive and high-risk investment objectives, we have to follow his wishes.” Meanwhile, Rhett’s lawyer, Darren Blum of Plantation, has also signed up two other clients referred to the broker by Rhett: Atlanta Falcons player Willie Jackson and record producer Derek Dudley. Each claims he lost several hundred thousand dollars with Gunn Allen. With the stock market tanking, Blum, who specializes in securities lawsuits, has been busy lately. Most of his clients are retirees whose life savings are slipping away. But he calls Rhett’s case “the worst one I’ve ever seen. I really feel bad for the guy.” The two are friends from their days as college students together. According to the lawsuit, the money represented most of Rhett’s total net worth. Rhett said he met a broker from Gunn Allen at a Tampa barbershop in 1998. The broker, he claims, talked him into initially investing $200,000. When he examined his statements from the firm, he realized that his broker was buying and selling stocks without telling him, earning as much as $10,000 in commissions per transaction, according to the lawsuit. He spoke to the branch manager, Reggie Robinson, and co-owner Rick Frueh. According to the suit, both apologized to Rhett and promised to recoup the money he had lost if he allowed them to personally handle his account. Over the next several months, Rhett’s stocks did return to previous levels. His confidence in the company restored, Rhett agreed to hand over his signing bonus, which after taxes came to about $1 million. Rhett claims he emphasized that the bonus represented his retirement nest egg. Robinson, Rhett contends, promised he would only choose safe stocks and would provide him a 13 percent average annual return. Rhett and lawyer Blum claim that brokers invested the money in high-risk tech stocks, bought and sold stocks without his knowledge, placed him on a $500,000 margin without notifying him and lied when they said his $600,000 in mutual funds would never be touched. When you buy stock on margin, you only have to put a percentage of the money down. But if the stock drops in value rapidly, the broker then requires the investor to put up all the money. He alleges that the company put his money in “high-risk, aggressive” stocks like America Online, Cisco Systems, Global Crossing, PSI Net, Motorola, eBay, Yahoo and Netscape. In one purchase, the suit alleges, Gunn Allen bought 80,000 shares of March First stock at $28 per share that now trades for less than a penny each. Unable to keep up with the voluminous notices from Gunn Allen, Rhett gave Blum a six-inch stack, many of them unopened. Blum opened the final statement and delivered a bombshell to his client: of the original $1.3 million, only $98,000 remained. Speechless, Rhett excused himself and sat in his car for hours in stunned disbelief. “How on earth could respondents place Errict on so much margin when they knew that he could never cover a margin call with cash?” the suit asks. Savage insists Rhett wanted to buy high-risk “speculative” stock and knew exactly what he was doing — in fact, he claims that Rhett dabbled in day trading. “From the football field?” counters Blum. Savage says Rhett signed forms and option agreements indicating his desire for such trades. Blum says that brokers routinely have clients sign forms and then fill in information later. Savage also insists Rhett’s broker called him before buying any stock. Blum says he intends to subpoena both parties’ mobile phone records to prove otherwise. Savage said he did not have Rhett’s account available and could not confirm that it was down to $98,000. As to the allegation that a broker made a $10,000 commission from one trade, Savage says, “It’s possible if it’s a very large trade.” Additionally, Savage claims that broker Robinson recommended stop losses to Rhett, but Rhett declined. Stop-loss orders allow for stocks to be automatically sold when they dip to a certain amount. NASD records show that Gunn Allen has been investigated and fined twice and has been involved in three arbitrations stemming from complaints. In August 2000, the firm was fined $5,000 for placing orders to sell shares in a stock in which trading had been suspended by the Securities and Exchange Commission. According to the NASD, the firm published quotations for these stocks without proper documentation and without a “reasonable basis” for believing the information was accurate or the sources of the information reliable. The firm also failed to file necessary forms with the SEC at least three days before the quotations were published. Gunn Allen was ordered to submit revised written supervisory procedures designed to prevent future violations and fined $5,000. The firm was fined $3,000 by the North Dakota Securities Commission in January for claiming to the commission, in a broker application, that it had never traded in North Dakota. In fact, the firm had traded on behalf of a resident there in December 2000. The NASD will appoint an arbitration panel to review the case. The panel’s ruling will be binding and final. Rhett is not completely destitute. He owns his Plantation house outright and some real estate. The married father of two is confident he will be victorious. “I trust in Darren that we will prevail,” he says. “I have high goals.”

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