By Michael Wursthorn
A former Morgan Stanley broker has filed a suit accusing the
firm of firing him for being a whistleblower who had raised
allegations of insider trading involving its Knoxville, Tenn.,
branch and had helped federal authorities uncover fraud at a
truck-stop chain.
The broker, John Verble, says in his filing that he wore a wire
to help the Federal Bureau of Investigation investigate the fraud
case, and that a superior at the Morgan Stanley office physically
threatened him when his efforts became known.
"As a direct result of plaintiff's involvement in assisting the
FBI to investigate violations...plaintiff was retaliated against,
discriminated against and illegally discharged from his position in
violation of numerous federal statutes," the complaint said.
Mr. Verble, now a financial adviser at Raymond James Financial
Inc., wants either to return to his old job or damages equal to
double his roughly $360,000 salary until he reaches 68 years of
age, according to the complaint. He is now in his mid-50s, his
lawyer's office says.
A Morgan Stanley spokeswoman denied Mr. Verble's allegations and
said "there is no basis" for the lawsuit, which the firm plans to
"vigorously contest."
Mr. Verble's suit alleges that employees in Morgan Stanley's
Knoxville branch were involved in insider trading and were
complicit in other companies' misrepresentation of financial
information to regulators. The adviser was a confidential source in
a fraud case against Pilot Flying J, the nation's largest
truck-stop chain, that involved the skimming of fuel rebates owed
to its trucking customers, the suit says.
Last year Pilot Flying J, which is based in Knoxville, accepted
responsibility for the criminal conduct of its employees and agreed
to pay $92 million in penalties in a settlement with the federal
government. Ten employees pleaded guilty to various charges. The
company is led by Jimmy Haslam, who also is chief executive and
majority owner of the Cleveland Browns football team. Mr. Haslam's
brother, Tennessee Gov. Bill Haslam, is said to own a stake in the
company. Neither has been accused of any wrongdoing.
Mr. Verble, whose resume includes a doctorate in psychology,
joined the Smith Barney brokerage in November 2006, some two years
before it merged with Morgan Stanley. Over time he "became aware of
numerous criminal activities on the part of clients" as well as
"illegal activities that violated the Sarbannes Oxley Act and other
federal statutes" by the brokerage itself.
Besides the fraud at Pilot Flying J, his suit claims he
uncovered alleged insider trading among the office's employees and
their clients involving Miller Energy Resources Inc., a publicly
traded oil and gas company focused on Alaska. Mr. Verble also
alleges in his suit that Miller Energy's books were manipulated to
conceal certain transactions from shareholders and the Securities
and Exchange Commission.
Neither law-enforcement officials nor securities regulators have
disclosed any investigation into the allegations claimed by Mr.
Verble to involve Miller Energy's shares and financial accounting.
Miller Energy's general counsel, Kurt Yost, said he hadn't heard of
the allegations until he was called by The Wall Street Journal for
comment on the lawsuit. "No one has gotten in touch with us before
this," Mr. Yost said, adding that there had been no communication
from the SEC on the matter.
Mr. Verble's suit says that Morgan Stanley wasn't aware of his
cooperation with authorities until local newspapers reported on an
investigation into Pilot Flying J and a Morgan Stanley employee
spotted Mr. Verble "getting into a black sedan with tinted windows
accompanied by what appeared to be federal agents" in late 2012 and
early 2013. This led to a confrontation with the branch manager
who, upset by Mr. Verble's collaboration with authorities, told
him, "I'm going to take you outside and whip your ass," the suit
says. In that meeting, Mr. Verble was asked if he "was wearing a
wire."
In May 2013 Mr. Verble was put on administrative leave and
eventually fired, the suit says. In his publicly available
BrokerCheck record, Morgan Stanley says he was fired for accepting
third-party funds outside of its compensation policy. Mr. Verble
says this involved a gift his daughter received five years earlier,
and that his managers were told about it at the time.
The repayment of Mr. Verble's recruitment bonus is also in
contention. Morgan Stanley says Mr. Verble continues to owe
$230,000 and has been resisting payment. Mr. Verble, in his
complaint, claims he doesn't owe the money due to his "unlawful"
firing, and added that Morgan Stanley had frozen his brokerage
account with the firm, totaling about $242,000, to force
payment.
One of Mr. Verble's lawyers, Richard Neely, said Mr. Verble's
firing was a "classic case of retaliation." But he expects the case
to be slowed down by Mr. Verble's involvement in federal
investigations that are still under way. "A lot of the facts that
will come out are facts that are currently under confidentiality
restraints," Mr. Neely said.
Matthias Rieker contributed to this article.
Write to Michael Wursthorn at michael.wursthorn@wsj.com
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