Messing With J.R., Take Four

Not so fast, J.R.

Larry Hagman, who played the rapacious oil tycoon J.R. Ewing in the 1980s hit TV series “Dallas,” recently won $11.6 million in a securities arbitration case against Citigroup. As DealBook reported last month, it was the largest arbitration award an individual investor received this year and the ninth largest award ever, according to the Financial Industry Regulatory Authority, or Finra, which oversaw the arbitration.

But Citi Global Markets is now crying foul.

The California-based law firm of Munger, Tolles & Olson has filed a motion to dismiss the award in Los Angeles Superior Court, alleging that the chairman of the arbitration panel failed to disclose a potential conflict of interest. Such motions are rarely successful.

A Citi spokesman, Alex Samuelson, said, “We are pursuing our legal options.”

Citi's petition cited a Finra rule requiring arbitrators to disclose “any circumstances which might preclude the arbitrator from rendering an objective and impartial determination.”

According to Citi’s petition, the lead arbitrator had a potential conflict because he was once a plaintiff in a lawsuit “involving the same claims and the same subject matter involved in this arbitration proceeding.”

Same claims? You be the judge.

Mr. Hagman, 79, and his wife Maj, 82, accused Citi of, among other things, fraud and breach of fiduciary duty. The couple contended that they sustained losses on stocks and bonds and a life insurance policy they held with Citi.

Two years earlier, the lead Finra arbitrator sued his real estate investment partner for fraud and breach of fiduciary duty, according to Citi’s petition. The arbitrator “alleged that he and his wife had ‘trusted and relied upon’ the investment advice of their former real estate partner with respect to ‘almost all their life savings,’” Citi’s petition said.

O.K., but were the subject matters the same?

According to a recent memo that Mr. Hagman’s lawyers filed with the court, the arbitrator’s suit against his real estate partner was “unrelated” to Mr. Hagman’s case.

The memo noted that the arbitrator’s case “did not involve a securities investment” nor did the two cases involve the same facts or parties.

The memo called Citi’s petition a “last-ditch effort.”

In its petition, Citi also said “the arbitrators refused to postpone the hearing to allow Citigroup’s key witness — the Hagmans’ financial adviser — to testify.” The panel ultimately allowed the broker, who was having surgery during the hearing, to testify about a month after the arbitration ended.

“It is noteworthy that she testified after having the opportunity to review the entire record, which was a strategic advantage,” the memo said.

Philip M. Aidikoff, a lawyer for Mr. Hagman, declined comment. So did a spokeswoman for Finra.

A hearing in Los Angeles Superior Court is scheduled for Dec. 17.

Meanwhile, Citigroup is on the hook for paying 10 percent interest on Mr. Hagman’s award. That is good news for charity: The Finra arbitration panel demanded that Citi pay $1.1 million in compensatory damages for Mr. Hagman and $10 million in punitive damages to be donated to the charities of his choice.

First Arrest Made In Insider Trading Probe

An East Coast employee of a California research consulting firm is accused of hooking up hedge fund operators with corporate executives who provided inside information. One of the executives who allegedly provided information works for Broadcom Corp. in Taiwan.

Federal prosecutors in New York disclosed charges Wednesday against Don Ching Trang Chu, who works at one of the research firms believed to be part of the government's investigation.

Prosecutors accused Chu of conspiracy for allegedly hooking up hedge fund operators with corporate executives who provided inside information about their companies.