Did you hear the one about the broker who sued his firm for his own bad choices?

By DAVID MOON, Moon Capital Management
November 17, 2002

Everyone has a favorite crazy lawsuit story. I have shared a couple in these pages over the years. Suits like the New Brunswick (Canada) father who is suing the local youth sports organization for not awarding his son the annual Most Valuable Player award. Sixteen-year-old Steven Croteau was so hurt and humiliated at not winning the trophy, he retreated home from the awards banquet, shoved his hockey equipment in the corner, and proclaimed he had no interest in playing the sport again. Croteau's father says of his son, "he was so sure of himself he took $50 of his own money to buy a nice shirt and tie to look good that night. He was so embarrassed."

There is no word yet if Tanya Harding is involved in this sordid case of hockey rink hostility.

It's bad enough to lose $50 after you think you're a lock for MVP of the New Brunswick junior hockey league. But imagine losing $250,000 in your stock portfolio because you relied on your broker's recommendation to invest all of your money in a single stock. These days, in many cases like this, investors are quick to sue their brokers, claiming they never understood the risks involved. This would be a bit hard for John Tripi; he is a broker for Morgan Stanley in New York. Or, at least he was, before losing a pile of money investing in a stock recommended by a Morgan Stanley analyst. He was so upset and damaged by the losses caused by his own employer's analyst, he filed a $1 million suit against the firm. He couldn't sue the broker; he WAS the broker.

Tripi is no longer employed by Morgan Stanley.

As a rookie broker in 2000, Tripi bought more than 3,000 shares of Copper Mountain Networks, a California telecommunications company. He claims he based his purchase on a strong 'buy' recommendation by Morgan Stanley analyst Alkesh Shah. Tripi spoke with Shah almost weekly and was encouraged by the analyst's constant bullish recommendation on the company - even after the shares began a precipitous decline. Only after the stock had declined 80 percent did Shah ever reduce his recommendation from "outperform" to "neutral." (I have always assumed that a "neutral" recommendation meant that a stock had declined so much from where an analyst initially recommended it that surely it couldn't do any worse than the overall market from its current prices.)

John Tripi wants Morgan Stanley to pay him a million dollars because the company couldn't protect him from himself. I wonder about the poor clients of Mr. Tripi. Do you think he did any better job with their investments than he did his own?

According to the Wall Street Journal, Mr. Tripi's attorney claims the only training Tripi received was in how to sell to his clients; he relied solely on the Morgan Stanley analysts for research and investment advice.

If Tripi was so incompetent or ill-trained, why did he take his own advice? If anyone should have known John Tripi couldn't pick stocks, it should have been John Tripi. Morgan Stanley has dozens of analysts with recommendations on hundreds of stocks. Tripi chose this one.

Tripi is now working in a profession where he is often gives advice but is unlikely to ever be sued for poor consultation. He is a bartender.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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