It took John Teeples six-and-a-half years as a software salesman at Microsoft to amass the stock options and other assets he felt he needed to take a break from work and spend more time with his wife, Sharon, and their two young sons.
"I wanted to park the bus," Teeples, 45, said in a recent interview from his home in Reston, Virginia. "So I pulled the bus over to the side of the road, I took my stock options and said, `I can reacquaint myself with my 9-year-old, who thought Daddy wasn't there for him.'"
As Teeples was about to exit the fast track of 80-hour weeks in late 1999, he encountered two Morgan Stanley Dean Witter brokers: Arun Sardana, 36, and Michael Moriarty, 46, partners in the firm's office in Chevy Chase, Maryland. Assuring him that they would handle all his financial, tax and estate-planning needs, the brokers persuade Teeples, who had never traded in the market, to entrust them with retirement accounts and stock options worth roughly US$700,000.
Within 16 months, Teeples said, what had taken him years to build was gone. By last April, all that was left of his portfolio was US$403.95 and a US$40,000 tax bill due next April. Now he's fighting back.
With the stock market in the doldrums and the practices of brokerage firms under the microscope, executives at Wall Street firms are clearly worried that investors have lost faith in the industry. If Teeples' account of how his money was managed is any indication of what passed for investment advice and brokerage services in the market mania of the late 1990s, Wall Street should be worried indeed.
Unfortunately for the industry and investors alike, Teeples' story is just one of many tales beginning to emerge as investors realize that their decimated portfolios may never come back, and that for novices, investing is not as easy as it looks.
But perhaps the most troubling aspect of Teeples' story is that he is not the only current or former Microsoft employee to say he has lost his life savings under the guidance of Sardana and Moriarty. In several arbitration claims filed recently against the brokers and Morgan Stanley -- most investor claims cannot go to court -- a total of 13 customers on the East and West coasts accuse the two men of a widespread pattern of sales-practice violations. These include recommendation of highly speculative stock trades and excessive use of margin borrowing. In about a year, these people lost US$20 million, according to the complaints.
"Morgan Stanley Dean Witter's brokers were out of control," said Jacob Zamansky, a lawyer at Zamansky and Associates in New York, who represents the Microsoft workers.
"Young, inexperienced brokers preyed on hard-working people with little or no investment experience. They lost my clients' retirement and life savings."
Across the country, many workers at technology companies have been hurt by stocks that have fallen below their options' prices. Even worse, some have exercised options at high levels and watched the underlying stock collapse. But the Teeples case is particularly compelling because it brings together all the elements of the speculative frenzy of the late 1990s. Now that the bubble has burst, brokerage-firm practices like the ones Teeples encountered are coming under scrutiny. All of Wall Street is on the defensive.
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