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September 17, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Former investment banker Bernard Beal ordered to pay $726K arbitration award

A bankruptcy judge in Poughkeepsie has ruled that former investment banker Bernard B. Beal must pay $726,365 to a former employee for bonuses earned in 2011 and 2012.

An arbitration panel had previously awarded the bonuses to Jacob Alpert, but Beal did not comply with the decision.

Beal’s lawyer argued in a bankruptcy pleading that Alpert was an at-will employee of M.R. Beal & Co., bonuses were discretionary and Beal personally had no obligation to pay them.

Beal founded the firm in 1988. Black Enterprise magazine named it the 2001 finance company of the year. In 1992 and 2003, it listed Beal as one of the most notable African-Americans on Wall Street.

Alpert, of Manhasset, Nassau County, joined M.R. Beal & Co. in 2006 to oversee municipal sales, trading and underwriting. He said in a court filing that he increased revenues in the municipal bond department nearly tenfold from 2006 to 2007.

But from 2010 to 2012, Alpert claimed, Beal delayed or failed to pay annual incentive compensation. By 2013, it had become clear “that the company had no intention of paying (Alpert) his incentive compensation for 2011 or 2012.”

Alpert resigned in 2013.

Five months later, M.R. Beal & Co. deregistered with the Financial Industry Regulatory Authority (FINRA). Beal transferred the assets to a new entity, Blaylock Beal Van LLC, and joined the firm as chairman.

Alpert filed for arbitration with FINRA, disputing the transfer of assets as a fraudulent conveyance.

FINRA ruled in Alpert’s favor in 2016, awarding him $475,000 to be paid by M.R. Beal & Co. or Beal personally.

The New York County Supreme Court confirmed the award, but Beal did not pay it.

Last year, Beal filed for Chapter 11 bankruptcy, declaring $1.8 million in assets and $2.3 million in liabilities.

His $1.1 million home in Poughquag, Dutchess County, was about to be sold in foreclosure, he declared in an affidavit. He disputed the three biggest debts: $500,000 to the state Department of Taxation; $642,000, including interest, to Alpert; and $1.15 million on his home mortgage.

Alpert sued. Beal should not be allowed to use bankruptcy to discharge debts, Alpert’s lawyer, Jeffrey L. Liddle of Liddle & Robinson in Manhattan, argued, citing the arbitration ruling.

Beal had “pursued the American Dream of founding a company that rose to Wall Street success but fell upon hard times due to circumstances beyond his economic control,” Beal’s attorney, H. Bruce Bronson, of Harrison, responded.

“When money did not flow as in years past, he had to make the tough decisions all business owners dread.”

Bronson argued that only the limited partnership, M.R. Beal & Co., and the general partner, M.R. Beal Securities Corp., which was not a party to the arbitration, could be held liable. According to Bronson, Beal owned the corporation, but he had no personal liability for Alpert’s claims and no evidence demonstrated that Beal had defrauded Alpert.

His actions should be viewed as those of a “prudent business owner exercising business judgment under the laws of both New York and the highly regulated securities industry.”

Cecelia G. Morris, the federal bankruptcy judge in Poughkeepsie, did not buy Beal’s argument, finding on Aug. 13 that the fraudulent conveyance issue was fully litigated in arbitration and confirmed by a New York Court Supreme Court justice.

She granted summary judgment to Alpert and, adding accrued interest, set the award at $726,365 plus 9 percent per year.