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Former Financial Advisors Sue Utah for Civil Rights Violations

January 14, 2010
Related Topics: Financial Impact, Compensation Design and Communication, Miscellaneous Legal Issues, Latest News
In an apparent first, two former financial advisors have filed a lawsuit against a state government claiming that it violated their civil rights.

Henry S. Brock and Jay Rice—who were both independent financial advisors licensed in Utah—filed the suit late last month. They allege that the Utah Division of Securities, among others, violated their right to due process and conducted unreasonable search and seizure, malicious prosecution, and cruel and unusual punishment enforced by extortion, bribery and witness tampering.

The defendant list in the complaint, which was filed in the U.S. District Court for the District of Utah, includes Gov. Gary Herbert, Attorney General Mark L. Shurtleff, Department of Commerce head Francine Giani and former and current directors of the Utah Division of Securities Wayne Klein, Keith Woodwell, Tony Taggart and George Robison.

Brock and Rice allege that the Utah Division of Securities heaped dozens of allegations on them (25 for Brock and 28 for Rice) without giving the advisors the ability to redress their grievances. According to the complaint, the Division of Securities came into Brock’s home and without permission downloaded the contents of his computer from the past 15 years, even though the statutory limitation on prosecutions is five years.

The letter came to Brock three years after Division of Securities agents “made an unreasonable search and seizure of his personal papers and effects” by downloading the contents of his computer and seizing information from the previous 15 years, according Brock’s attorney, JoAnn S. Secrist.

The two former advisors also allege that the Division of Securities posted false press releases claiming the plaintiffs were “poster boys of securities fraud in Utah.” In addition, they assert that the Division of Securities paid search engine specialist Google a fee to make sure that the state’s press releases would appear at the top of Google searches.

In the complaint, Rice claims that the Division of Securities offered one of his clients $35,000 if he didn’t write a letter stating that he had no claim against Rice.

As a result of the agency’s actions, both plaintiffs said, they have declared bankruptcy, and Rice has been put out of business. Brock, who was named one of America’s top financial planners in 1987 by Money magazine and served as president of the Financial Planning Association of Utah, still sells insurance.

The plaintiffs are seeking $357.6 million in damages.

The defendants were expected to be served with papers about the complaint Wednesday, January 13.

“This lawsuit is about civil rights violations and Utah’s Division of Securities gone wild,” said JoAnn Secrist, former Utah assistant attorney general and legal counsel for Brock and Rice.

This is not the first time securities regulators in the Beehive State have come under scrutiny. In 2007, Utah’s legislative Auditor General’s Office completed an audit of the Division of Securities, finding there were numerous instances where the division overstepped its bounds.

“The audit found that the division was running over people’s rights,” Secrist said.

During that audit, Wayne Klein, a defendant in the case, resigned from his post as director of the Utah Division of Securities.

That division is part of the Utah Department of Commerce, which referred calls to the Utah Attorney General’s Office. Spokesman Paul Murphy said it had not yet been served with the lawsuit and couldn’t comment. He added that the office would be representing all the defendants in the case.

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Filed by Jessica Toonkel Marquez of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail

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