Spy Novelist Who Claimed Deception by Morgan Stanley Wins $3.6 Million
(The final two paragraphs have been updated for clarity.)
Keith Melton, a spy novelist, consultant to U.S. intelligence agencies and founding board member of the Spy Museum in D.C., took everything his broker told him at face value for four years before realizing he was being fed mouthfuls of deceit.
According to a new arbitration award posted on the Financial Industry Regulatory Authority’s website, Morgan Stanley advisor Kim Dee Isaacson overstated the value of Melton’s investments in gold and in Brazil’s national oil company Petrobras by as much as $2.6 million without setting off supervisory alarms at the firm or raising the novelist’s suspicions.
Isaacson, who joined Ameriprise Financial following what his BrokerCheck disclosure describes as his “voluntary resignation” from Morgan Stanley in 2014, declined to comment when reached at his Ameriprise office in Midvale, Utah.
The three-person arbitration panel ordered him and Morgan Stanley to pay Melton the difference between what Isaacson said the account was worth at various times over four years and its actual value. It determined the amount at $2.6 million and also ordered disgorgement of $993,989 in fees and commissions, according to the award.
Isaacson admitted to lying during testimony, the panel said. Melton discovered the actual value of the accounts when Isaacson’s assistant answered the phone while Isaacson was out of the office and gave Melton an accurate report of the investments, according to the award.
“We are disappointed by the decision and do not believe it is supported by the facts,” a Morgan Stanley spokeswoman said. She did not respond to questions about whether the company would challenge the decision in court.
“[Isaacson] knew that claimant Melton relied on his oral representations,” the panel wrote. Morgan Stanley “perpetuated the fraud by failing to supervise and monitor the ongoing fraud over a period of four years.”
Melton and businesses he ran actually sought as much as $12.6 million but the $3.59 million awarded is still significant, said Edward O’Neal, a principal at Securities Litigation and Consulting Group,who testified on liability and damages on behalf of Melton.
“It’s fairly rare to see an arbitration award in the $3 million to $4 million range,” O’Neal said.
Melton, author The Official CIA Manual of Trickery and Deception who lives in a “Spy Mansion” in Boca Raton, Fla., did not respond to a request for comment on why he accepted his broker’s oral accounting for so long.
A lawyer representing Melton said Morgan Stanley will likely try to vacate the award in court but deferred additional questions to the lead attorney, Andrew Mytelka. He did not respond to messages requesting comment.
Isaacson’s resigned from Morgan Stanley amid “allegations that the representative verbally provided client inaccurate information about the client’s account performance,” according to his Finra BrokerCheck record. He was hired by Ameriprise the same month, his registration records show.
Finra’s enforcement division opened an investigation of Isaacson in April that is ongoing, according to BrokerCheck. He also has a pending customer complaint filed in February by a client alleging unsuitable stock investments and provision of inaccurate information about account performance from 2008 to 2014, according to the report. Isaacson joined Morgan Stanley in 2008 from UBS Wealth Management Americas.
“It would certainly seem to me that Ameriprise would have known what was going on with Isaacson,” O’Neal said. “Brokerage firms could prevent a lot of investor harm by making their hiring practice a little more careful.”
A spokeswoman for Ameriprise did not respond to a request for comment by deadline.
The Finra arbitration panel found that Isaacson’s sales assistant and his branch manager at Morgan Stanley were not involved in the misrepresentations, and ordered that mentions of the Isaacson issue be expunged from their records.
Quin Gardner, Isaacson’s partner at Morgan Stanley and Ameriprise, was also named as a respondent but the arbitrators did not evaluate the claims against him because he separately settled with Melton in October 2015, according to the award.
-Jed Horowitz contributed reporting.