By Peter Henderson and Jed Horowitz
NEW YORK/SAN FRANCISCO (Reuters) - The U.S. soldier accused of killing 16 civilians in Afghanistan left for war without paying a $1.5 million judgment for defrauding an elderly client in a stock scheme, and remains shielded from the obligation as long as he remains in the military, legal experts said.
Before beginning his military career in November, 2001, Robert Bales worked almost five-and-a-half years at a series of largely intertwined brokerages that received repeated regulatory censures, according to regulatory records.
Bales joined the Army 18 months after an Ohio investor filed an arbitration complaint alleging unauthorized trading, breach of contract and other abuses against him, his securities firm and the firm's owner. In 2003, the arbitration panel ordered them to pay the investor $1.2 million, including $637,000 in punitive damages for willful or malicious conduct and $216,500 in attorneys' fees.
Bales never appeared before the panel and did not hire a lawyer to represent him.
Earle Frost, a lawyer for the victim, Gary Liebschner, said his client never received any of the payment ordered by the National Association of Securities Dealers (NASD) panel.
He said Liebschner could have taken Bales to court to enforce the award, but "we couldn't find him."
By that time, Bales had embarked on an Army career that included three tours of duty in Iraq and a fourth in Afghanistan.
Even if Bales's victim had pressed the claim, Bales had protection under laws that shield members of the military from some financial obligations.
Any active-duty member of the military can apply for relief from outstanding financial obligations as long as he or she makes less in the service than before, said John Odom, a retired Air Force colonel and a partner at the law firm of Jones & Odom in Shreveport, Louisiana.
Bales, a staff sergeant, is expected to be charged this week in the March 11 killings of nine children and seven other civilians, who were gunned down in a late-night rampage.
His financial troubles add to the complex portrait of the man accused of the massacre.
His lawyer, John Henry Browne, did not respond to a request for comment on the NASD arbitration ruling. He has said Bales joined the army to defend the United States after the September 11, 2001 attacks.
His service in Afghanistan was complicated by mounting financial pressures back home, his lawyer has acknowledged. His home in Washington state had been listed for sale shortly before the alleged massacre.
Bales began his financial industry career in 1996 at Hamilton-Shea Group, a brokerage in Florida that was expelled from NASD in 2001 and fined $1.4 million over several issues, according to records from NASD and its successor organization, the Financial Industry Regulatory Authority (FINRA).
Hamilton-Shea was "the kind of place where you learn to cold call, to 'pump and dump,'" said Joseph Dehner, a lawyer in Cincinnati, Ohio, who specializes in cases involving rogue brokers and firms.
Pump and dump refers to a practice in which firms artificially raise the prices of stocks they hold by aggressively selling shares to clients and then selling their own shares.
At least three Hamilton-Shea brokers who worked briefly with Bales pleaded guilty to violations of securities law after he left Florida to work in Ohio at Quantum Capital Corp., according to records from FINRA. Quantum also owned Hamilton-Shea.
Bales left Quantum in early 1998 to join Michael Patterson Inc., or MPI, whose eponymous owner had worked with him at both Hamilton-Shea and Quantum. Bales remained there until late 1999, then worked for two other Ohio brokerages until December 2000.
Patterson, whose firm was shuttered one month after Bales joined the Army, could not be reached for comment.
Neither FINRA nor the Ohio Divison of Securities ever suspended Bales, who simply let his securities license lapse, according to regulators. If an arbitration award is not paid within 30 days, FINRA can suspend a broker and would not allow him or her to join another firm during the suspension.
(Reporting By Nick Carey, Jed Horowitz and Peter Henderson.; Editing by Marilyn W. Thompson, David Brunnstrom and Paul Simao)
(The story was refiled to add missing first name of soldier in paragraph two)