NEW YORK - Bear Stearns Cos. on Tuesday lost a bid to reverse a $171 million jury award to currency speculator Henryk de Kwiatkowski.
U.S. District Judge Victor Marrero refused Bear Stearns' "extraordinary" request to overturn the award.
Late in 1994, Mr. de Kwiatkowski purchased foreign currency contracts worth approximately $6.5 billion and lost an estimated $215 million a few months later.
In May jurors concluded that Bear Stearns, the sixth-largest U.S. securities firm, had failed to adequately warn the Canadian investor of the risks of foreign currency speculation. They ordered the firm to pay $111.5 million in damages; Judge Marrero later tacked on $60 million of interest.
"The recovery here is unusually big only because the amounts de Kwiatkowski placed at risk were correspondingly large," Judge Marrero wrote in a 126-page opinion. "But the culpable conduct which gave rise to Bear Stearns' liability would have been no less wrongful whether the amount in controversy implicated hundreds of dollars or hundreds of millions.''
A Bear Stearns spokesman said that the ruling was not a surprise, and that the firm would ask a federal appeals court to overturn it.
Mr. de Kwiatkowski's suit claimed that Bear Stearns investment advisers, including managing director Albert Sabini, were negligent for allowing him to buy $6.5 billion of foreign currency futures. Bear Stearns argued that Mr. de Kwiatkowski, who is in his mid-70s, was a gambler who was well aware of the risks of currency speculation.
The jury exonerated Mr. Sabini.
In asking Judge Marrero to overturn the verdict, Bear Stearns argued that the jury's ruling, if allowed to stand, would set a precedent in the industry, saddling securities firms with the obligation to warn clients of all potential risks from investing.
Judge Marrero concluded that that in this case, where Bear Stearns had a "special'' relationship with the "exceptionally wealthy" Mr. de Kwiatkowski, the firm had "responsibilities that far exceeded those associated with a common broker/client relationship."