If you lose a Financial Industry Regulatory Authority (FINRA) arbitration, FINRA must give you a copy of the audio record of the hearing so you can appeal, if you wish.

In 2011, Mark Mensack lost his FINRA arbitration against Morgan Stanley. And he asked FINRA for the eighteen hours of his hearing.

When he got the audio disk from FINRA, it had only ten hours on it.

Eight hours were missing. And it wasn’t just eight hours in the beginning or the middle or the end. It was eight key hours of testimony.

Mensack thinks the audio was deliberately deleted.

Mensack blew the whistle on what he alleges is a pay to play scheme at Morgan Stanley, where he worked from August 2008 to November 2009, when he was effectively forced out.

Mensack and Morgan Stanley went to FINRA arbitration, where Mensack lost his case.

But then things got interesting.

Mensack asked FINRA for a copy of the audio of the eighteen hours of hearing records so he can prepare for his appeal.

He gets a disk in the mail, and lo and behold, there are only ten hours on it.

Eight hours are missing.

“The missing eight hours was not a block missing from the beginning, middle or end — it was fourteen separate sections containing testimony from Morgan Stanley witnesses necessary for me to file a successful motion to vacate,” Mensack says.

Mensack reaches out to the FINRA case administrator, Arthur Baumgartner.

“Baumgartner, said — those eight hours were never recorded due to either human or mechanical error,” Mensack told Corporate Crime Reporter in an interview last week. “After Baumgartner told me it was human or mechanical error, he writes me to tell me that the disk that they had originally sent me was a complete copy of the record that FINRA had on file. He’s saying — we gave you everything we have on file. But there is no reference to the fact that eight hours are missing.”

After an additional three months of complaining, Mensack gets another letter from FINRA Northeast Regional Director Katherine Bayer.

“She says — I apologize for the missing record,” Mensack says. “We have never had a problem with these recording devices. We checked out the recording device used in your arbitration, it worked fine. I talked to the person who handled the recording device, he said he thought he recorded everything. And essentially, if you don’t like it, tough.”

Mensack believes that the record was deliberately tampered with.

Why couldn’t it have been human error?

“Oh God no,” Mensack says. “In my mind, it was clearly manipulated.”

Do you know who did it?

“No,” he says.

“The exact same month, the same sort of thing happened to someone else,” Mensack said. “Second, the conference room in which the arbitration took place was a relatively small room. I wasn’t eight feet away from the panel chairman who was pushing the button on the digital recorder. And he was very formal in his manner. He would say, okay, we are going on the record and he would push the button. And then he would say — okay, we are now on the record.”

Is there any movement to get someone from inside FINRA to corroborate your theory that someone tampered with evidence?

“I have no idea,” Mensack said. “The only thing I can tell you is that I filed a criminal complaint with the New Jersey Attorney General’s office against FINRA and Morgan Stanley for all of these issues. I have a letter from them saying that they are not going to investigate my complaint because it would be a duplication of the investigation that the Department of Labor, the SEC and the IRS have ongoing. And if those investigations find any criminal activity, it will be reported to the FBI and they will handle it.”

What is the status of the investigations?

“They won’t say,” he says.

Are they talking to you?

“I have talked to and provided additional evidence to all three agencies,” he says.

When was the last time you spoke with any of them?

“Two weeks ago,” Mensack says.

Are they calling you, or are you calling them?

“Two weeks ago they called me,” he says.

Who called you?

“I can’t tell you who it was,” he says. “They are huge on not talking on what they are or are not doing. But yes, one of those organizations reached out to me and asked me additional questions.”
“Back in 2010, before the FINRA fiasco, I did file a whistleblower complaint with FINRA’s whistleblower office. In October, 2010, I got a letter from FINRA saying that they were sending the information to the Department of Labor because it involves 401(k) issues and the Department of Labor handles those issues.”

Are you encouraged that there is an active federal investigation?

“I can’t say with certainty. The mere fact that they are asking questions seems promising. But they are just asking questions at this point.”

FINRA spokesperson Nancy Condon said FINRA would have no comment on the matter.

[For the complete transcript of the Interview with Mark Mensack, see 28 Corporate Crime Reporter 5(13), February 5, 2013, print edition only.]