Reviews and Interviews
Bimonthly Review of Law Books
September/October 2004
Corporate & Wall Street Ethics
By Michael L. Rustad
Thomas F. Lambert Jr. Professor of Law
Suffolk University Law School
This book is a profile in courage, describing in moving detail the saga of a private attorney general who suffered great personal costs while serving the public interest by uncovering corporate wrongdoing. Keith Schooley's well-written book is an odyssey of his struggles with Merrill Lynch management that took him on a journey through nearly every regulatory agency, a blue-ribbon arbitration panel, and finally the Tenth Circuit of the U.S. Court of Appeals...
Mr. Schooley illustrates the ways the "powerful and mighty" play the game inside and outside of a court of law, including employing unethical and perhaps illegal tactics. It is a powerful story of the personal costs of whistle-blowing and doing the right thing as well as an insider's guide to the world of the securities industry... Mr. Schooley's lawsuit did vindicate the public's interest in uncovering unsavory practices. As Justice Brandeis reminds us: "Sunlight is said to be the best of disinfectants." In view of the current climate of corporate scandals - Enron, Arthur Anderson, WorldCom, Adelphia, and others - Schooley's book is an important one that offers a hard and disturbing look at Wall Street's largest securities firm. As a former employee of Merrill Lynch, Schooley gives a backstage view at what goes on behind the impression-managed front-stage. The public relations voice of corporate America differs significantly from the reality. Mr. Schooley documents a pattern of problems at the firm ranging from brokers to senior management, and suggests that the problems could even be traced to the board of directors.
This is a book that should be read by not only Merrill Lynch clients, but all investors... In an era of lax industry and governmental control, we need more private attorneys general like Mr. Schooley. We need more brave litigants and trial lawyers willing to take on corporate America more than ever.
Oklahoma Bar Journal
August 16, 2003
Merrill Lynch: The Cost Could Be Fatal
By James C. Lang
This reviewer expresses no opinion as to the merits of the litigation by Mr. Schooley, which encompassed a period from approximately 1992 until 2000.
In this book, Mr. Schooley initially addresses his life prior to July 1, 1991, at which time he became a financial consultant trainee with the Merrill Lynch office in Enid. Thereafter, he discusses his employment at Merrill Lynch and his subsequent reporting to management of certain concerns, including allegations of impropriety by certain financial consultants in taking the self-administered life insurance examinations, the unauthorized use of a proprietary country club membership list by management and the falsification of expense reports by management. The author then describes the subsequent investigation of the allegations by Merrill Lynch and his dissatisfaction with the results of the investigation. This dissatisfaction then leads to the submission of a 31-page letter to each member of the Board of Directors, as well as notification to self-regulatory organizations such as the National Association of Securities Dealers and the New York Stock Exchange.
After a confrontation with a supervisor, the author alleges that he was constructively discharged and did not return to the office. Merrill Lynch alleged that he unjustifiably abandoned his position and thereafter, the author filed a lawsuit. After filing suit, the author then spent a substantial amount of time discussing his disappointment in learning that his dispute was subject to an arbitration clause in a U-4 registration form. The arbitration proceeding is then discussed at great lengths with lengthy quotes apparently taken from the arbitration transcript. Finally, the author discusses his disappointment in recovering nothing as a result of the arbitration proceeding and his subsequent disappointment at the lack of any relief afforded by the self-regulatory organizations, as well as governmental agencies.
Having lost at all levels in the arbitration and judicial proceedings, the author, in the last chapter entitled, "Court of Public Opinion, You Be the Judge," appeals to the court of public opinion to somehow right the alleged wrongs described in the earlier chapters of the book.... [T]he book is well written and mentions a number of prominent Oklahoma lawyers and judges.
Borders Books
June 2003
When Keith Schooley went to work for Merrill Lynch, he had high hopes for a successful career in finance. What he found instead shocked him. In this time of disturbing revelations about many well-known companies, Keith brings us a thrilling and disturbing real-life tale of one of the largest and best known Wall Street entity and the man who saw cheating and deception within its walls and dared to stand up against it. Don't miss this!
Foreword Magazine
August 14, 2002
The créme de la créme of indie press offerings...
Business - Merrill Lynch: The Cost Could Be Fatal by Keith Schooley....In the true spirit of David and Goliath, financial consultant Keith Schooley takes on his former employer in a stand to expose internal wrongdoing and cover-ups.
Ada Evening News
April 11, 2003
Enid author to sign book at Ada Sunday
["Merrill Lynch: The Cost Could Be Fatal"] is generating ripples nationally. Schooley has been featured in an author interview in the September/October 2002 issue of Bimonthly Review of Law Books; interviewed by the Chicago Tribune; and invited to appear on radio shows.
Schooley's book exposes a litany of wrongdoing, including a widespread cheating scandal that was twice covered up by senior management of the largest firm on Wall Street. It recounts the author's almost 10-year war with the firm in an effort to establish truth and justice. The book shows how the "powerful and mighty" play the game inside and outside a court of law.
Schooley says he is well aware of the risks of taking on the giant corporation, a point driven home when Lloyd's of London declined a request to insure his book. Stephen Jones, the famed Oklahoma lawyer who represented Schooley early in the conflict, has called the book dangerous because it "names names, takes no prisoners, and is explosive."
Oklahoma Gazette
May 29, 2003
Court of public opinion
Fired financial superstar exposes questionable practices at Merrill Lynch. He says he is still paying the price and hopes his book will be his vindication.
By Brian Brus
Keith Schooley felt he had found the successful career for which he was destined. The Oklahoma native had just taken a job with one of the largest securities firms on Wall Street and was gaining recognition for turning healthy profits for his clients and the company's Enid office.
And then he wrote a detailed memo to his managers in New York about problems he saw in the business - potentially illegal or unethical practices - and his life took a dive.
"I was on the fast track at Merrill Lynch. I was a superstar rookie financial consultant....And I turned a blind eye for a while, but it finally got to the point where enough was enough and I had to do something," Schooley explained.
Schooley was fired. For years afterward, his life was tied up in arbitration, lawsuits taken to the federal Court of Appeals and the state Supreme Court, and appeals to the New York Stock Exchange and the National Association of Securities Dealers. By the end of his ordeal, Schooley had been blackballed from the securities industry and had seen his marriage crumble.
He was left with a book based on his experiences that is now being referenced in college business ethics classes a decade since he took his first steps as an industry whistle-blower: "Merrill Lynch: The Cost Could Be Fatal."
What I'd like the public to know is what really goes on behind the facade. To this day, Merrill Lynch has escaped any serious consequences," he told the Oklahoma Gazette. The book, which was published last year, represents his final appeal. "I had to take this case to the court of public opinion...because justice was never achieved."
Schooley's original four-page memo to his managers - ironically, "in compliance with Merrill Lynch's ethical guideline policy," he said - outlined several questionable issues within the firm, including cheating on insurance exams, the misuse of proprietary mailing lists, the falsification of expense reports and misrepresentations in the company's competition for new accounts. He said his managers tried to downplay the significance of the practices and ordered him to keep selling.
"That's when it hit the fan. The New York office came in and instead of getting rid of the bad apples, they tried to cover up," he said.
The book's release coincided with other Big Business scandals and bankruptcies in the United States recently, ranging from $4 billion in cash flow accounting fakery at WorldCom Inc. to allegations against Tyco International Ltd.'s chief executive of cheating on sales taxes to Martha Stewart's insider trading. In an unrelated case, Merrill Lynch last year settled for $100 million with the New York Attorney General's office on accusations it had misled investors.
Schooley, a life-long Oklahoma resident, still lives in Enid with his two children and is back in the oil business where he started before joining Merrill Lynch. The securities office has since closed and he hasn't heard from any of his former coworkers, he said.
"Maybe I didn't win the legal battles, but I won the battle of the truth," he said. "I believe the truth has value of its own."
The Norman Transcript
April 27, 2003
Author fires back at ex-employer
By Transcript Staff
During a stint of employment with Merrill Lynch, author Keith Schooley was at the least disappointed at the practices he saw.
In his book, "Merrill Lynch: The Cost Could Be Fatal - My War Against Wall Street's Giant," the Enid resident chronicles his battles with Wall Street's largest firm.
The events led the financial consultant to a courtroom battle with the company and eventually to presenting his case in "the court of public opinion" with his book.
...Schooley filed his first complaints with the company while an employee there in 1992. He was terminated from his position during investigations into the complaints and brought a wrongful termination lawsuit against the company.
"Unfortunately, I was denied a jury trial," he said...."The case went to arbitration by the New York Stock Exchange, a process that I believe Merrill Lynch, because of its corporate clout, was able to fully control."
From there he battled the company for 10 more years before writing the book, which details his struggle and allegations against the company.
Even some appearances to discuss the work have brought controversy.
A news release last month documented the decision by Steve's Books and Magazines in Tulsa to cancel a late February book signing at the last minute due to "too much static" from Merrill Lynch employees, Schooley said he was told by store owner Steve Stephenson.
The Sunday Ardmoreite
April 13, 2003
Author speaks on corporate culture of 'unethical behavior'
By Leah J. Simmons
In the mode of WorldCom's Cynthia Cooper, Enron's Sherron Watkins and Coleen Rowley of the FBI, former Merrill Lynch employee Keith Schooley has put his lips together to blow the whistle on what he terms the "corporate culture of unethical behavior" in one of Wall Street's giants.
...Schooley['s]...book, "Merrill Lynch: The Cost Could Be Fatal,"...outlines "lying, cheating and cover-ups" he witnessed during his 15 months of employment as a Merrill Lynch broker in Enid.
Schooley moved from Oklahoma City to Enid in 1991 to work in the Enid Merrill Lynch office in what he assumed would be a "career change and a new opportunity." What it led to was 10 years of court battles against the company he accuses of a series of wrongdoings.
"Basically, I was certainly under the impression that Merrill Lynch was a company of very high integrity and a company that you could trust and, unfortunately, what I found in my short 15-month employment was a corporate culture of unethical behavior," Schooley said. "This disturbed me because this is a company that people trust with their money."
Schooley said after a fashion, "it was hard to turn a blind eye" to such misdeeds as cheating on life insurance examinations and company-wide contests, misrepresentations to clients on investments and failure to deliver on promises. His first effort to address the issues was writing a memorandum.
"I eventually gave my manager a four-page memorandum asking him how a certain 10 different things could be justified because they just weren't right. And that got faxed to his boss in Oklahoma City and then on up the chain all the way to New York and then New York comes in and does an investigation, but then they proceed to cover up," Schooley said. "I felt like I was twisting in the wind so I then sent a lengthy letter to the board of directors, bringing to their attention in great detail the cover-up that had been conducted in the first investigation."
After flying to New York and meeting with some of Merrill Lynch's top people, Schooley said he returned to Enid, where, "within days, I was terminated." His dismissal led to years of litigation involving an arbitration panel under the auspices of the New York Stock Exchange. That was followed by further litigation in federal court in Oklahoma City, before the 10th Circuit Court of Appeals, as well as the Oklahoma State Court of Civil Appeals and the Oklahoma State Supreme Court," he said.
"As you can tell, it was a long journey, and I've documented this very well in this book. At least I feel like I've made a persuasive case that justice was never arrived at," Schooley said.
"The book is essentially an indictment of predominantly Merrill Lynch, but also the regulatory system, as well as the 'judicial system' available through securities binding arbitration," he said. "So the book is an indictment of that system and I explain in detail of the flaws in that system."
Since he got no satisfaction in the legal system, Schooley said he published his book in an attempt to present his case "to the ultimate court in this country which is, in my view, the court of public opinion."
Schooley said he has already seen backlash where his book is concerned. A booksigning scheduled in February at a well-known Tulsa bookstore was called off after a two-paragraph notice of the event appeared in The Tulsa World.
"The owner of the bookstore called and said he wanted to cancel the signing because he was getting too many complaints from his customers and, as we talked, I found out the customers that he was alluding to were two Merrill Lynch brokers in the Tulsa office, as well as their boss," Schooley said.
...Well-known Oklahoma attorney Stephen Jones, called the book dangerous because it "names names, takes no prisoners and is explosive." Also, Schooley said Lloyds of London would not insure the book for media perils coverage.
"That speaks volumes. It's very controversial," he said.
The author said the potential is there for retaliation on the behalf of Merrill Lynch, but he believes his cause is worth the chance he took by getting the information to the public.
"I don't have a clue what Merrill Lynch might do. There are two sides to that coin. They might speak up and fight back or on the other hand, they might decide to not draw attention to it by doing nothing, hoping that it just basically goes away," Schooley said.
"Fundamentally and bottom line is I know I speak the truth. I'll just cross that bridge when I come to it."
The InfoJustice Journal (Editor)
September 2002
I have read your book with a great deal of interest and agree you cannot trust Merrill Lynch advice....Perhaps my readers will purchase your very interesting book.
Barnes & Noble Booksellers
March/April 2003
Keith Schooley['s]...highly-controversial book, Merrill Lynch: The Cost Could Be Fatal...has earned its author a great deal of interest. ...His book takes an investigative look at one of America's largest financial institutions.
Orlando Sentinel
August 18, 2002
But Keith Schooley's 13-year marriage didn't survive his whistleblowing activities at Merrill Lynch in 1992.
Schooley, a financial consultant on the fast track at the Enid, Okla., office, was fired after he took allegations of cheating and fraud all the way to the board of directors. He recently published a book about his ordeal, Merrill Lynch: The Cost Could Be Fatal.
"I ended up going through a divorce in 1994. You can't blame others for it. Nevertheless, I have no doubt if Merrill Lynch hadn't taken place, the marriage and family would be intact today," said Schooley, who is independently employed in the oil and gas business.
Schooley said he couldn't stand by and watch unethical behavior. He played it by the book. "The only thing I made the mistake on was trusting the company to take the appropriate action," he said.
Tulsa World
February 16, 2003
Schooley's book details a list of wrongdoing, including a cheating scandal he says was twice covered up by senior management of the largest firm on Wall Street. He recounts his 10-year war with the firm to establish truth and justice. He shows how the powerful and mighty play the game inside and outside a court of law.
Garfield County Daily Legal News
August 9, 2002
Keith Schooley's new book, Merrill Lynch: The Cost Could Be Fatal, is his story about dashed expectations, ethical lapses, and disillusion. He became David to Merrill Lynch's Goliath.
He tells the story in great detail, including the ebbing away of his optimistic expectations - then respect for his superiors and for the company as he did what he believed to be morally and ethically correct.
He spent years opposing the company, in court, then in mandatory arbitration. He got little satisfaction in tangible terms. But his story illustrates his nitty-gritty determination and persistence for sure.
And it confirms what most of us learn sooner or later: big organizations don't have a conscience or a soul. There is no internal imperative to "do the right thing". So Keith deserves kudos for facing them down....It is an interesting story about a determined individual.
The Justice Journal
February 2007
Police Need Citizen Involvement..
By Chandra Niles Folsom
..In 1991, former financial consultant Keith Schooley came forward to report internal misconduct and cover-ups at the brokerage house, Merrill Lynch.
"I knew there was some risk involved but I honestly believed the propaganda espoused by senior management—that Merrill Lynch insists on the highest level of integrity," said Schooley, whose wrongful termination lawsuit went all the way to the Oklahoma Supreme Court. "After a period of time, I simply couldn't stand by and continue to witness blatant violations of rules, regulations, and laws that repeatedly placed clients in harm's way, all at a firm that people are supposed to trust with their money. If corporate management knew there were more people out there who are willing to stand up and be counted, things might significantly change for the better."
Oklahoma Gazette
March 20, 2003
...One of CFN's favorite movies is 1999's "The Insider." How fitting that this interesting little tidbit of news would drift our way: a well-known Tulsa bookstore called off a scheduled book signing by whistleblowing author and Enid resident Keith Schooley, as a result, they said, of pressure from the company whose practices were exposed by Schooley, Merrill Lynch.
Schooley's book, Merrill Lynch: The Cost Could Be Fatal, charges the Wall Street Giant with a corrupt corporate culture that stretches back more than a decade, when he worked for the firm as a financial consultant.
Bimonthly Review of Law Books
(September/October 2002) interview with Keith Schooley, author of: Merrill Lynch: The Cost Could Be Fatal. Enid, Oklahoma. Lakepointe Publishing, 2002. 282 pp. ISBN 0-9716103-6-3. $27.95
Professor Michael Rustad: Keith, you are a native of Oklahoma with an MBA from OSU and experience in the oil industry. Your book describes your struggles with Merrill Lynch, a highly regarded securities firm. Your book is an odyssey of your struggles with Merrill Lynch management that took you on a journey through nearly every regulatory agency, a blue-ribbon arbitration panel, and finally the Tenth Circuit of the U.S. Court of Appeals. Why did you write this case study of your litigation?
Keith Schooley: Dr. Rustad, when I went to work for Merrill Lynch, I was thrilled to be part of an organization that I truly admired - one that became hugely successful largely because it had the trust of the American people. I was shocked to see that trust abused, time and again. I did everything I could to find remedies within the company, and then within the legal system. The results were disappointing. By writing the book, I'm appealing to the only court that remains open for me - the court of public opinion. I think it's important that investors, clients, shareholders, and the public know about the activities by employees of the company that has successfully cultivated its public image as the broker of Main Street, not Wall Street.
Also, the book is a multi-faceted story that discusses not only my battles with Merrill Lynch but also the failure of the regulatory system, the inherent unfairness of binding arbitration, and a look at how the "powerful and mighty" play the game inside and outside of a court of law. My story, I believe, will resonate with your readers, particularly in light of the recent scandals involving Enron, Arthur Andersen, and, of course, Merrill Lynch. While many may believe that Merrill Lynch's recent settlement with New York Attorney General Eliot Spitzer was a quick fix, my book shows that the problems run deeper - that even ten years ago the corporate culture tolerated dishonesty on the part of its employees.
MR: Tell us about the audience for your book. Is this a book of interest to acquisition law librarians? What other law-related audiences will be interested in your case study?
KS: The primary audience for my book will be investors and anyone employed in the area of securities, insurance, financial services, employment law, or human resources; as well as anyone with an association with Merrill Lynch. My book is a behind-the-scenes look at what goes on behind the facade.
I think the book will definitely be of interest to acquisition law librarians. In addition to issues involving employment law, my book covers in significant detail five other important legal issues. They are: 1) binding arbitration, 2) regulatory investigations, 3) corporate legal strategies which may suggest that the ends justify the means, 4) internal investigations versus investigations by outside counsel, and 5) the legal and fiduciary role of the board of directors as the ultimate guardians of shareholder value.
For the legal community, the most important role of this book may be as a case study of what is wrong with the arbitration system. As Stephen Jones said in the foreword, my experiences "set forth dramatically everything that is wrong, unwise, and indeed unhealthy and unfair, about the arbitration proceedings." Those are strong words, but I think nobody who reads the book will consider Stephen Jones' comments to be an exaggeration. I hope that legal scholars everywhere will take notice.
MR: Does your book shed light on the ethics of other Wall Street securities firms?
KS: In an indirect fashion, yes. Merrill Lynch has long been considered by many to have the finest legal and compliance system on Wall Street. My book shows a pattern of problems at the firm ranging from the brokers to senior management, and, arguably, the board of directors. Even the experienced NASD investigator in charge of the Merrill Lynch matter told me that his eyes had been opened regarding how large securities firms really work and he was no longer sure his assumption that they were pretty good at policing themselves was correct. So, I would say that if Merrill Lynch has problems, it stands to reason that the rest of Wall Street likely has problems, too.
MR: When you say that, arguably, there are problems with the board of directors, could you please elaborate.
KS: Yes. When I sent my 31-page letter to the board of directors, I made reference to the fact that the first internal investigation was flawed, either intentionally or because of incompetence. At that point, I had the expectation that the directors, given their fiduciary responsibilities to the shareholders, would surely not allow the same senior management to do a second internal investigation. Common sense tells me that if you have the same people redo the investigation, they're not going to conclude there was a cover-up in the first one. So I felt the board had the responsibility, at that point, to retain outside independent counsel for the second investigation. The directors chose not to do that.
MR: Tell our readers a little about why your case was tried as an NYSE Arbitration as opposed to a case in the courts. What is the logic and limits of arbitration for this kind of dispute?
KS: My case was a wrongful termination case. The employment agreement I executed with Merrill Lynch did not require arbitration of any disputes I might have with the firm. However, the U-4 registration form filed with the securities regulators, which I had to sign, had some language in small print that effectively required arbitration of any dispute. My counsel filed the action in state court, but it was soon removed to federal court. Merrill Lynch filed a motion to compel arbitration, against which we unsuccessfully made a number of legal arguments. As a result, I had no choice but to arbitrate under the auspices of either the NYSE or NASD, both self-regulatory organizations controlled by the securities firms themselves.
The logic for arbitration is that it supposedly is a quicker, less expensive, and more efficient process than the courts, largely because the arbitrators are familiar with the securities industry. The limits, particularly in my NYSE case, were significant. The three arbitrators - who are paid a fee for their services - were selected by the director of arbitration of the NYSE. Each side has the right to challenge an arbitrator for cause as well as exercise one peremptory strike. Once the panel was selected, however, I felt there to be a serious, inherent conflict of interest. The arbitrators were charged with deciding an extraordinarily sensitive matter, particularly in respect to my allegations of a senior management cover-up. This could reach not only the upper echelon of senior management but also the boardroom of Merrill Lynch. The arbitrators were also very much aware of the peremptory challenge that could be wielded against them by Merrill Lynch in any future case involving the firm, but knew they would likely never see me again. Consequently, I felt the very system meant that the arbitrators lacked the objectivity of a jury of one's peers.
MR: What role did regulators play in your case?
KS: A disappointing one. In my book, I cover in great detail the shortcomings of the different regulators. The NASD failed to interview critical parties, and allowed wrongdoing by certain individuals to go unpunished. The SEC and NYSE largely relied on Merrill Lynch's numerous self-serving and inaccurate responses to my allegations. Of course, in my arbitration, Merrill Lynch, in an effort to strengthen its case, downplayed the seriousness of the multitude of wrongdoings I had brought to light, as supported by the lack of any significant regulatory action. Frankly, it is now easy for me to see why Merrill Lynch and other securities firms make it a regular practice to hire enforcement personnel away from the various regulators. The dangling carrot of more lucrative pay in the private sector can be enticing.
MR: Your book is in the form of a personal narrative. Why did you choose that format?
KS: I thought a personal narrative would be the most effective way to tell the story - a way that all readers could relate to. My story has not only legal, business, and ethical dimensions but also a human one. I share in detail the level of hostility and tension I encountered. I also share the concern I had for my family as things unraveled so disastrously. I explain my motives behind my actions, including coming to the realization that I did not want to be part of an organization that I saw as infected with hypocrisy, right up to the highest levels. I wanted my book to be one that could be understood and appreciated not only by legal and academic professionals and sophisticated Wall Street investors, but also by other readers who can relate to simple issues such as right versus wrong, fairness versus unfairness, and decency versus indecency. I've been told by many readers that the narrative form makes for interesting reading, as the story unfolds the way it would in a novel - and the way it did in real life.
MR: Tell us a little about what led you to write this book?
KS: I wrote my book because I have a story that I believe the public needs to hear. As I see it, it is a story of how a large corporation accepted widespread wrongdoing and then how it played a game in which the primary objective was to win, regardless of the merits. The more I learned about Merrill Lynch's modus operandi, the more resolved I became to expose it.
Having seen pervasive problems in a company that people trust with their money, I spent ten years going through all the normal available channels - within the company, before regulators, and in the courts. This was David v. Goliath, and Goliath had the brute strength to prevail.
But I'm an optimist. I am hopeful that the truth will prevail, and that an effective verdict will come from the court of public opinion.
MR: What relevance does your book have for employment law and securities law?
KS: A great deal of relevance, I hope. I tried to blow the whistle on a corporate climate that violated the trust the public had invested in a huge corporation. As a result, I lost my job. Also, the regulators, for the most part, and the judicial system sided with the company. Something is wrong with that picture.
MR: What is your take on recent revelations concerning brokers?
KS: I'm certainly not surprised. The corporate culture ten years ago was to downplay the interests of clients, in favor of the company's financial bottom line and maximizing remuneration of individual employees. That's consistent with all of the current and recent allegations.
I was disappointed with the outcome of Attorney General Spitzer's case against Merrill Lynch concerning the conflicts with investment analysts' research opinions. If Spitzer had the case he claimed to have, I think he should have gone much further since so many Merrill Lynch investors apparently suffered significant losses as a result of less-than-honest research reports. Instead, Spitzer allowed the firm to do what it is so good at doing - that is, to buy its way out of a problem. A firm with $38 billion in revenue paying a fine of $100 million would be the same as an individual with annual income of $100,000 paying a fine of $263 to avoid testifying in public hearings and possible criminal indictments. While some beneficial changes will be made as a result of the settlement, Merrill Lynch, of course, did not have to admit to any wrongdoing. I'm confident that Merrill Lynch is celebrating behind closed doors, as they have once again "prevailed."
MR: What reforms would you recommend to prevent future wrongdoing in brokerage houses?
KS: I would abolish the self-regulatory system, that is, the NYSE, NASD, and others, because of the inherent conflicts of interest, and expend those funds to strengthen the SEC. I also think, in an effort to restore integrity to the system, there should be a prohibition of SEC enforcement personnel going to work for securities firms for a reasonable length of time after their service with the SEC.
Also, I recommend making binding arbitration available only if it is agreed to by both parties to a dispute, on a dispute-by-dispute basis. Unknown to many, and in most cases, whenever one becomes either an employee or client of a securities firm, the requirement of binding arbitration of disputes is part of the contractual agreements. Furthermore, arbitration essentially takes place behind closed doors and makes it more difficult for the public to be aware of brokerage firm wrongdoing. I think open hearings in a court of law would allow investors to obtain better information about the markets and serve as an incentive to Wall Street firms to clean up their act.
MR: Do you have any final thoughts on your case and its social impact?
KS: We've heard from a lot of commentators that investors today - particularly the small investors who are trying to save funds for college and retirement - are feeling that they can no longer trust the advice of professionals. They don't know where to turn. This damages investor confidence, a key factor in the nation's economic health.
I hope that my case will help to pinpoint some of the problems and to generate solutions. I also hope that actions will be taken to better protect the interests of whistle-blowers and to create a climate in which the main incentive of Wall Street firms and financial advisors is to give the best possible advice to their clients.
This has been a difficult chapter in my life. If making it public will help to spare others similar fates and reform the system, it will have all been worthwhile.
Foreword Reviews
August 15, 2002
Merrill Lynch: The Cost Could Be Fatal
By Brian Gilmore
Call this author a man with daring. An ex-stockbroker with legendary corporate giant, Merrill Lynch, Schooley took a bold chance in 1992. After witnessing questionable conduct by the management of the Merrill Lynch field office where he was employed in Enid, Oklahoma, Schooley contacted the corporate board of the company hoping they subscribed to the same level of morals and ethics.
He "could have ignored the problems" when he witnessed inappropriate activities, kept his job, and went on with his life. But Schooley didn't. His fateful choice resulted in his termination, the loss of his marriage and family, and led to a long, legal fight for Schooley against the company.
Schooley's story of his ordeal against Merrill Lynch is impressive in detail. The book fits right in with the current climate in America of rampant corporate scandals. Schooley's lawyer, Stephen Jones, wrote a letter to the Oklahoma attorney general and included this list of crimes: perjury; conspiracies; embezzlement; falsification of records; insurance law violations; illegal sale of securities by brokers not registered to sell them; misrepresentation of securities; and misappropriation of property....
..His story revolves around repeated examples of uncouth management cover-ups, a lackadaisical board of directors, and the final farce of going to arbitration.
As difficult as it gets, Schooley always seems to gather strength through the tough times. He felt it important that his story be told regardless of how things unraveled for him in the end. If anything, Merrill Lynch: The Cost Could Be Fatal confirms that large corporations cannot maintain the high ideals as described in their own literature to the public and employees.
Ethikos and Corporate Conduct Quarterly
November/December 2002
Taking on "America's Broker"
By Loren Singer
Merrill Lynch: The Cost Could Be Fatal; by Keith Schooley; 282 pages, Index; Lakepointe Publishing, 2002
In our time it is possible to behead a corporation, as a number of executives have learned. Disregard of the rights of their own shareholders and employees, and of the general public as well brings forth demands not only for restitution, but retribution and in some cases a call for vengeance....
...[Schooley] writes that he "declared war" on Merrill Lynch after they refused to live up to the terms of their own corporate philosophy as stated in the firm's "Guidelines for Business Conduct" that included such statements as "Improprieties should be reported to whatever level of Management necessary to properly address the situation." Quite single-mindedly, he took the company at its word, certain that the founder Charles Merrill would have wanted it that way.
...[This book is] a most worthwhile memoir setting down in exhaustive...detail just how corporate entities maneuver around, over and through problems with corporate ethics while continuing to profess the highest regard for their commitment to them.
Registered Rep
August 2002
A Little Light Reading
By David Gaffen
Merrill Lynch: The Cost Could Be Fatal, details Keith Schooley's career at an Oklahoma Merrill Lynch branch, a career that lasted one-seventh the time of his legal battle for a settlement. Schooley was fired after a year at the firm spanning 1991 and 1992, much of which seems given to reporting misdeeds--some large, some not--at the branch. His drawn-out arbitration battle failed, and with legal recourse exhausted, he wrote and self-published this gossipy tome to tell his side of the story. The foreword is written by his initial attorney, Stephen Jones, better known for representing executed bomber, Timothy McVeigh.
Business Times
December 2002
When Keith Schooley took a job with one of the largest, most respected securities firms on Wall Street, he had high hopes for a successful career in finance. He was proud to work for a company of such high integrity as Merrill Lynch. It didn't take long, however, for Schooley to realize Merrill Lynch's well-cultivated reputation was not based on what went on behind the facade....
Chicago Tribune
August 18, 2002
Tell-tale Risks
By T. Shawn Taylor
...Keith Schooley's 13-year marriage didn't survive his whistleblowing activities at Merrill Lynch in 1992.
Schooley, a financial consultant on the fast track at the Enid, Okla., office, was fired after he took allegations of cheating and fraud all the way to the board of directors. Schooley said he couldn't stand by and watch unethical behavior.
"The only thing I made the mistake on was trusting the company to take appropriate action," he said.
Enid News & Eagle
December 9, 2002
What comes around...Allegations against firm appear prophetic
By Scott Fitzgerald
It's a classic case of David standing up to Goliath.
Former Merrill Lynch financial consultant Keith Schooley of Enid, who worked at the now defunct Enid office from 1991-1992, continues to challenge one of the country's most prominent brokerage firms.
...Schooley said his story, told in the first person, is "an indictment of not only Merrill Lynch, but of securities regulations oversight, inherent unfairness of the securities binding arbitration and the impact on investors who are subject to binding arbitration if they have a dispute with their brokerage firm."
...Schooley's story is prophetic of what's happening now in the corporate financial world. Massive corporations are declaring bankruptcy because of financial mismanagement and deception. Chief executives are getting charged with white collar crimes a mile long. Those who serve on boards are getting scrutinized. Do they do anything at all?
...Schooley's book is generating ripples. He has been interviewed for a story in the September/October 2002 issue of Bimonthly Review of Law Books. Schooley has also been interviewed by the Chicago Tribune and is scheduled for interviews on several radio shows.
..."What is frightening," [Schooley] said, "is the misbehavior by corporate leaders we are seeing now is only the tip of the iceberg. People need to be encouraged to stand up and speak out."
Amazon Top 10 Reviewer (Robert Morris)
...Dante reserved the last (and worst) ring in hell for those who, in a moral crisis, preserve their neutrality. According to Schooley, there were many senior-level executives within the Merrill Lynch organization who did so as did officials at various regulatory agencies...
...I rate this book so highly because I think it raises a number of questions which must be addressed by senior-level corporate executives, especially now as other allegations are made by other Schooleys in their respective organization...I think this [book] is a brilliant achievement.
Amazon Top 100 Reviewer (Linda Zarate)
This is a chronicle of one man's attempt to do the right thing only to pay a high price in his personal and professional life. The book opens with a quote from Merrill Lynch's corporate counsel made when the author joined the firm, "[b]ut let integrity slip and take second place to revenue - then it will cost us more than dollars. The cost could be fatal." This sets the background in what was to become a war of one rookie financial consultant against hypocrisy and internal expediency that was the opposite of the lofty rhetoric of the corporate counsel.
...A few things about the story - there is no bitterness or rancor on the part of the author. He is fair and objective, and writes in an even manner. He names people by name, has thoroughly documented the episode and has left it to the body of readers to be the court of public opinion. The book is a good read, and it may just expose some of the fallacies in the very systems that are designed to protect us as individuals, consumers and shareholders.
Amazon Top 10 Reviewer (Joanna Danemen)
What happens if a stand-up kind of guy decides to follow the written code of ethics in his brokerage firm? Well, the result is as if you sent a cub scout to join a den of vipers.
...Schooley soon found out that his office co-workers and supervisors were playing a bit fast and loose with their own guidelines in order to pass exams and win contests. When Schooley notified Merrill Lynch of violations of the ethics code as set down in their own documentation, his findings were hardly received with cries of joy. Rather, a cover-up on the scale of the Watergate break-in resulted.
...As far as taking care of the customer, including doing all in the customer's best interest and fully informing a client about the financial products they were investing in, that was not even a consideration. As one supervisor put it "Just sell."
Why read this book? The arbitration proceedings, which form a greater part of the book, are interesting to see how these guys operate. The view into a brokerage office will make you think again about the trust and faith you may be putting in your broker.
Amazon Top 50 Reviewer (Mike Tarrani)
...Most readers who work for large corporations will relate to the disparity of their company image as projected to the public versus the reality of what goes on inside. Some will even relate to the moral and ethical dilemmas the author faced, and this book will perhaps inspire some to go with their conscience and others to take the easier path. Regardless of the path chosen, the story is a real life examination of integrity and ethics and how they relate to contemporary business values. It would make an excellent case study in a course on business ethics. It's also a book that should be read by anyone whose profession has a code of professional ethics.
