American Investors Co. and others were ordered to pay a $2.7 million award to a retired American Airlines pilot in a case involving suitability.  On the advise of his broker, Sewell Frey, Sr., claimant Andrew Michalak invested more than $2mn - essentially all his savings earned over a 30-year career - in a pair of non-public mortgage funds managed by Dunham & Associates Investment Counsel.  The funds suspended redemptions in early 2009, preventing Mr. Michalak, who's in his seventies, from accessing his retirement accounts to pay for the daily living expenses of Mr. Michalak and his wife. 

“I don't think he ever appreciated the difference between public and private funds.  He woke up one day and didn't have any access to his money."  -- Thomas Costello, claimant's counsel.

After the 5-day hearing, the arbitration panel agreed with claimant that retirement money should not have been concentrated in 2 non-public mortgage funds. 

    Panel's Award.   The panel decided that American Investors Co. and adviser Sewell Frey Sr. should pay $1.32mn in damages, interest and fees.  Fund manager Dunham & Associates was ordered to pay $1.4mn in damages to Mr. Michalak who, in turn, transferred ownership of his shares back to Dunham.  [Investment News, 3/25/11]

Claims against another Dunham entity and 2 officers "were completely dismissed and expungement recommendations were made for one of the officers," said Dunham's chief sales and marketing officer Salvatore M. Capizzi.  This is FINRA Dispute Resolution Case 09-05641.   [InvestmentNews, 3/25 ]