Legaspy: I do a lot of personal work. I’m an emotional intelligence coach. I have a whole other side to me that’s not financial. And my practice got me through this. It would have been very easy to slip into being a victim. I allowed myself to be angry, really, really angry. But then I focused that anger and that rage, which was not controlled, into a very creative energy. When I’m facing a much bigger, stronger enemy, then I have to focus on tender spots. Identify conflicts of interest, create doubts and confusion. That was a lot of my strategy. And I hate bullies. I knew if I didn’t fight I wouldn’t make it, so I said "I’m going to fight until I can’t fight anymore, and I’m going to make it really expensive for them." You have to cherish the battle independent of the outcome.
FA: What else was part of your strategy?
Legaspy: In the old days, when the retail investor was serviced by a broker that had discretion, it was a two-way relationship. But now more and more investment advisors are the ones managing the relationship, and the brokers are just service providers. However, the arbitration agreement between the brokerage firm and the end client does not include the investment advisors. So in my case, the perpetrators were not part of Finra. So they were betting that they were out of reach in the proceedings. What they didn’t expect is that I would run to federal court to file separate parallel proceedings. So in order for them to prevail, they had to win twice. Or we do a mutual walk-away. And that’s how we settled a lot of the lawsuits.
FA: Ultimately, how much did you pay out, and what were your legal fees?
Legaspy: The lawsuits totaled $40 million. My out of pocket expenses were $4 million, including $2 million in legal fees. I’m currently suing Deutsche Bank for $7 million to cover my out-of-pocket and $3 million for the diminishment of the value of my company.
FA: Larry, looking back is there something Carlos legally should have done differently at any stage?
Landsman: No, I think Carlos did what he was supposed to be doing. He was the custodian of these assets. He wasn’t selling them or recommending them, he was the custodian. Biscayne Capital was a formidable and respected entity for a long period of time, and he saw an opportunity because Raymond James was coming out of that space. I think he had done the due diligence that he was responsible to do, and there weren’t really allegations about that. A lot of the claims brought against him didn’t have anything to do with the Ponzi scheme, it was more about mundane issues regarding the management of the accounts.
FA: Carlos, what do you do differently now?
Legaspy: One of the things I recognized was that in my striving to build my business I rejected a team effort. At the end of the day my own ego got in the way and I wanted to be the sole decision maker. But as experienced as I am, I have blind spots. So now I have partners. What I want is, when we enter into a business relationship, we have a discussion among the partners so that they may see something I don’t see. I don’t know if that would have caught this or not, but it’s harder to fool three people than one person. And that required humility for me to recognize that. I’m not perfect, and I have to relinquish some control.