Why FINRA's late appearance into smoothie-throwing broker James Iannazzo's life might be rough

The first cut was deep, but the most recent one bares big teeth.

Broker James Iannazzo, who was fired by Merrill Lynch last January, within hours of tossing a frozen drink at a high school girl with a side order of racially charged invective, is facing new headaches.

Now FINRA, the self-regulating financial industry oversight board, is igniting one more ring of fire – which may be the direct, or indirect result, of all the punishments and negative publicity Iannazzo received, according to Max Schatzow, managing partner of RIA Lawyers LLC of Princeton, N.J. 

“It is very common for FINRA and member firms to conduct fulsome investigations when a member is in the spotlight,” the lawyer says.

FINRA, short for the Financial Industry Regulatory Authority, disclosed on Nov. 9 that it is recommending disciplinary action against Iannazzo for allegedly structuring “cash transactions in his personal bank and brokerage accounts to avoid federal reporting requirements,” according to BrokerCheck.

The FINRA investigation is continuing and Inannazzo has declined to respond to publications like FundFire about the latest.

You may recall, following the January blow-up – which gained international attention – the 48-year-old Connecticut man lost his CFP credential (in February), was placed on probation (in April) and settled a lawsuit for $7,500 (in September). See: CFP Board bars Jim Iannazzo from using its mark 'or [even] suggesting' he holds it, at least until the ex-Merrill broker is adjudicated on three crimes arising from smoothie-throwing tirade

Upholding standards

This time, the agency cites the probable violation of Rule 2010, which dictates that “a member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.”

FINRA can impose a wide range of sanctions, including fines, suspensions, bars and expulsions, among other fitting sanctions, according to its sanction guidelines.

What makes it hard to assess is that the FINRA allegation against Iannazzo specifies transactions in his personal bank and brokerage accounts, which typically don't fall under FINRA oversight, Schatzow says. FINRA is solely focused on professional abuse.

But Schatzow says there are instances where personal accounts come under FINRA’s National Adjudicatory Council for this particular offense.

In a 2019 case, a Wells Fargo trader was accused of illegally structuring cash deposits in violation of the Bank Secrecy Act by breaking up gambling winnings into amounts of less than $10,000, the threshold for currency transaction reporting to the IRS. See:  Department of Enforcement v. White, 2019 WL 3425042 (July 26, 2019).

The trader argued that he had not engaged in business-related conduct for the purpose of FINRA's Rule 2010 because the deposits were made to his personal bank accounts.

The NAC ended up disagreeing, Schatzow explains.

“Noting that Wells Fargo and its employees have a heightened duty to comply with banking regulations, it relied on Wells Fargo’s code of conduct and other internal policies that explicitly forbade employees from illegally structuring their personal banking transactions,” he says.

Iannazzo is currently employed by Aegis Capital. See: The amazing -- though unsurprising to recruiters -- resurrection of 'smoothie' broker James Iannazzo, who lands at a brokerage 52 days after Merrill Lynch sacked him for his outburst

Intemperate outburst

The incident began last Jan. 12, when Iannazzo and his son visited a Robeks Fresh Juices & Smoothies shop in Fairfield and ordered drinks.

His son, who has an allergy to nuts, began exhibiting symptoms of an allergic reaction and ultimately had to be rushed to a hospital.  See: Merrill Lynch fired and removed all corporate traces of Jim Iannazzo in 24 hours -- after he went ballistic in a bigoted tirade caught on video-- but he still has a possible future as... an RIA

Iannazzo returned to the smoothie shop in a rage shortly afterward, holding the smoothie that had been served to his son.

An employee was already videoing him when he walked up to the counter. 

"I want to speak to the fucking person who made this drink. Was that you?" he said to an employee.

One of the workers tried to explain. "There's four of us here so we honestly don't know who made it," she said. 

But Iannazzo grew even more intemperate. "Fucking stupid, fucking ignorant high school students," he fumed, demanding to speak to the manager. 

"Okay, good-bye," said one of the workers, trying to get him to leave. "You can call corporate, or whatever you want."

 "Fucking bitch," he shot back. "I want the number."

Going Viral

As the woman began approaching the front counter, Iannazzo threw the drink, striking her in the shoulder and demanded the phone number, again. 

"I'm calling the police!" she shouted. "I'm calling the police!"

Iannazzo and the woman got into a shouting match that literally went downhill from there. Both engaged in expletive-filled rants.  At one point, he called her a "fucking immigrant bitch."

The scene was captured in the one-minute, nine-second video that ultimately was viewed more than four million times on social media and re-tweeted at least 10,000 times on Twitter.

Iannazzo claimed the drink contained peanut butter, which he said he'd specifically asked the baristas to avoid.

While there was no peanut butter in the drink, there may have been peanut residue, according to top prosecutor Ann Lawlor, who handled the case.  

Employees told police he did not mention the allergy and had only requested no peanut butter in the drink.

Top Gun

Iannazzo, who landed a new job less than three months later, pleaded not guilty to the charges.

Although the case was a low-level misdemeanor, it drew some of the state's top legal talent into court. See: The amazing -- though unsurprising to recruiters -- resurrection of 'smoothie' broker James Iannazzo, who lands at a brokerage 52 days after Merrill Lynch sacked him for his outburst

Iannazzo hired Eugene J. Riccio, a legend among local defense lawyers with 43 years of experience involving some of the state's highest profile criminal cases. 

Riccio gained early fame in 2002 when he represented one of the suspects in the sensational murder of Martha Moxley, who lived next door to the Skakel family in posh Greenwich, Conn. The Skakel's were related by marriage to Robert F. Kennedy.

The Skakel family tried to pin the murder on Riccio's client, a tutor who had been living at the Skakel house. But Michael Skakel, a nephew of Ethel Kennedy, was ultimately convicted of the crime.  

Sensational cases

Riccio became known for his connections and his ability to win reduced sentences for his wealthy clients.  

In 2012, he represented multi-millionaire landlord Joseph DaSilva Jr.,  and was able to limit his sentence to 18 months in prison for beating to death Luis Encalada, an impoverished, undocumented immigrant from Ecuador, according to NewsTimes. 

In 2014, he briefly represented John Michael Farren, the former Xerox general counsel and deputy White House counsel under President George W. Bush, who ultimately was convicted of attempted murder.

From there, he has been involved in a slew of  high-profile cases, ranging from a former Stamford teacher accused of child porn to the sensational case of socialite Hadley Palmer, who lived in the wealthy enclave of Belle Haven, Conn.

Palmer was accused of filming minors having sex in her multi-million dollar mansion; Riccio represented one of her victims.  

Riccio was also involved in the sensational 2019 murder of Jennifer Dulos. He was brought into the case in an attempt to get a $500,000 bond reduced for suspect Fotis Dulos. The judge ultimately rejected his plea.

Consequences?

In the Iannazzo case, Riccio successfully argued for the broker to be placed in a special program for first-time offenders, known as "accelerated rehabilitation."

Riccio said Iannazzo’s son vomited, told his parents he couldn’t breathe, and went unconscious. The son’s mother, a nurse, administered two EpiPens to bring him back. "This kid could have died that day," he said, according to Citywire, which covered the hearing in detail. 

For his part, Iannazzo profusely apologized for his actions. He claimed he was under duress after seeing his 17-year-old son hospitalized for an allergic reaction due to his peanut allergy. 

Prosecutor Lawlor did not oppose the program but argued for a lengthy probation. 

Lawyer Timothy P. Aspinwall, representing one of the employees, was against it.

"He traumatized four high school students and assaulted one of them. Granting AR will send a cold message to the Black and Hispanic members of the community,” he argued, according to press reports. 

The judge ultimately ordered Iannazzo to serve one year probation, make a $500 charitable donation, and to stay out of Robeks and avoid contact with any employees. If he stays out of trouble for a year, the charges will be dropped. 

Aspinwall likened the program to a “get out of jail free card." 

Smoothie guy

Ironically, the video worked in Iannazzo's favor during the hearing. 

"I was shocked and amazed at the number of times the video has been viewed," said a judge in the case. 

"The case has been covered by World News Tonight, TMZ, The New York Times, People Magazine, the New York Post, and even The Daily Mirror out of the UK… to say that he gets just a slap on the wrist or a free pass on this is absurd."

“He will forever be known as the Fairfield Smoothie Guy,” said another judge in one of two hearings on the case. “Thousands and thousands have watched the video, he went viral in a terrible way and that’s something he will never fix.”