Oppenheimer Has Heart of Stone, Ethics of Putty

New York broker-dealer Oppenheimer & Co., a unit of Canada's Oppenheimer Holdings(OPY Quote), has been forced to pay out more than $2 million for letting one of its financial advisers scam an elderly woman while her husband lay dying.

The company's costs in a settlement announced Monday include a remarkable $1 million fine levied by Massachusetts Secretary of State Bill Galvin as well as $1.1 million in restitution to the client, Doris Pitera.

Oppenheimer, a firm that likes to trace its roots back to 1881, is not related to OppenheimerFunds, the mutual fund management subsidiary of Massachusetts Mutual Life Insurance.

The real scandal about the Pitera case isn't that an unscrupulous adviser allegedly preyed on an elderly and trusting customer who knew little about finance. It isn't even that the adviser was able to operate under the nose of his supervisors without being stopped.

Those things, alas, happen all too often. Galvin has charged the adviser, Stephen J. Toussaint, with securities fraud and excessive and unauthorized trading.

The real scandal is how Oppenheimer management behaved when it learned of the wrongdoing in its Boston office.

You might have expected managment to fire the adviser, cooperate fully with investigators and repay Mrs. Pitera her money.

Instead it tried to ignore the problem, which included both account manipulation and $350,000 in forged checks. It even employed Toussaint for another year before letting him quietly resign.