An arbitrator later ordered Bales and the owner of the firm that employed him to pay $1.4 million — about half for compensation and half in punitive damages — for taking part in “fraud” and “unauthorized trading,” according to a ruling from the Financial Industry Regulatory Authority, the independent disciplinary board for brokers and brokerage houses.
A review of the investor’s account statements, obtained by The Washington Post, shows that valuable stocks were sold off in favor of penny stocks as part of what the arbitrator called “churning” by Bales to pump up commissions.
The client, Gary Liebschner, a 74-year-old retired engineer for AT&T, said Sunday that he “never got paid a penny” of the award.
There is no indication that the civil ruling weighed on Bales in recent years. He never attended an arbitration hearing in the case — although he had been given legal notice of his right to present his version of events — and an attorney for Liebschner said it had been years since his client had attempted to collect the award from Bales.
But the finding of financial fraud adds to an increasingly complex picture of a man who, on the one hand, is described by friends and neighbors as a family man and an even-tempered soldier, and, on the other, had repeated encounters with the law, including an arrest on suspicion of drunken driving, involvement in a hit-and-run accident and a misdemeanor assault charge.
In addition to those incidents, he had evidently been under financial stress. His home near Tacoma was put up for a short sale a few days before the March 11 shootings in Afghanistan.
Bales is being held at a detention center at Fort Leavenworth, Kan. He is expected to be formally charged in the coming days.
On Monday, his attorney, John Henry Browne, told the Associated Press that Bales has a sketchy memory of the night of the massacre and recalls very little about the time when military officials said the shootings occurred.
Browne did not respond to requests for interviews over the past several days. At the time of the complaint involving the stock trades, Bales did not have an attorney.
Bales, a 38-year-old father of two, was on his fourth war tour when he reportedly walked out of his unit’s camp alone in the black of night in a rural area of Kandahar province and shot sleeping villagers, most of them women and children. As a member of the 3rd Stryker Brigade Combat Team, 2nd Infantry Division, he had deployed three times to Iraq and once to Afghanistan from Joint Base Lewis-McChord in Tacoma.
Bales’s wife, Karilyn, issued a statement Monday describing the shooting as a “terrible and heartbreaking tragedy.”
“Our family has little information beyond what we read and see in the media,” she said. “What has been reported is completely out of character of the man I know and admire.”
The period of Bales’s life immediately before he joined the Army has remained relatively opaque, even as details have emerged about his childhood and time overseas.
Financial records, however, indicate that Bales held a series of brokerage jobs from July 1996 through December 2000, spending little more than a year at each firm. In 1996, he passed an entry-level exam that permitted him to trade stocks, bonds and various municipal securities, and in 1997, he met a similar testing standard set by state regulators, records with Finra show.
Bales and his brother, Mark, formed an investment firm in Doral, Fla., in 2000 along with Marc Edwards, a former NFL player and longtime friend of Robert Bales’s from their days playing high school football together in Norwood, Ohio.
The company lasted less than a year and closed because of “market forces,” Edwards said through a spokeswoman Monday. Edwards added that the episode did not affect their friendship, saying that he viewed Bales as “a person with enormous integrity, courage and loyalty.”
That is not the man that Liebschner said he dealt with when Bales was much younger and listed as the “investment executive” on his retirement account. The fund held stock that Liebschner had inherited and earned during his AT&T days, as well as other investments.
Although Liebschner said he would occasionally suggest a stock purchase — he bought stock in the Cleveland Indians for sentimental reasons, he said — he mostly had the firm where Bales worked manage the account.
A severe reaction to medication left Liebschner hospitalized and in a rehabilitation center from November 1998 until June 1999. At the time, his wife, Janet, who took time off from her nursing job, was pressed for money to cover car and mortgage payments, as well as the cost of renovations to their home to make it wheelchair-accessible, she said.
She hadn’t previously been in charge of the couple’s finances, she said, but after she began to examine account statements, she realized that the fund had been severely depleted.
Her husband’s retirement account had nearly $700,000 in 1998, his statements show. By early 2000, the fund had about $30,000 in it.
Once Janet Liebschner and her husband realized what had happened, they were “outraged,” she said.
Bales took them to dinner at a “very nice Columbus club” and assured them that the stocks would rebound, she said. Bales paid for dinner — “or I guess now I’d say we actually did,” Janet Liebschner, now 65, said ruefully.
The couple’s attorney, Earle R. Frost Jr., said he had called Bales and attempted to reach a settlement with him to avoid the arduous process of arbitration. Frost said that Bales declined and that the case moved forward.
“They found fraud,” Frost said, referring to the arbitrator’s decision. “I can’t say it any better than that.”
By the time the 2003 ruling for his clients was made, Frost had suffered a stroke that still impairs his speech, and although he spent about a year in 2003 trying to serve further legal action on Bales, he never succeeded.
Gary Liebschner said the reappearance of Bales raised his hope that he might get his money.
Thompson reported from Columbus, Ohio. Staff writers Carol Morello in Tacoma and Steve Mufson in Washington contributed to this report.