TheStreet Foundation (July 14, 2016) -- The brokerage industry works hard to keep customer complaints out of public view, with aggressive firms fighting to remove grievances that sully their brokers' records. The interminable campaign to sanitize the dossier of former Royal Alliance Associates broker Kathleen J. Tarr is a disheartening case in point.

At a court hearing Friday, a lawyer for New York-based Royal Alliance made a case to a panel of three California appellate judges that a customer dispute -- one of 44 -- on Tarr's Finra records should be expunged.

It was but the latest in what's become an epic drama that could only take place in the wacky world of Wall Street's private justice system. More importantly, it's a screaming reminder that anyone who does business with a securities firm would be insane to assume that the stuff they read on Finra's online BrokerCheck tells the whole story.

Tarr wooed dozens of AT&T employees to open accounts when they were getting early retirement offers during a series of downsizings starting in 2007. By 2010, the complaints began to roll in, accusing Tarr of steering clients into portfolios of high-commission variable annuities and non-traded real estate investment trusts, or REITs. (Fifteen of the 44 complaints were either dropped by the investor or denied by her employer and never reached the point where an arbitration claim was filed.)

Now, she, her lawyer, and Royal Alliance are on a quest to scrub at least some of that information from her unsightly record. Should they succeed, the case will be deleted from the Finra BrokerCheck website, which is meant to give investors some insight into the brokers they may choose to work with.

In Fall of 2014, I wrote in The New York Times that Tarr had appealed to a panel of Finra arbitrators that the record of a Royal Alliance settlement with her former client Sandra Liebhaber of Scappoose, Oreg. should be deleted. Liebhaber's lawyer shared an audio recording of the outrageous 40-minute private expungement proceeding with me at the time. The arbitrators allowed Tarr to carry on about her pedigree -- the daughter and granddaughter of ministers -- and to detail how the portfolio she designed for Liebhaber "completely fulfilled her objective." But the arbitrators wouldn't allow Liebhaber to speak at all, and cut off her lawyer, Robert Banks, when he asked to cross-examine Tarr.

In the end, the panel recommended expungement. Incredibly, they also wrote that Liebhaber had given a "full argument" that day.

Finra claims on its website that expungement "is an extraordinary remedy that should be recommended only under appropriate circumstances," yet, according to the Public Investors Arbitration Bar Association, a trade group for lawyers who represent investors, "arbitrators granted expungement in roughly nine out of 10 cases that were resolved by stipulated award or settlement." Finra has tried to address PIABA's criticisms.

With an expungement recommendation in hand, a brokerage firm still has to file in court for confirmation of the award. So Liebhaber had the opportunity to file an opposition to the expungement recommendation and persuaded a California superior court to overturn the decision. At Friday's hearing, Royal Alliance argued that the superior court was in error.

Among its arguments, the brokerage firm said in a March 17 brief that just because Finra rules say arbitrators "should" allow an investor to testify in an expungement hearing doesn't mean it is required.

To get an idea of how Tarr became the target of so many angry customers, consider the backdrop described in an ongoing case filed with Finra on June 30, 2014. Four investors who had worked in AT&T's Sam Ramon, Calif. facility said in a Statement of Claim that Tarr and a partner "would roam the halls, especially when an upcoming layoff or employee buyout was announced, seeking to market their services to employees being laid off, or wondering whether to take a buy-out package." Like most of the other investors who filed complaints against Tarr, the San Ramon group said they were put into illiquid investments that were not suitable for retiree accounts.

A spokeswoman for New York-based Lightyear Capital, which owns a group of brokerage firms that includes Royal Alliance, declined to comment.

Paul W. Thomas, the Carlsbad, Calif. lawyer who represents Tarr, said in a telephone interview that Tarr is "hoping that she can get back in the industry" and that he can say "without reservation" that she gave sound financial advice to her customers. Thomas said he recently persuaded a Finra panel to recommend that a reference to fraud be expunged from her record and that he's preparing an expungement request for Tarr in yet another case. She faces 15 pending cases.

Craig McCann, a former senior financial economist at the Securities and Exchange Commission, said in a telephone interview that he has testified as an expert witness in three cases against Royal Alliance after analyzing "a couple dozen" accounts of Tarr's former clients. "These are very modest investors with $300,000 or $400,000" in retirement money, he said. The only reason to put them in high-commission REITs and annuities "is to put money in" the pockets of Tarr and her former employer, he said.

Three investors were awarded $1.4 million in damages and costs in one of McCann's cases. Tarr was not listed as a respondent, but did ask for expungement because the case was listed on her record. The arbitrators denied her request. Seven investors were awarded $600,000 in damages and costs in a second case against Royal Alliance in which Tarr similarly asked for expungement, which was denied. The third McCann case is ongoing.

Thomas said that if his client "was really in the business to make high commissions" she would not have advised them to keep cash reserves that did not generate revenues for her.

To fully appreciate the folly of the developments around the Liebhaber case, you need to understand the privileged position that brokerage firms have been in for the past 29 years.

If investors were able to actually sue their brokers, I'd be keeping myself busy this week writing a list of 10 ways to adjust your portfolio if Donald Trump becomes president and Thomas would be explaining to Tarr that there are no friendly arbitration panels to vaporize your records when someone sues you in court. But the investment industry has fought hard to set up a system where justice is doled out behind closed doors, and expungement is among the perks.

The nifty arrangement for Wall Street all derives from a 1987 Supreme Court case involving a Yonkers, N.Y. couple who had agreed in account opening documents that they would arbitrate in the event of a dispute. They filed a court complaint when they later lost money, but their broker fought to force them into arbitration, where hearings are private and documents are not filed publicly. The Supreme Court agreed that the couple could be forced to use arbitration.

On July 14, 2010, Royal Alliance fired Tarr, noting on her Finra records that she was discharged for "failure to follow firm policy regarding the pre-approval of variable annuities." So you might wonder why the firm would be putting so much energy into fighting on her behalf.

Royal Alliance explained it aptly in a brief on Nov. 12. If the complaint gets expunged, "Royal Alliance will be able to use that judgment and the Expungement Award to its benefit in the ongoing arbitrations and in any later filed arbitration." In other words, as Liebhaber's Los Angeles-based lawyer Leonard Steiner put it, "They want to be able to walk into future hearings waving around these court orders and saying 'Look, the panel found Tarr did nothing wrong.'"

Finra joined Steiner in arguing against the expungement on Friday -- a welcome change from a self-regulatory group that sometimes coddles the brokerage firms that pay its bills.

Steiner expects the judges will issue a decision on the Liebhaber case within 30 days, but don't get your hopes up that you'll hear the end of Tarr's saga any time soon. Her lawyer told me he has filed a $15 million defamation claim with Finra against two of Tarr's former colleagues from brokerage firm SII Investments, one of whom allegedly "drove her out of the industry" when he contacted dozens of her clients to trash her. Neither responded to my emails.