TheStreet (June 24, 2015 9:00 am) —
Wall Street’s private justice system for investor disputes has been full of surprises in recent years.

There was the time the Financial Industry Regulatory Authority offered a list of potential arbitrators to the parties in a dispute and two of the arbitrators were deceased.

And there was the case of the arbitrator who told Finra he was a lawyer, but wasn’t. That guy managed to participate in 38 arbitrations over a 15-year period before Finra caught up with him, according to Reuters. In yet another case, an arbitrator misled Finra about the terms of his indictment by a grand jury.

You can now add to those stories the previously untold tale of the arbitrator who failed to say on his arbitrator-disclosure report that he had been accused of judicial misconduct and had been arrested for voyeurism. The charges against him are dated, and reports by psychologists 13 years after his arrest included remarks that his behavior was in “long term remission.”

But lawyers for an investor who requested that he be jettisoned from a proposed arbitration panel say Finra should have known it was offering them an adjudicator whose judgment could be called into question. The story of Mark H. Adams is the latest example of Finra’s inability to find and keep reliable information about the backgrounds of the people who sit as judge and jury on closed-door arbitration hearings.

“You need to give people confidence that if they’re forced into arbitration, they at least have the information they need to make informed decisions,” said Susan MacPherson, a jury consultant who has worked with the plaintiffs’ lawyers at Piaba, a bar association of investors’ lawyers, on a study of Finra arbitrators.

In December, Finra assigned Adams to a three-person panel that would oversee an upcoming arbitration brought by an aggrieved investor. It would have been the third Finra arbitration he’d participated in since 2010.

Apparently unbeknownst to Finra, Adams, a former court commissioner for the Washington State Court of Appeals, agreed in a stipulation with the state’s Commission on Judicial Conduct on August 26, 1991 that he would no longer serve in any judicial office in the state because of what the commission called “acts of judicial misconduct” while he served as a commissioner. Not only did he fail to include that on his disclosure report, but Finra failed to pick it up in the vetting it describes as standard operating procedure before putting an arbitrator on a panel.

Finra disqualifies anyone who has been the subject of adverse disciplinary action by a professional body for non-technical violations, and so Adams should have disclosed the stipulation when he applied to be an arbitrator, said Joseph C. Peiffer, president of Piaba and one of the lawyers for the investor whose panel originally included Adams. If Finra had known about that history, it should have immediately disqualified him, Peiffer said.

Also, Finra makes a broad request of arbitrators to disclose any charges against them that the parties to a dispute should be aware of and says that failure to disclose material information is grounds for permanent disqualification.

Adams sat on two investment-case panels and was about to sit on his third before lawyers discovered his history and asked Finra to remove him from the case. Seth Lipner, a Garden City, N.Y., lawyer who represents investors in arbitrations, said it’s unlikely the awards in the earlier cases could be overturned. Courts would expect the parties in a case to discover information that’s easily available on Google before — not after — a hearing takes place, Lipner said.

In the stipulation agreed to in 1991, Adams denied the underlying charges of misconduct, which included allegations that he had put his hand in his pants pocket “in the presence of female court employees which they perceived as inappropriately touching his genitals, asking female court personnel to arrange dates for him,” and other improprieties. In an interview in early April, he said the allegations of inappropriate behavior at work “were groundless.”

The stipulation also said he had been charged in 1982 with a misdemeanor trespass “that he looked through a neighbor’s window.” The charge was dropped after he underwent two years of counseling for his voyeurism, according to a 1995 petition asking for Adams’ reinstatement as a court commissioner.

In the disclosure document he provided to Finra, he emphasized his skills in employment controversies, including gender-discrimination  and sexual-harassment cases.

Finra spokeswoman Michelle Ong said Adams was no longer an arbitrator on Finra’s roster. Asked when Finra took him off the roster, she said, “That’s all I have for you on this.

Adams told me in April that he had not been notified by Finra that he was out of the pool and that he “wouldn’t know why” he would be. There was “nothing pertaining to the 1991 incident with the Washington Commission that has anything to do with arbitration or Finra,” he said. He did not respond to a recent phone message and email seeking updated information.

Leslie Akins, a lawyer who is working on the case with Peiffer, said that her client was not comfortable having Adams on the panel once he knew about his history and that even if the on-the-job allegations and voyeurism charge had been made years ago, they were “fairly egregious.”

Two years ago, in the wake of the earlier glitches that included the non-lawyer who said he was a lawyer, Finra said it had begun to run Google searches of its arbitrators right before assigning them to cases.

“The procedures we are putting in place will help ensure not only that parties receive the information that they should but also that Finra’s active arbitrators are eligible to serve,” a spokeswoman told InvestmentNews.

But you’ve got to wonder if Finra is running those Google searches as promised. When I typed “Commissioner Mark H. Adams” into my Google search engine, the first item I got was the stipulation that describes his alleged “acts of judicial misconduct.”

There are lots of gray areas to consider in the case of an arbitrator who is said by therapists to have addressed the voyeurism that led to his arrest three decades ago. But one issue in this story is black-and-white: When it comes to vetting its arbitrators, Finra doesn’t have its act together. Investors facing an upcoming arbitration would be wise to check into prospective panelists on their own.