In 2014, when LPL Financial CEO Mark Casady learned that his friend, the broker James E. “Jeb” Bashaw, was being investigated by the firm over two separate million-dollar loans by a client as well as other irregularities, he said he was heartbroken but also felt “taken advantage of and conned.”

Casady, who’s since retired, made the comments in a FINRA arbitration hearing in August 2017. The sealed transcripts obtained by Financial Planning reveal for the first time the details of how the nation's largest independent broker-dealer turned on one of its own, moved swiftly to oust him, then had the dismissal upheld in arbitration.

“I thought it was an awful situation no matter how you look” at it, Casady said, describing Houston-based Bashaw as the largest producer ever investigated and terminated by LPL. The firm and Bashaw’s practice had expanded rapidly together for 13 years.

The Casady-Bashaw relationship went beyond business. The men went whale-watching off Cape Cod and enjoyed talking about books, such as one on Abraham Lincoln that Bashaw was reading at the time and a book on the Cape Cod Baseball League that Casady later sent him.

Casady and his wife Julia had donated money for research into Huntington's disease, an incurable genetic brain disorder that left Bashaw’s wife Kim unable to perform daily tasks at the time of his September 2014 firing. She died about six months later.

Within a month of vacationing at Casady’s Cape Cod home, Bashaw was told on a phone call with a member of LPL’s compliance and supervision staff that he had been terminated. The case presents a cautionary tale for advisors on how a loan from a client can tear apart a multimillion-dollar business.

Bashaw, 55, later named Casady in his arbitration claim, in which he sought damages of $30 million. After the panel rejected his claims last fall, in a 2-1 decision, Bashaw filed for Chapter 11 bankruptcy protection.

Bashaw’s lawyers had filed unedited transcripts as exhibits in their opposition to LPL’s court filing seeking confirmation of the arbitration decision. Last November, LPL’s legal team sought successfully in Houston federal court to seal the arbitration transcripts, asserting they revealed confidential partnership information; heavily redacted transcripts were subsequently made public.

Financial Planning obtained the transcripts before they were sealed, revealing the often-hostile and dramatic exchanges. Since none of the parties involved will discuss them, they present the only details available about the case. (See excerpts from another LPL executive's testimony below.)