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What’s involved when an employer is ‘doubly negligent’?

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The employee was involved in at least one other diversion-and-cover-up scheme, the foundation’s complaint also claimed.

Second, the court emphasized that the employer’ duty to supervise its employee did not extend only to dealings with customers. A customer relationship was not a prerequisite before filing a negligent supervision claim, the court said.

Third, the court noted that the allegations of the employee’s drinking and gambling problems did not, on their own, support a finding that the employer should have known about the employee’s propensity to commit fraud. There was a disconnect between these alleged acts and the employee’s fraud, the court said.

Excessive drinking and obsessive personal stock trading might be unprofessional or irresponsible for a financial advisor and could be deserving of oversight or discipline, the court acknowledged. However, these acts were not illegal, tortious, or indicative of dishonesty or a propensity to mislead or to intentionally harm others, the court said.

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