Did they agree to return your shares? I would also file a formal complaint with FINRA just so you have proof they have done this in the past (and to motivate them to quickly resolve the problem).
It is outrageous that a broker somehow believes they have that right to just discard your shares. I guess they figure many folks will never notice.
What I am wondering is what they did with the electronic shares. Did they put them in a Penson "bit bucket" account where they hold them and wait for some to gain value and then cash those out for their own gains?
Before you criticize a man, walk a mile in his shoes. That way, if he gets angry, he's a mile away and barefoot.