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part two/ Location: NASD > Notices > 1992 > Disciplinary Actions (November)
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Disciplinary Actions (October) Disciplinary Actions (December)


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Disciplinary Actions (November)


Disciplinary Actions Reported for November

Michael Richard Johnson (Registered Representative, Wauwatosa, Wisconsin) submitted a Letter of Acceptance, Waiver and Consent pursuant to which he was fined $3,000 and suspended from association with any member of the NASD in any capacity for one day. Without admitting or denying the allegations, Johnson consented to the described sanctions and to the entry of findings that he recommended to public customers that they exchange one insurance product for a similar product offered by a company Johnson represented that was not an insurance affiliate of his member firm. The NASD found that, in connection with such activities, Johnson failed to give prompt written notice to his member firm of his outside business activities with other insurance companies.

Jay Frederick Keeton (Registered Representative, Seattle, Washington) was fined $25,000 and barred from association with any member of the NASD in any capacity. The SEC affirmed the sanctions following an appeal of a decision by the NBCC. The sanctions were based on findings that Keeton sold units in general partnerships that he formed, for the purpose of purchasing private placement stock, to investors without providing written notice to his member firm.

In addition, Keeton sent threatening correspondence to a corporation with the intent of coercing the company into meeting his demands for compensation relating to the purchase of its common stock by an investor. In connection with a firm's pending application for NASD membership, Keeton also submitted a Form BD that failed to disclose that he was the managing partner of three general partnerships involved in securities investments.

Edmund Francis Konczakowski (Registered Representative, Pompano Beach, Florida) was fined $20,000, suspended from association with any member of the NASD in any capacity for one year, and required to requalify by examination as a registered representative. The sanctions were based on findings that Konczakowski effected the purchase of shares of a common stock in the account of a public customer without the customer's knowledge or consent.

Lloyd Charles Krein (Registered Representative, Irvine, California) was fined $54,495 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Krein charged public customers unfair commissions on foreign currency options transactions.

David M. Lichniak (Registered Representative, Elyria, Ohio) was fined $40,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that without a public customer's knowledge or consent, Lichniak executed and submitted a salary reduction form concerning the customer's premium payment on a fixed annuity. In addition, Lichniak failed to respond to NASD requests for information.

Michael John Mclntyre (Registered Representative, Oceanside, California) submitted an Offer of Settlement pursuant to which he was fined $10,000 and suspended from association with any member of the NASD in any capacity for seven days. Without admitting or denying the allegations, Mclntyre consented to the described sanctions and to the entry of findings that he engaged in outside business activities and a private securities transaction without notifying his member firm.

Barry J. Miele (Registered Representative, Staten Island, New York) submitted a Letter of Acceptance, Waiver and Consent pursuant to which he was fined $15,625 and suspended from association with any member of the NASD in any capacity for five business days. Without admitting or denying the allegations, Miele consented to the described sanctions and to the entry of findings that he placed a purchase order on behalf of a public customer and charged excessive commissions of 23.08 percent of the total cost of the transaction.

Sidney C. Milsaps (Registered Representative, Knoxville, Tennessee) was fined $200,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Milsaps obtained checks totaling $164,000 drawn on the accounts of public customers, forged endorsements on the checks, and deposited the monies into his personal checking account, thereby converting the funds to his own use and benefit. In addition, he failed to respond to NASD requests for information.

Jeffrey Christopher Milton (Registered Representative, Houston, Texas) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Milton failed to respond to an NASD request for information concerning his termination from a member firm.

Anthony J. Morrell (Registered Representative, Rochester, New York) was fined $35,000 and barred from association with any member of the NASD in any capacity. The fine may be reduced by any amounts that Morrell pays in restitution. The sanctions were based on findings that Morrell misappropriated and converted to his own use insurance premium payments totaling $5,910.48 received from public customers. In addition, Morrell failed to respond to NASD requests for information.

Leslie L. Murphy (Registered Representative, Uniontown, Pennsylvania) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Murphy received from a public customer three checks totaling $2,507.18 intended as payment of insurance premiums and received five checks totaling $5,183.72 issued by his member firm to another customer. However, Murphy cashed the checks and retained the proceeds for himself. In addition, he failed to respond to an NASD request for information.

Jeffrey Andrew Murray (Registered Representative, Minneapolis, Minnesota) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Murray failed to respond to NASD requests for information concerning his termination from a member firm.

Christopher P. Mussenden (Registered Representative, Sarasota, Florida) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Mussenden converted customer funds totaling $12,156.50 to his own use and benefit. In addition, Mussenden failed to respond to an NASD request for information.

Charles Gerard Patterson (Registered Representative, Tampa, Florida) submitted an Offer of Settlement pursuant to which he was fined $10,000, suspended from association with any member of the NASD in any capacity for five days, and must pay $20,000 in restitution to public customers. Without admitting or denying the allegations, Patterson consented to the described sanctions and to the entry of findings that he recommended the purchase of securities to public customers without having reasonable grounds for believing that such recommendations were suitable for the customers. In addition, the NASD found that Patterson effected the sale of shares of common stock for the account of the same customers without their knowledge or consent.

Norman E. Phillips (Registered Representative, New York, New York) was fined $20,000 and suspended from association with any member of the NASD in any capacity for six months. The sanctions were based on findings that Phillips executed transactions in the accounts of five public customers without their knowledge or authorization.

Johnny W. Ray, Sr. (Registered Principal, Birmingham, Alabama) was barred from association with any member of the NASD in any capacity. The sanction was based on findings that in connection with the solicitation of funds from public customers for investments, Ray failed to give full and adequate disclosure to the customers regarding the identity or financial status of such investments. Ray also failed to maintain a current Uniform Application for Broker-Dealer Registration (Form BD) for his member firm. In addition, he failed to respond to NASD requests for information.

David D. Reeves (Registered Representative, Little Rock, Arkansas) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Reeves executed unauthorized option transactions in the accounts of two public customers. Reeves also failed to maintain current information on his Uniform Application for Securities Registration or Transfer (Form U-4). In addition, he failed to respond to NASD requests for information.

Dale Dwight Schwartzenhauer (Registered Representative, Sandy, Oregon) was fined $50,000, suspended from association with any member of the NASD in any capacity for 30 days, and required to requalify by examination. The SEC affirmed the sanctions following an appeal of a decision by the NBCC. The sanctions were based on findings that, to raise capital for a corporation, Schwartzenhauer engaged in private securities transactions without his member firm's prior written approval.

Moreover, Schwartzenhauer purchased restricted or control stock from customers, issuers, or officers of issuers and then sold a substantial portion of these shares to public customers. In these transactions, Schwartzenhauer also failed to obtain his employer's written approval. Furthermore, in contravention of the NASD's Mark-Up Policy, Schwartzenhauer charged excessive markups on sales of corporate securities to public customers.

Douglas P. Shebroe (Registered Representative, Smithtown, New York) was fined $10,000, barred from association with any member of the NASD in any capacity, and required to requalify by examination. In addition, Shebroe has to pay $26,500 plus interest in restitution to a public customer. The sanctions were based on findings that Shebroe recommended and effected unsuitable transactions in the account of a public customer that generated excessive commissions and markups. Moreover, Shebroe failed to disclose to the customer the commission and fee structure and did not reflect these commissions on his confirmations.

David M. Smith (Registered Representative, Lancaster, Pennsylvania) submitted an Offer of Settlement pursuant to which he was fined $1,500 and barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Smith consented to the described sanctions and to the entry of findings that he forged a registered representative's endorsement on a $310.94 payroll check issued by his member firm. According to the findings, Smith negotiated the check, and retained the proceeds for his own use and benefit.

Ted R. Starling (Registered Representative, Brooklet, Georgia) was fined $50,000, barred from association with any member of the NASD in any capacity, and must pay $306,021.38 in restitution to public customers. The sanctions were based on findings that Starling solicited and accepted checks totaling $306,021.38 from public customers, deposited the checks in his personal bank account, and applied the proceeds to his own use. In addition, Starling failed to respond to an NASD request for information.

Dennis Wayne Swanzy (Registered Representative, Hurst, Texas) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Swanzy failed to respond to an NASD request for information concerning his termination from a member firm.

Theodore Edmond Thomas (Registered Principal, Danville, California) was barred from association with any member of the NASD in any capacity. The sanction was based on findings that, in financing or refinancing numerous properties owned by limited partnerships previously underwritten by his member firm, Thomas diverted $1,899,003 of loan proceeds to other limited partnerships that were sold by his member firm without disclosure to the limited partners. In addition, Thomas, acting through his member firm, sold units of various limited partnership offerings and failed to deposit funds received from investors into an escrow account.

Manuel Mendoza Tiangha (Registered Representative, Redondo Beach, California) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Tiangha failed to respond to NASD requests for information concerning his termination from a member firm and a customer complaint.

Charles D. Tom (Registered Representative, Issaquah, Washington) was suspended from association with any member of the NASD in any capacity for one year. The SEC affirmed the sanction following an appeal of an NBCC decision. The sanction was based on findings that Tom executed options transactions in the joint account of two public customers without obtaining the customers' prior written discretionary trading authority and without his member firm's written acceptance of the account as discretionary. In addition, Tom guaranteed these customers against losses in their account.

Bruce D. Warshaw (Registered Representative, New York, New York) submitted a Letter of Acceptance, Waiver and Consent pursuant to which he was fined $10,000 and suspended from association with any member of the NASD in any capacity for one year. Without admitting or denying the allegations, Warshaw consented to the described sanctions and to the entry of findings that he fabricated fictitious customer complaints and forged correspondence regarding purported settlements with customers totaling $99,000 for the purpose of recording losses for income tax reasons.

Warshaw's suspension was deemed served from September 1, 1990, to September 1, 1991.

William R. Wohlers (Registered Representative, Keedysville, Maryland) was fined $25,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Wohlers executed unauthorized transactions in the accounts of public customers.

Derek H. Yamada (Registered Principal, Denver, Colorado) and William J. Caltabiano, Jr. (Registered Representative, Massapequa Park, New York). Yamada was fined $50,000 and an additional $100,915.62, jointly and severally with his member firm and another registered representative, and barred from association with any member of the NASD in any capacity. Caltabiano was fined $16,511.20 and ordered to requalify by examination before acting in any capacity requiring registration. In a separate NASD action, Yamada was fined $50,000 and barred from association with any member of the NASD in any capacity.

These sanctions were based on findings that a member firm, acting through Yamada and Caltabiano, effected principal sales or caused customer orders to be received and processed for purchases of securities at unfair and unreasonable prices. The markups on these trades ranged from 5.44 to 100 percent over the firm's contemporaneous cost for the securities, in contravention of the NASD's Mark-Up Policy. Moreover, Yamada and Caltabiano failed to disclose to customers that the prices charged were unfair and unreasonable.

Larry Lamont Ziebell (Registered Representative, Sunnyvale, California) was fined $53,044.76 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Ziebell received from a public customer a $3,044.76 check intended for the purchase of insurance and misappropriated the proceeds for other uses.

INDIVIDUALS FINED

David John Bernstein (Registered Principal, Youngstown, New York) was fined $12,500 and required to requalify by examination as a general securities principal or representative before acting in either capacity. The sanctions were based on findings that Bernstein engaged in private securities transactions with public customers without providing prior written notice to his member firm.

Morton B. Erenstein (Registered Representative, Florham Park, New Jersey) was fined $70,000. The sanction was based on findings that Erenstein engaged in private securities transactions without giving prior written notification to his member firm.

Ezra Grayman (Registered Principal, Springfield, New Jersey) submitted an Offer of Settlement pursuant to which he was fined $10,000 and required to requalify by examination as a general securities principal. Without admitting or denying the allegations, Grayman consented to the described sanctions and to the entry of findings that a former member firm, acting through Grayman, purchased common stock from customers as principal at prices that were unfair and unreasonable with markups ranging from 13.3 to 20 percent above the prevailing market price of the security.

The NASD also found that, in contravention of the Board of Governors' Free-Riding and Withholding Interpretation, a former member firm, acting through Grayman, sold shares of a new issue that traded at a premium in the secondary market to a restricted account.

Stuart Lee Huber (Registered Representative, Brooklyn, New York) was fine $20,000. The sanction was based on findings that Huber failed to respond in a timely manner to NASD requests for information concerning a customer complaint.

Cabin Wayne Parker (Registered Representative, Corona Del Mar, California) submitted an Offer of Settlement pursuant to which he was fined $10,000. Without admitting or denying the allegations, Parker consented to the described sanction and to the entry of findings that, in violation of Regulation T of the Federal Reserve Board, and without the knowledge or consent of his member firm, Parker loaned a public customer $45,000 for the purpose of trading securities in his account maintained at Parker's member firm. The findings also stated that Parker solicited and received from the same customer a $20,000 loan without the knowledge or consent of Parker's member firm.

Michael D. Stewart (Registered Representative, Cambridge, England) submitted an Offer of Settlement pursuant to which he was fined $15,000 and required to requalify by examination as a general securities principal. Without admitting or denying the allegations, Stewart consented to the described sanctions and to the entry of findings that he engaged in private securities transactions and outside business activities without providing prior written notice to his member firm.

FIRMS EXPELLED FOR FAILURE TO PAY FINES AND COSTS IN CONNECTION WITH VIOLATIONS

Cenpac Securities Corporation, Phoenix, Arizona

First Capital Funding, Incorporated, Denver, Colorado

FIRMS SUSPENDED

The following firms were suspended from membership in the NASD for failure to comply with formal written requests to submit financial information to the NASD. The actions were based on the provisions of Article IV, Section 5 of the NASD Rules of Fair Practice and Article VII, Section 2 of the NASD By-Laws. The date the suspension commenced is listed after each entry. If the firm has complied with the request for information, the listing also includes the date the suspension concluded.

Blarron Group, Inc., Raleigh, North Carolina (October 12, 1992)

E.R. Keller & Co., Inc., Princeton, New Jersey (October 12, 1992)

A.J. Mulligan & Co., Amarillo, Texas (October 12, 1992)

Preston, Reynolds Securities, El Paso, Texas (October 12, 1992)

Seward, Groves, Richard & Wells, Inc., New York, New York (October 7, 1992 to October 15, 1992)

Worthington & Dunn Securities, Dallas, Texas (October 12, 1992)

SUSPENSIONS LIFTED

The NASD has lifted suspensions from membership on the dates shown for the following firms, since they have complied with formal written requests to submit financial information.

Hall, Curley & Co., Inc., New York, New York (September 25, 1992)

Harold Pastron-Funded, Northbrook, Illinois (October 1, 1992)

Nederland Securities, New York, New York (October 2, 1992)

Wincrest Securities, Inc., Irving, Texas (October 19, 1992)

INDIVIDUALS WHOSE REGISTRATIONS WERE REVOKED FOR FAILURE TO PAY FINES AND COSTS IN CONNECTION WITH VIOLATIONS

Patrick J. Allen, Denver, Colorado

Howard N. Barlow, Jr., Mundelein, Illinois

Gerald N. Bovee, Phoenix, Arizona

Philip J. Cooper, Bronx, New York

David S. Elliott, Kirkland, Washington

Thomas M. Legan, San Francisco, California

Charles D. Matthews, Houston, Texas

Ronald L. Russo, Richmond, Virginia

NASD TAKES DISCIPLINARY ACTION AGAINST GRAHAM SECURITIES CORPORATION AND ITS PRESIDENT

The NASD has expelled Graham Securities Corporation of Covington, Louisiana from membership in the NASD and has taken disciplinary action against Pete G. Theo, the firm's president.

Pursuant to a Letter of Acceptance, Waiver and Consent, in which Graham Securities and Theo neither admitted nor denied the allegations, Graham Securities paid a fine of $250,000 and was expelled from membership in the NASD. In addition, Graham Securities has demonstrated to the satisfaction of the NASD that it has entered into settlement agreements with public customers for an amount not less than $5 million. Also, Theo paid the NASD a fine of $25,000, was barred from association with any member of the NASD in any principal capacity, and was suspended for six months in all capacities.

From April 1985 until September 1989, Graham Securities promoted sales of the Prudential-Bache Energy Growth Funds and the Prudential-Bache Energy Income Funds. The NASD found that Graham Securities, acting through Theo:

Distributed information in certain marketing materials to Prudential-Bache Securities, Inc., n/k/a Prudential Securities Incorporated, that did not present a balanced description of certain features of one of the funds.


Distributed certain written information to limited partners of one fund that failed to disclose the portion of cash distributions to the limited partners that consisted of return of capital.


Failed to ensure that performance information for one of the funds was adequately disclosed in certain written materials.


Failed to ensure that the prospectus for one of the funds disclosed a prior business relationship with a bank and, in doing so, failed to disclose a potential for conflict of interest arising out of this prior business relationship.


Failed to provide information about the illiquidity for one of the funds in certain written materials used to market the fund.


Distributed publications concerning the Income Funds that did not discuss the risks associated with those funds and, therefore, failed to provide an adequate basis for investing in the funds.
In addition, the NASD found that Graham Securities, acting through Theo, failed to ensure that certain individuals associated with Graham Securities were properly registered with the NASD. The NASD found that these activities of Graham Securities and Theo constituted violations of the NASD's Rules of Fair Practice. This disciplinary action was taken by the DBCC for District 5 in New Orleans, Louisiana.

Theo's suspension in any capacity commenced with the opening of business on October 19, 1992.


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Disciplinary Actions (October) Disciplinary Actions (December)

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