Regulators Charge Brokerage Firm Raymond James
By REUTERS, September 30, 2004
WASHINGTON - The U.S. Securities and Exchange Commission on Thursday charged brokerage firm Raymond James Financial Inc. with fraud over the misconduct of a former broker in 1999 and 2000.
The SEC said it also brought additional charges against the St. Petersburg, Florida-based firm; a former president, Stephen Putnam; and a former branch manager, David Ullom, for failing to properly supervise the activities of former broker Dennis Herula.
Raymond James Chief Executive Richard Averitt said the firm believes the fraud charge against the firm is "wholly unjustified.'' Putnam's attorney, Jerry Isenberg, said through the firm's media statement that he and his client "strongly disagree'' with the SEC's assertions and that Putnam "fully complied'' with his supervisory responsibilities and will fight the SEC's allegations.
An attorney representing Ullom could not be reached immediately for comment.
The SEC has accused Herula of participating in a scheme with others that raised about $44.5 million from investors. Herula raised about $16.5 million of investor funds, most of which was later transferred to his wife's brokerage account at Raymond James, the SEC said, adding that the money was never returned to investments.
The SEC said Putnam and Ullom were aware of Herula's activities involving a "suspicious'' business venture using Raymond James's letterhead but failed to stop him.
"Raymond James was aware at the highest levels that Herula was making misrepresentations to potential investors and yet failed to put a stop to Herula's activities,'' SEC enforcement chief Stephen Cutler said.
Raymond James Financial shares were up 22 cents at $23.99 in trading on the New York Stock Exchange.
In May 2003, federal agents arrested Herula in Boston, where he was staying under an assumed name. He was arrested on a warrant in connection with a criminal indictment obtained by the U.S. Attorney's Office in Colorado. The indictment charged he participated in a fraudulent investment scheme.
In October 2002, in one of two civil fraud enforcement actions brought by the SEC, Herula was permanently enjoined from future violations of U.S. securities laws and ordered to pay $19 million. As part of that action, a Rhode Island federal court froze his assets.
In January 2003, an arrest warrant was issued in Providence, Rhode Island, after Herula failed to participate in a bankruptcy proceeding resulting from the order to pay $19 million.
The SEC filed a second civil action in July 2002 against him and others in federal court in San Francisco, accusing him of participating in another scheme to defraud investors.
On May 29, 2003, a federal magistrate ordered Herula to be transferred to Colorado to face charges where a magistrate said he was a flight risk and ordered him detained pending the outcome of criminal charges there.
The SEC said in Thursday's announcement that a hearing will be held before an administrative law judge. The SEC did not announce a date for the hearing.