Brokers fined for securities violations
Two former Smith Barney stockbrokers and their Medford manager have beendisciplined by the National Association of Securities Dealers.
Broker Lewis Aytes was fined $100,000 and suspended for 18 months andbroker Charles W. Duquette was fined $50,000 and also suspended for 18 months.
Aytes was accused of violating NASD rules in the sale of limited partnershipsin 63 transactions from 1992 to '95.
The NASD found he charged up to 90 percent more than the price of thepartnerships and in some cases did not tell clients the transactions wereoff the Smith Barney books. In some cases he didn't tell clients their moneywould be pooled to buy partnerships from former purchasers.
Duquette violated NASD rules in 25 transactions involving partnershipssold during several months in 1992, charging up to 61 percent more thanthe value of the partnerships, according to the NASD. He also didn't disclosethat the purchases wouldn't be consistent with the firm's practices andprocedures.
Bill Smith, Medford Smith Barney manager, was fined $20,000 for failingto adequately supervise the brokers. He was required to certify that hehas undergone additional training as a supervisor.
The suspensions against the two brokers were imposed in early 1996 whenthe investigation started and expired this summer.
Aytes entered the business as a broker with Shearson Lehman Hutton in1985. He remained with Smith Barney after that company acquired Shearsonin 1993. Then, in February 1995, he left to become the manager of Medford'snew Merrill Lynch office.
Duquette started with what's now Smith Barney in 1982. He left in January1996 to sail around the world for two years and now lives in Tualatin.
The issues have also spawned a pair of civil suits in Jackson County.
Smith Barney accuses Aytes, Duquette and a third former broker, MarkDegner, of fraud involving forged financial documents. The pattern of activity,the brokerage contends, constitutes racketeering under Oregon law.
None of the men has been charged with a crime. No action by the NASDhas been taken against Degner, who went to the new Merrill Lynch officewith Aytes.
Aytes has sued, contending that Smith Barney and its managers' actionsconstitute a vendetta against him for leaving the brokerage for MerrillLynch.
The allegations forced him out of the Merrill Lynch job, he contends,and his trustworthiness has been harmfully attacked. He sued for $16 million.He could not be reached for comment Monday.
Aytes' lawyer, Sandra Sawyer, said Smith Barney has been eliminated fromthat suit, though the managers are still defendants. Instead, Aytes makesthe same allegations in a counterclaim within the Smith Barney lawsuit.
Sawyer has also been accused by the Oregon State Bar of ethical violationsin connection with the case.
She's accused of having people who bought the limited partnerships releaseAytes from responsibility before accepting settlements from Smith Barneythat release the brokerage from responsibility. The bar says Sawyer advisedthe clients not to tell the brokerage they'd promised not to sue Aytes.
The bar contends her action was dishonest and that she was improperlygiving advice to a person whose interests conflict with her client.
A bar spokeswoman said the state Professional Responsibility Board hasrecommended prosecution. The actions will be presented to a trial panel,probably before the end of this year.