A former Baltimore stockbroker, accused by securities regulators of stealing $3.7 million from his clients, has settled the case by promising not to commit similar acts in the future.
Former PaineWebber Inc. broker D. Jeffrey Rice, in a consent decree and final judgment entered simultaneously with a lawsuit filed by the Securities and Exchange Commission, neither admitted nor denied guilt but agreed to refrain from committing the types of illegal acts outlined in the civil complaint.
The SEC said it did not seek a fine because of Mr. Rice's "demonstrated inability to pay."
The SEC's action comes a few weeks after it announced a new get-tough policy against so-called rogue brokers. The commission had promised to step up efforts to find and punish the industry's worst offenders.
The suit, filed Wednesday in U.S. District Court in Baltimore, accused Mr. Rice of conducting a three-year scheme of fraud, forgery, theft and various other securities violations. He allegedly made 90 unauthorized cash withdrawals from 37 different clients, and illegally sold some of them securities in companies in which he had a financial interest, outside of the supervision of PaineWebber.
The SEC said it typically follows up this kind of civil case by pursuing administrative sanctions, such as permanently barring the defendant from the securities industry. Neither the commission nor Mr. Rice's attorney, to whom Mr. Rice referred questions, said they were aware of further proceedings by any criminal authorities.
In March, Mr. Rice signed a consent decree with the state that barred him permanently from the securities industry in Maryland.
He now works with a Northern Virginia software company, said his attorney, James Ulwick.
Mr. Ulwick added that Mr. Rice has paid back everyone involved and has left the securities industry for good.
Without agreeing to the specific charges in the SEC's lawsuit, he said, "I will say that Mr. Rice admits making mistakes."
PaineWebber, which fired Mr. Rice about a year ago, said in a statement that each of the client accounts affected by Mr. Rice's misappropriations had been reimbursed. "Upon learning of Mr. Rice's activities, PaineWebber immediately terminated his employment and brought the matter to the attention of the appropriate state and federal authorities," a company spokeswoman said.
Under the final judgment and order, issued by U.S. District Judge Herbert N. Maletz, Mr. Rice is permanently enjoined from committing any of the frauds or other violations of securities law outlined in the lawsuit. The order notes that the SEC may seek civil penalties at any time in the future if it finds that Mr. Rice lied about his current financial condition.
"In this case, basically this will be the end of it" in terms of any fines, said C. Annette Kelton, assistant administrator of the SEC's Philadelphia district office.
The SEC complaint explains in detail how Mr. Rice allegedly stole $3.7 million from his clients, starting in August 1990. That's when he left Alex. Brown & Sons Inc. to join the Baltimore office of PaineWebber.
According to the SEC, "He obtained custody of funds in the accounts by effecting numerous unauthorized cash withdrawals and by using fictitious and forged documents." He forged authorization letters from his clients in order to receive checks from PaineWebber, and he forged his clients' signatures on the checks, the complaint maintains.
The lawsuit says he used at least $1.5 million "to finance his personal investments and living expenses." The rest of the money was placed in other clients' accounts, either to conceal his earlier misappropriations or to mislead them into buying more securities, the suit alleges.
The SEC said Mr. Rice also violated securities laws by selling investments outside of the supervision of PaineWebber, including companies in which he had a financial interest.