Brokerage is sued for $431,000

Coleman Craten accused of fraud by Schwab & Co.

Bad check alleged

New firm planning lavish club also hit with judgment in N.Y.

April 15, 1999|By Sean Somerville and Kevin L. McQuaid | Sean Somerville and Kevin L. McQuaid,SUN STAFF

Coleman Craten LLC, a downtown brokerage and financial club founded last year by two Legg Mason veterans, has been accused of fraud by Charles Schwab & Co. in a lawsuit seeking $431,000.

The Baltimore brokerage firm, which gained attention through its efforts to open a lavish financial club with a bar, restaurant and other facilities for clients, also faces a $93,000 judgment stemming from a New York law firm's suit alleging that Coleman Craten failed to pay its legal fees.

The Schwab lawsuit, filed April 12 in Baltimore City Circuit Court, alleges that Coleman Craten deposited a bad check for $650,000 with the discount broker and then attempted to draw funds against it over a one-month period that started Feb. 19.

Schwab's charges against Coleman Craten include fraud, breach of contract, and unjust enrichment.

In its lawsuit, Schwab charges that Coleman Craten is "in desperate financial straits" and is "dissipating financial assets."

Principals of the company, Monica L. Coleman and John G. Craten, did not return calls seeking comment yesterday evening, but Andrew Levine, a lawyer for the company, said the Schwab case was without merit.

"There is no basis for the claim," he said. "It is totally false."

Levine said he would have no comment for the record about the judgment obtained by the New York law firm of Wilson Elser Moskowitz Edelman & Dicker.

Wilson Elser filed its lawsuit Jan. 22, demanding $93,697.92 for legal services rendered. A default judgment was entered in that case March 16, giving Coleman Craten 30 days to move to vacate that order.

Coleman Craten opened its doors with a lavish party in December after spending $300,000 on renovations in a city-owned building at Redwood and Light streets.

At the time, it said it planned to hire about 120 financial advisory professionals and stockbrokers by June. Coleman Craten also said it would hire 150 employees, including financial advisers, pages, waiters and other staff, to staff a financial club that would cater to wealthy clients. The company leased eight floors in the building from the city.

In its suit, Schwab charges that Coleman Craten contacted Schwab's service center in Orlando, Fla., on Feb. 11, saying it wanted to make a "substantial securities purchase in a very short time."

Check delivered

The retail brokerage directed Coleman Craten to deliver a check to Schwab's Baltimore branch office.

The $650,000 check, drawn against a First National Bank of Maryland account, was delivered later that day, the lawsuit says.

More than two weeks later, on Feb. 29, Coleman Craten instructed Schwab to wire $300,000 out of its Schwab account and into an account controlled by Wasky Investment Co. at Commercial and Farmers Bank, in Ellicott City, according to the lawsuit.

Wasky Investment is an entity that remains unknown to Schwab and is not registered to do business in Maryland, Schwab contends in the lawsuit.

That transaction relied on the $650,000 check. Schwab fulfilled the request.

On March 1, Coleman sent instructions to Schwab to wire $150,000 to a NationsBank account in Bethesda. Four days later, on March 5, the $650,000 check was returned for insufficient funds. Coleman claimed a bank error had occurred, and instructed Schwab to redeposit it. That day, Coleman Craten made three additional transfer requests for a total of $117,000.

On March 19, Schwab said, it was advised that it was unable to redeposit the initial $650,000 check because Coleman Craten had closed the First National account.

Two weeks later, on April 2, Coleman assured senior Schwab officials that a check for $190,000 was forthcoming. Schwab said only $19,000 arrived April 5, however.

The next day, April 6, according to the lawsuit, Coleman said she would be wiring funds to satisfy the debt from her father-in-law's trust. Schwab says in its lawsuit that Coleman Craten admitted that Schwab was entitled to $431,000, but failed to deliver any of it.

Pub Date: 4/15/99

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