Brokerage, founder sued for millions

$12.4 million sought from Monica Coleman, Coleman Craten LLC

`Ponzi scheme' alleged

Instead of 50% return Howard County couple allege bounced checks

Fraud

April 16, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

Coleman Craten LLC, the downtown brokerage and financial club that already is fighting a $431,000 suit filed by Charles Schwab, also faces allegations that Monica L. Coleman, a co-founder, defrauded a Howard County couple of nearly $800,000.

Jean K. Aziz and Dr. Shahid Aziz contend in a lawsuit filed in Baltimore County Circuit Court that Coleman persuaded the couple to invest in a "family office" business that would offer wealthy investors "one-stop shopping" for a range of financial and professional services.

Beginning in June 1997, the couple said they made investments in what became Coleman Craten with the promise of investment returns as high as 50 percent over six months.

The suit said Coleman described herself as "very wealthy," called Mrs. Aziz "her dearest friend in the world" and said she wanted her friend to benefit from her good fortune.

In their suit, the Azizes accuse her of using Coleman Craten to operate "a Ponzi scheme" fraud. They are seeking the return of $765,000, plus promised interest of $640,000, $1 million in compensatory damages and $10 million in punitive damages.

Yesterday, Coleman denied the lawsuit's charges, saying the Azizes have mis-characterized their relationship with her. "Almost all" of the information in the suit is false, she said.

Coleman said she expects the lawsuit to be dismissed. But she would not discuss grounds for dismissal or otherwise respond in detail to the allegations. "Unfortunately, because I am in a lawsuit, my attorneys cautioned me to be careful about what I say," she said.

She said she was unable yesterday to reach her attorneys, saying they were in Mississippi.

Coleman Craten also has denied the charges in a suit filed Monday by Schwab, which alleges that the firm deposited a $650,000 bad check with the discount brokerage and drew funds against it. The $431,000 represents the money still owed Schwab.

Jean Aziz declined to comment on the case yesterday, referring questions to her attorneys, who could not be reached.

The Azizes' suit, filed March 15, names Coleman and the firm as defendants. It does not name as a defendant the firm's co-founder, John G. Craten, who worked with Coleman at Legg Mason until December, when Coleman Craten opened its doors at 7 E. Redwood St., a city-owned building.

The Azizes said they opened an account with Coleman in 1994 at Legg Mason and met with her frequently. Coleman told the couple she owned numerous businesses -- including a carwash, and at some point a McDonald's restaurant, the lawsuit says. She presented herself as a "very successful stockbroker" with many millionaire clients.

By May 1997, the Azizes had a stock portfolio of $175,000 with Coleman, whom they considered their "sole financial adviser," the couple said in their lawsuit. About the same time, according to the suit, Coleman told the couple that she wanted to build a "family office" business that would offer "one-stop shopping" for legal, financial and travel services for wealthy investors.

Coleman, who told the couple she planned to run the business within Legg Mason, said she needed funds to develop the business, according to the suit. She said their investment would carry "no risk" and provide a 50 percent return in six months, according to the suit. Asked how she could assure such returns, the lawsuit says, Coleman pointed to her own wealth.

Liquidating part of their Legg Mason portfolio, the couple gave Coleman $200,000 for the venture, according to the lawsuit. Coleman produced a promissory note saying the investment of $200,000 and interest of $100,000 was to be paid to the couple by the end of the year, the lawsuit says

Responding to a promise that another investment, in a company called "JMC," would produce a 30 percent return over a four-month period, the Aziz couple paid Coleman another $200,000, liquidating their remaining $90,000 stock portfolio at Legg Mason and using $110,000 in other funds, including a home equity line of credit.

Coleman said JMC financed inventory for "engineering-type" businesses, according to the lawsuit. Coleman again delivered a promissory note reflecting the terms she had promised, according to the lawsuit.

Early in 1998, according to the lawsuit, Coleman assured the Azizes that her "family office" concept was expanding, with at least 50 "high net-worth clients." They could withdraw their investments, Coleman told them, but then would be unable to get back in. "Once out, completely out," the lawsuit quotes Coleman as saying.

Coleman encouraged the couple to reinvest in the "family office" business, using the "proceeds" from their two investments, according to the lawsuit.

At the same time, the lawsuit said, Coleman told the Azizes that she had named them as beneficiaries of a $1 million life insurance policy on herself.

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