Partner quits firm sued for fraud

Craten asks co-founder to remove his name from Coleman Craten

2 suits allege bad checks

Craten's lawyer says client also was victim of `dishonored' checks

Finances

April 23, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

John G. Craten, senior partner of the beleaguered Baltimore financial company Coleman Craten LLC, has resigned from the firm and directed co-founder Monica L. Coleman to remove his name from the company, his lawyer said yesterday.

Craten's resignation, which became effective Monday, comes after reports last week of lawsuits alleging that the company and Coleman committed nearly $1.2 million in fraud, largely through bad checks.

Craten is himself a victim of bounced checks and is "owed more than $90,000 after checks in payment of long overdue amounts were dishonored," said Herbert Better, his attorney.

Coleman and Craten, both Legg Mason Wood Walker veterans who started the company last year, did not return phone calls seeking comment.

Coleman has previously denied wrongdoing in the suit filed against her, the company and Craten by Charles Schwab & Co. She also denied wrongdoing in a fraud suit brought against her and the company by a Howard County doctor and his wife.

Better said Craten would not be available for comment because of the pending litigation.

Melanie Senter Lubin, the state's securities commissioner, would not say yesterday whether the state was investigating the firm.

"We can neither confirm nor deny the existence of an investigation," she said. "I would encourage any investor who has a problem with this brokerage firm or any other financial planner to get in touch with the securities division."

Better said Craten is not named as a defendant or otherwise accused of wrongdoing in a case filed by Dr. Shahid Aziz and his wife, Jean K. Aziz. The suit alleges that Coleman and the firm defrauded the Howard County couple of $765,000.

Better said Craten first learned of the lawsuit last Friday, when he read about it in The Sun. "She [Coleman] didn't tell him about it," Better said.

Better also denied wrongdoing on Craten's part in the case filed by Schwab, which names Coleman Craten LLC and the two principals as defendants, claiming that they defrauded the discount broker of $431,000 after depositing a bad check for $650,000.

"To the extent that Schwab has accused him of fraud, I believe the evidence will show that it's baseless and that it's unfair to him," Better said.

Coleman Craten, which sought to combine a luxurious financial club with investment advice and a brokerage, opened its doors with a lavish party after spending $300,000 on renovations at its downtown offices at 7 E. Redwood St.

The company said at the time that it had $500 million under management and expected to hire 400 people by June.

But last month, the Azizes filed a lawsuit in Baltimore County, saying they had invested money in increments as high as $200,000 and been promised returns as high as 50 percent over six months.

The promised returns never materialized and they are suing for the return of $765,000 in principal. The suit also seeks promised interest of $640,000, $1 million in compensatory damages and $10 million in punitive damages. The couple alleges Coleman is running a "Ponzi scheme."

In its suit filed April 12, Schwab is charging the defendants with fraud, breach of contract and unjust enrichment. Schwab alleges that the firm is "in desperate financial straits" and is "dissipating financial assets."

Pub Date: 4/23/99

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