Bubbly beginning, and bruising fall

May 02, 1999|By Sean Somerville and Bill Atkinson | Sean Somerville and Bill Atkinson,SUN STAFF

ON A CHILLY Saturday evening in early December, Monica L. Coleman and John G. Craten threw a coming-out bash for their new financial services company.

And what a party.

Guests were serenaded by strolling violinists and handed champagne as they entered Coleman Craten LLC's lavishly renovated headquarters on a red carpet.

Inside, they feasted on jumbo shrimp, caviar, oysters, roast beef and a sumptuous array of desserts. The brassy sound of big band music blared in the background as flappers danced, summoning images of the Roaring Twenties.

Amid the opulence stood the new firm's brokers, many of them forcing smiles while seething because they hadn't been paid in weeks. They knew what the guests did not -- the gala was a charade and things already were falling apart at Coleman Craten, which had been operating quietly in a start-up mode since the previous February.

Today, less than five months after the party that was intended to make a splash with wealthy investors in Baltimore, Coleman Craten's plan to provide financial services in a stately downtown social club appears on the verge of collapse, and the Maryland securities division has launched an investigation.

By all accounts, the driving force behind Coleman Craten is Monica Coleman. She is described as a hard-working, average broker, according to interviews with more than two dozen former and current employees and former associates. They say she is smart, charming and energetic, known for her generosity to the Gilman School, the Maryland Science Center and Harbor Hospital.

But associates also say Coleman has harbored a deep desire not only to be recognized for her wealth, but also to be respected as a player among Baltimore's social elite.

To build her new businesses, she promised brokers huge signing bonuses and generous salaries, and guaranteed investors in the firm no-risk returns as high as 32 percent in as little as three months. Those promises were not kept, according to lawsuits.

Court records and interviews show that:

Seven lawsuits have been filed against the company, alleging, among other things, fraud. Collectively, plaintiffs say they are owed more than $2.3 million.

Every broker and investment adviser -- seven in all -- hired by the company before the Dec. 5 party has departed, as has co-founder John Craten, who says he was deceived by Coleman, an allegation she denies. Other employees, ranging from the club manager to the in-house counsel, also have left, leaving a handful on board.

The company faces possible eviction from its city-owned home at 7 E. Redwood St. after failing to come up with a portion of a $650,000 security deposit required by the city and falling a month behind in rent payments. "That's the direction we're moving in," said M. J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development agency.

The Florida firm that was executing trades for Coleman Craten severed relations late last month after news of the lawsuits surfaced.

A Tampa, Fla., brokerage backed out of a tentative merger with Coleman Craten hours after it was announced.

"It's a disaster," said a former employee.

People who worked for the firm said they did not want to be identified because they fear lawsuits and retribution.

"There are a lot of friendships that have crumbled because of this scandal," added another former employee.

"This has devastated anyone, regardless of how innocent they are, who had any connection with Coleman Craten," said Alan J. Hoff, an attorney representing Randal Jenkins, a broker who is suing for more than $500,000 he says he is owed.

Monica Coleman also faces foreclosure on her waterfront Pasadena home. According to a lawsuit filed by investors in the firm, Coleman had told them the property had no liens and could be mortgaged as a source of funding.

Coleman and Craten declined several requests for interviews. The Sun declined an offer from Coleman's lawyer, David King, that it submit written questions that Coleman might answer.

In a statement, Coleman said that "at no time was any intentional wrongdoing or fraud committed in our dealings with anyone. We continue to attempt to resolve the current financial difficulties and hope to set the company back on firm footing."

King said the firm remains in business.

"She intends to continue to operate the financial club," he said.

Craten declined to speak with reporters because of pending litigation. "When all the evidence is out, we'll be satisfied with what that shows," said Herbert Better, Craten's lawyer.

The sudden silence of Coleman and Craten follows a blitz for business by the company that began with December's party and continued late into April with an advertising campaign.

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