Ex-broker enters plea of innocent

Coleman accused of fraudulent use of investors' money

April 03, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

Three years after opening a posh downtown Baltimore investment club with a lavish party, former stockbroker Monica L. Coleman pleaded not guilty yesterday to 15 counts of felony theft, misappropriation by a fiduciary and securities fraud.

Coleman, 44, was arraigned in Baltimore Circuit Court in a proceeding that lasted several minutes. A jury trial was scheduled for Aug. 30.

A Baltimore grand jury indicted Coleman on Jan. 3. The Maryland attorney general's office said Coleman, who launched the now-defunct Coleman Craten LLC in February 1998, misappropriated $2.6 million from clients and converted the money "to her own personal or business use, never investing [the funds] as she represented to her investors."

If convicted, she could face a maximum of 15 years in prison and up to a $1,000 fine for each count of felony theft. Coleman could also receive a maximum of five years in prison for each count of misappropriation by a fiduciary, and a maximum of three years and a $50,000 fine for each count of securities fraud.

"From what I have seen from my client, I think she has a strong defense," said Jeffrey Kinstler, an assistant public defender who is Coleman's attorney. "There's at least a strong argument that what we have are loans or investments in Coleman Craten and that nothing was stolen ... and that we have educated investors. But I haven't see everything yet."

Kinstler added that the "state's victims are educated investors."

"They knew what they were investing in, and that was Coleman Craten, the venture itself," he said.

Eileen McInerney, the state's prosecuting attorney, declined to comment on the case.

Coleman and her partner, John G. Craten - both of whom previously worked at Legg Mason Wood Walker Inc., the Baltimore-based brokerage firm - made a splash in December 1998 when they opened their new headquarters on the ground floor of a building at 7 E. Redwood St.

Coleman Craten was unlike any other brokerage house in Baltimore. It boasted a restaurant and bar, a billiard room and overstuffed leather chairs in an Elizabethan-style library stocked with annual reports and prospectuses.

Soon after the doors opened at the Redwood Street office, Coleman Craten was hit with lawsuits.

In March 1999, Shahid and Jean Aziz accused the firm of running a Ponzi scheme and wanted their $765,000 investment returned with $640,000 in promised interest. Astrid Nielsen Lin, in a similar suit, demanded her $100,000 investment and $203,000 in promised interest.

In April 1999, Charles Schwab & Co. accused Coleman Craten of drawing funds against a bad check. Craten, a senior partner in the firm, resigned later that month and directed Coleman to remove his name from the company.

On May 7, 1999, a Baltimore Circuit Court judge appointed a receiver to take over operation of the firm after clients James R. and Carol J. Hyde of Towson accused Coleman of embezzling about $2 million of their retirement funds. That day, Coleman filed for bankruptcy, a move that halted the scheduled foreclosure sale of two Pasadena waterfront properties she owned.

On May 11, 1999, the Maryland securities commissioner ordered the firm and Coleman to stop selling securities and advising investors. The securities commissioner stated that Coleman and the firm had committed fraud and violated Maryland securities laws.

That same day, Coleman Craten filed for Chapter 11 bankruptcy protection, a move that ousted the court-appointed receiver and restored Coleman's control of assets.

On Dec. 11, 1999, the attorney general's office announced that it had launched a criminal investigation of Coleman.

Weeks later, the Maryland securities division revoked Coleman's license as a stockbroker and permanently barred her from securities and investment-advisory businesses in the state.

In a settlement agreement, Coleman neither admitted to nor denied allegations that she violated the Maryland Securities Act.

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