Supreme Court to hear Md. case

SEC seeks right to recover funds of defrauded investors

November 09, 2001|By Meredith Cohn | Meredith Cohn,SUN STAFF

The Supreme Court agreed yesterday to decide if the U.S. Securities and Exchange Commission can recover money a Maryland stockbroker defrauded from an investor and his daughter, both mentally disabled.

Charles Zandford was found guilty in 1995 in federal District Court of 13 counts of wire fraud and sentenced to 52 months in prison and ordered to pay $10,800.

The SEC said Zandford, then a stockbroker in the Bethesda office of Dominick and Dominick Inc., defrauded William R. Wood of his life's savings of $343,000.

Wood, now deceased, was elderly and had physical and mental disabilities. He held a joint account with his daughter Diane Wood Okstulski, also mentally disabled.

Zandford, who listed Glen Burnie and Annapolis addresses in court papers, liquidated the securities in the victims' account as well as mutual fund shares they also held. He used the money to purchase securities through a girlfriend's brokerage account and for personal expenses, including credit-card debts and bank loans.

The SEC sought in a civil suit to recover the stolen money. But the 4th U.S. Circuit Court of Appeals ruled in January that the SEC did not have authority to sue Zandford to recover the funds. It did uphold the criminal conviction.

The Justice Department, which asked the Supreme Court to review the case, said that if the decision against the SEC civil case is not overturned, it "will significantly impair the SEC's ability to enforce the securities laws for the protection of investors."

Solicitor General Theodore B. Olson, who represents the federal government before the Supreme Court, wrote to the court: "Brokers play a critical role in enabling the participation of investors in the securities markets, and frauds that impair customer assets erode investor confidence and undermine the operation of the markets."

But Zandford's attorney, Steven H. Goldblatt, questioned the scope of the case. "This case does not pose an issue of national concern," he said in court papers. "To the extent that broker theft is a national problem, it is fully addressed by federal and state law and is not hampered by the court of appeals here."

Goldblatt and the SEC declined to comment further.

The Supreme Court will hear the case next year.

The Associated Press contributed to this article.

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