3rd Ferris employee returning from leave

He was among six who left for probe

March 21, 2007|By Paul Adams | Paul Adams,Sun reporter

Ferris Baker Watts said yesterday that its director of retail sales will return to work tomorrow while the brokerage and federal officials continue to probe an alleged stock manipulation scheme carried out by a former client.

Patrick Vaughan was among six executives and traders placed on temporary leave as the firm's outside counsel conducted an investigation of the scheme.

The alleged scheme involves a one-time Ohio client of Ferris who is accused of cheating investors in his IPOF fund. Nearly $28 million is missing.

Legal experts say Vaughan's return, along with the return of two institutional traders last week, is a sign the investigation is progressing. Ferris, which maintains dual headquarters in Baltimore and Washington, declined further comment.

Two other Ferris officials placed on leave have left the company, and a third remains on leave.

Theodore W. Urban, the firm's general counsel and head of compliance, opted for early retirement, and Horace D. Usry Jr., director of institutional sales, resigned after being put on leave.

An attorney for Louis J. Akers Jr., director of the firm's private client group, said yesterday that his client continues to discuss his return to the firm but is "undecided about his future."

The investigations center on David A. Dadante, of Gates Mills, Ohio, manager of the IPOF fund. Federal investigators say he used accounts at Ferris and several other firms to carry out a scheme to manipulate the stock of Innotrac, an order processing and logistics company in Duluth, Ga.

Dadante accumulated 4.2 million shares of Innotrac while using at least four sham trading techniques to artificially bid up the price of the company's stock, federal investigators allege.

A criminal complaint against Dadante says he bought many of the shares through a Ferris account that at one point was worth $18.4 million. The criminal complaint is part of a federal case being assembled against Dadante and does not accuse Ferris of wrongdoing.

Dadante was arrested Thursday and appeared in federal court in Cleveland on two counts of securities fraud. He was later released on bond.

Securities firms are required to police the activity of brokers, traders and clients to ensure fairness. The Securities and Exchange Commission and Justice Department are still investigating the role of Ferris and other firms in the matter. Ferris has said none of its clients lost money as a result of Dadante's activities.

An attorney for Vaughan was unavailable for comment yesterday.


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