In January 2003, Stephen J. Glantz left the Advest brokerage in Ohio and went to work for Ferris Baker Watts, bringing with him a solid book of business and a big client named David A. Dadante.
For the century-old Baltimore brokerage, it was the start of a legal and financial debacle that will linger long after Glantz and Dadante are sentenced this week for their roles in a stock-manipulation scheme involving Ferris' trading desk.
The firm faces a continuing federal investigation and several civil lawsuits that could take years to untangle.
Dadante pleaded guilty in August to defrauding investors in a $50 million fund he managed. Federal court records show that with the help of Glantz, Dadante used accounts at Ferris and other firms to engage in illegal trades that artificially raised the share price of a thinly traded stock over the course of more than two years.
In Cleveland yesterday, U.S. attorneys also charged former Advest broker William H. Salem with securities fraud and lying to investigators for his part in the alleged fraud. Advest, which was acquired by Merrill Lynch in 2005, was a Connecticut-based brokerage with offices in Ohio.
The charges were filed as a "criminal information," which typically means the target is seeking a plea agreement. An attorney for Salem could not be reached yesterday.
The criminal case against Glantz, who pleaded guilty to securities fraud in September, is scheduled to end with his sentencing at 1 p.m. today in Cleveland. His plea agreement calls for a sentence of 27 to 33 months in prison. Dadante's sentencing is set for tomorrow, with the judge expected to hand down a sentence of 10 to 12 years.
But for Ferris, the future is less clear. The brokerage remains the subject of a Securities and Exchange Commission investigation that legal experts say might not be resolved for months or years. Meanwhile, Ferris has said it is at least "open" to considering buyout offers from four suitors interested in acquiring the firm.
The SEC declined to comment for this article, in keeping with its policy of not confirming active investigations. Ferris has acknowledged it is under investigation by the SEC but declined to comment further this week. Ferris indicated in an August financial report that the SEC's investigation of the firm centers on Glantz and Dadante.
