The fund is under court receivership. Its investors lost $28 million.
Dadante pleaded guilty to securities fraud charges and is serving a 13-year sentence in federal prison. Glantz also pleaded guilty and is serving 33 months. Three former Ferris executives, including general counsel Ted Urban and Vice Chairman Lou Akers, either retired or left the firm last year amid fallout from the federal investigation.
In an interview with The Sun before entering prison, Dadante said Ferris employees didn't try to stop him until his debt to the firm grabbed the attention of top executives. An attorney for one of the Ferris traders who placed Dadante's orders recently told The Sun that his client spoke to superiors about Dadante's activities. He said the traders had no knowledge that Dadante was doing anything illegal.
In addition to the fine, Ferris faces more legal fees to settle the matter, the documents say. The firm estimated those costs at $200,000 to $400,000. It also would have to defend any current and former employees who face SEC civil action stemming from the Dadante fraud. Ferris estimated those costs at $100,000 to $250,000 for each person affected.
While not admitting fault, Ferris has agreed to pay roughly 100 investors in Dadante's fund $7.2 million in cash to settle lawsuits. The firm would also relinquish its claim to about 3 million shares of Innotrac stock, worth about $11 million at yesterday's closing price, that are still held in Dadante's accounts at Ferris. A federal judge in Cleveland must approve the settlement.
The merger with Dain Rauscher requires Ferris to set aside money to pay any settlement costs and legal fees associated with the Dadante matter. Ferris said in the filing that it believes it has already established sufficient reserves.
paul.adams@baltsun.com
Valuing the sale for executives
Royal Bank of Canada's $230 million deal to buy Ferris, Baker Watts Inc. outlines various change-of-control agreement payments (commonly known as golden parachutes), stock values and options to certain executives at the Baltimore-based brokerage. They include:
George Ferris, chairman
Value of stock in the company: $50.59 million Accelerated stock options: $67,584 Stock option cancellations: $26,303
Roger L. Calvert, president and chief executive officer
Value of stock in the company: $4.47 million Change-of-control payment: $2.54 million Accelerated stock options: $690,736 Stock option cancellations: $257,989
