How unlikely ties helped to damage Ferris

Drug user, gambler charmed Cleveland elder statesman

June 20, 2008|By Paul Adams | Paul Adams,Sun reporter

CLEVELAND - The troubles for Ferris, Baker Watts Inc. started in this city 20 years ago with an unlikely friendship.

David A. Dadante was an admitted drug user and blackjack addict who faced foreclosure on his suburban home after a string of bad luck at the tables in 1989. The Atlantic City, N.J., casino host reached out to Frank Regalbuto, a self-made millionaire, horse breeder and elder statesman of Cleveland's Italian-American community.

Regalbuto bought Dadante's house and allowed his family to stay there at little charge. That friendship was still strong in 1999, when, Dadante says, he lied to persuade Regalbuto to invest millions of dollars in a "can't-miss" investment fund.

It ended six years later in a path of financial destruction that stretched to the Baltimore offices of Ferris, one of the region's oldest and most respected brokerages. Today, Ferris shareholders are scheduled to vote to sell the firm to Royal Bank of Canada, a decision made amid federal and civil investigations stemming from a stock manipulation scheme hatched by Dadante and aided by his former Ferris broker.

From the start, it was a case of greed and misplaced trust between two men who came from the same side of town and started with nothing.Dadante "was a drunk, a cokehead and a gambler," Regalbuto said in an interview. At the time, Regalbuto had enough faith in him to persuade 100 of his friends to invest nearly $47 million in Dadante's fund, accounting for the vast majority of the investors. "It was my mistake."

Dadante, 54, is serving a 13-year term at a federal prison in Ashland, Ky., for making illegal trades through accounts he held at the firm. Stephen J. Glantz, 54 - his broker at Ferris - is serving nearly three years at a federal prison in West Virginia for helping him.

And Regalbuto, 71 and legally deaf, spends most of his days in the basement office of his Gates Mills, Ohio, home trying to figure out how to get back the estimated $28 million he and the other investors lost. He says he has forgiven Dadante, in part because the former fund manager is helping him in the effort.

"My father, he passed away last March, and that was his retirement fund," said Mike LaMonica, an investor who lost $70,000 in the fund. His father lost $175,000. "That was everything he had."

How a fast-talking casino host with a high school education managed to swindle some business-savvy multimillionaires out of their fortunes comes down to loyalty. Regalbuto gave it freely, and his friends and family returned it tenfold.

Dadante was once part of that circle. He went to Regalbuto with a good story and a fistful of phony financial statements, claiming that the IPOF fund he started was earning big returns. All he needed were investors. Regalbuto provided them.

The list of IPOF investors, which Regalbuto shared with The Sun, is a who's who of Cleveland's Italian-American community, including the nephew of Catholic Bishop Emeritus Anthony Pilla and members of the Quagliata family, who own a string of well-known local restaurants. It included Regalbuto's family - children, grandchildren and in-laws - who borrowed against their homes and emptied savings accounts, believing that Dadante was making them rich.

But most of all, they believed in the man who vouched for him. Most still do, though at least one family is suing Regalbuto for money it invested with Dadante.

"His word is good to this day," said Jerry Ciricillo, Regalbuto's brother-in-law and an IPOF investor who lost $325,000. "If [Regalbuto] had another investment fund and he said it was good, I'd go. That's the reputation this man has."

Dadante grew up poor on Cleveland's west side. His father was a machine operator, stamping out sheet metal for Otis Elevator Co. His mother worked for Giant Tiger, a once-prominent chain of discount department stores. His parents sent him to St. Ignatius, a private Catholic high school where Dadante mingled with middle-class kids from big houses. It was there he first glimpsed a better life. It made an impression, he said in an interview before entering prison in February.

He took a series of jobs after high school - all of them trading on his business savvy and penchant for talk. But his life took a bad turn in his late 20s, when he opened a nightclub outside Cleveland called Cuzzens. It was then, he said, that he got a taste for life in the fast lane, drinking heavily and using cocaine. He ended up in rehab for a time.

The bar lasted about two years. It wasn't until the mid-1980s that Dadante found a new niche, when a friend introduced him to life as a casino host. His job was to fill charter planes with eager gamblers bound for Atlantic City.

He booked trips for Trump's Castle, the Tropicana and the Taj Mahal. Before long, he was earning a six-figure salary with a client list that included a few "whales" - industry talk for high rollers. But he was always in search of more.

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