CLEVELAND — 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.
