Court Restrains Securities Firm Tied to Forger : Quarterly Fees Can’t Be Collected From Clients

The Los Angeles County Superior Court issued a temporary restraining order Wednesday against the Long Beach investment adviser F. G. Smathers & Co., two days after state authorities had accused the firm of not notifying officials that a controlling stake had been transferred to a company run by a convicted forger.

The order, according to the California Department of Corporations, has the effect of preventing the firm from collecting its customary quarterly advance fees from its clients.

Smathers collected about $175,000 in advance fees last quarter and about $400,000 this year, the court was told.

Files for Chapter 11

The company filed a petition under Chapter 11 of the bankruptcy law in U.S. District Court on Tuesday, a day after the Corporations Department filed a complaint against it and its owner, Frank G. Smathers, in Superior Court.

Judge Warren Deering set Oct. 6 for a hearing on the suit.

The complaint alleges, among other things, that Frank Smathers did not notify the state that he had entered an agreement 18 months ago to transfer 85% of his company’s stock to Indemnity Federal Financial Corp., whose president, Peter Messineo, had been convicted of forgery.

Grounds for Revocation

Messineo’s forgery conviction constituted a ground for revocation of Smathers’ state certification as an investment adviser, the state’s papers in the suit said.

A Corporations Department attorney said neither Indemnity Federal nor Messineo, now have any involvement in Smathers & Co.

Michael Trainotti, an attorney for Smathers, said Wednesday that he had no comment on the lawsuit.

Special Investigation

The state’s suit said the Corporations Department began a special investigation last July of books and records of Smathers & Co., a state-certified investment adviser since April, 1975.

The department discovered that the defendants had not maintained required records, including those on net capital, which was found to have “significant deficiencies,” the suit said.

The restraining order forbids the defendants to do anything to advise others on securities investments without first filing all necessary amendments to its certificate, bringing up to date all books and records and meeting all net capital requirements.