Settlement Proposed in Theft Case Against Stockbroker

A 79-year old retired schoolteacher who said a stockbroker plundered almost all of her life’s accumulation of assets will receive $550,000 and $1,500 a month under a tentative court settlement disclosed Wednesday.

Margaret Van Luven of San Jacinto said she faces “severe financial hardship” unless the settlement of her civil lawsuit against stockbroker Steven Michael Sullivan is quickly approved.

The deal came less than a week after the arrest of Sullivan, who is charged with securities fraud, embezzlement and grand theft from Van Luven’s $1.3-million account.

Sullivan, a former official with J. David Securities, which was headed by convicted swindler J. David Dominelli, was being held in lieu of $500,000 bail.

Van Luven hired Sullivan as her stockbroker in 1979. According to court papers, he allegedly persuaded her to sign a document giving him power of attorney over her financial affairs when she entered a hospital in March, 1983, suffering from severe anemia.

Fortune Inherited

Riverside County authorities allege that Van Luven had no recollection of signing the document, which reads in part, “I give to Steven M. Sullivan all my municipal bonds and all my gold, all my stocks and all securities as a gift forever.”

Last week, prosecutors said Van Luven had inherited most of her fortune.

Court documents filed late Wednesday indicate that Van Luven will receive the money from Smith Barney Harris Upham & Co., in whose Newport Beach office Sullivan worked, and from First Interstate Bank of California, where Sullivan maintained personal banking accounts. Neither the brokerage house nor the bank acknowledged any wrongdoing.

Sullivan, a defendant along with two other stock brokerage houses in Van Luven’s lawsuit, was not involved in the proposed settlement.

The civil lawsuit alleges that Sullivan cashed checks for Van Luven totaling $265,000 and deposited them in his own accounts. In addition, Sullivan allegedly used $600,000 worth of Van Luven’s bonds as collateral for personal loans from the bank. The bank redeemed the bonds when Sullivan defaulted on the loans.

Assets Declined Sharply

When Van Luven requested the return of her assets in 1985, their value had fallen from $1.3 million to $42,000, according to her lawsuit.

Law enforcement authorities allege that Sullivan used the plundered assets to, among other things, finance the now-defunct Liberty Street Chronicle, a business magazine.

Van Luven, through her attorney, Ronald B. Coloumbe, asked for an expedited hearing on the settlement Wednesday. Neither Van Luven, Coloumbe, nor Smith Barney representatives could be reached for comment.

In a statement filed in the case, Van Luven said she receives no Social Security benefits and has no source of income other than minimal earnings from a few stocks.

“Any unnecessary delay in completing the settlement may work a severe financial hardship on me,” Van Luven said in her declaration to the court.

The settlement was reached after negotiations before John K. Trotter Jr., presiding justice of the 4th District Court of Appeal in Santa Ana. Trotter arranged for talks toward a possible resolution after part of the claims in the case reached the appellate court.