Broker’s Lifelong Goals Crumble in Insider Case
From a young age, Brian J. Callahan dreamed of becoming a stockbroker, according to those who know the former Prudential-Bache Securities broker. Callahan, 28, who was fired last week for his alleged role in the widening stock trading scandal centered around a Business Week column, achieved his dream early in life. But now his career has been shattered.
“All he wanted to be was a broker,” said one person familiar with Callahan’s career. He is said to have become hooked on the market at the age of 11, when his father gave him eight shares of Walt Disney Co., then trading at $18 a share. A couple of years later, Callahan was able to sell the stock for about $62 a share. Soon thereafter, his parents opened up an account for Callahan at a local Merrill Lynch office.
“That sounds like Brian,” said Thomas Ambrose, a classmate of Callahan’s at the University of California at Riverside, where Callahan graduated in 1981. Until Friday, Ambrose was also one of Callahan’s roughly 250 clients at Prudential-Bache.
“Brian always had a very clear focus of where he was headed,” Ambrose said.
Callahan grew up in La Habra, after his family moved to the area from Northern California when he was 9. He attended Servite High School, a Catholic boys school in Anaheim, where he was trainer of the football team.
At UCR, he majored in psychology, but the stock market remained his primary passion. In his junior year, Callahan launched an investment club that more than 30 students and faculty members joined.
One teacher, who remembers investing $25 in Callahan’s club to purchase shares in a company called Delta Data Systems, recalls Callahan as an enthusiastic extrovert.
“He was a creative student. . . . He was above average in his course work but not outstanding,” said Peter Diege, an environmental sciences lecturer.
Financed Education
College friends said that it was not unusual for Callahan to skip classes, miss meals and work late into the night at the school library, researching stock reports for the investment club.
Callahan, however, never formally studied finance in college.
“He practically worked his way through college buying and selling stocks,” said George Spitzer, a Callahan client and retired insurance executive whose daughter, Leslie, lived in the same dormitory as Callahan.
For all his zest for the market, Callahan went on to develop a competent though undistinguished business as a broker, beginning with Paine Webber in 1981. In 1984, he moved to Prudential-Bache in Anaheim.
Callahan’s gross commissions rose to about $220,000 in 1987 from about $140,000 in 1986. Of that gross, Prudential-Bache brokers typically are allowed to keep from 37% to 40%. By industry standards, however, Callahan’s numbers were not impressive.
“He was not your typical aggressive broker,” said one source. “He didn’t come in early in the morning and cold-phone people. He was doing mediocre numbers, and truly aggressive people show more than that.”
Callahan was successful enough, however, that Prudential-Bache named him one of its 50 most-improved brokers in a six-month competition ending in February and gave him a free three-year lease on a spanking new Porsche.
Clients of Callahan’s said his record was mixed but that they liked doing business with him because of his agreeable personality and his patience in explaining his investment ideas to them.
A Good Teacher
“His performance was good and bad, which is the way it should be. You can’t hit it every time,” Spitzer said. “I have been impressed with Brian for some time because he is very fair and won’t try and sell you something that he doesn’t believe in.”
According to Ambrose, “Brian is a good teacher. He takes the time to explain things and he seems to understand the market.”
Callahan’s penchant for introducing novices to the market was fully realized when he came up with the idea, at the age of 23, of a stock-picking contest in which participants who came up with the best portfolio selection won a prize.
Callahan presented the idea to the Orange County Register, which held its first contest in 1983, when 12,000 people participated. The contest has been a popular event ever since, and the Register has said it will continue to run it with the assistance of Prudential-Bache.
Callahan also began contributing a weekly “Hot Trades” stock summary to the paper in 1986. The Register terminated its relationship with Callahan when the broker was fired last Friday.
Shocked by News
Meanwhile, Orange County acquaintances are surprised and troubled by Callahan’s firing and alleged involvement in the insider trading scheme.
“People are absolutely amazed that he would sacrifice a career for a few thousand dollars, if in fact he is actually guilty,” said one source close to the industry.
“We were all shocked by the news. There was absolutely no indication of this. Brian is a good guy, a hard worker,” said Claire Rosenberg, a member of the Young Republicans, for which Callahan served as treasurer in 1986. “Brian was a really good speaker and he cared about making a difference and supporting the club,” she said.
“People are flabbergasted,” said Russell R. Diehl, a Newport Beach investment banker. “If Brian Callahan, an extraordinarily well put together guy, got pulled into this thing, people are thinking, ‘There but the grace of God go I.’ Here is a guy who has the reputation of being a real strong client representative. He won’t do anything to hurt his clients. Perhaps he’s been too good to his clients.”
