Cantor Fitzgerald Charged With Helping to Defraud Investors : Commodities: L.A. firm allegedly aided brokers in collecting $4 million in fees they were not entitled to.

Federal regulators said Friday that they have charged the Los Angeles-based Cantor Fitzgerald & Co. brokerage firm with helping a group of commodities brokers defraud thousands of investors of more than $4 million.

The investors were Germans and other Europeans from whom the brokers obtained $29 million in 1989, promising that they would collect a fee only if their commodities and securities trading was profitable for the customers.

In a civil action filed Thursday, the Commodity Futures Trading Commission alleges that the brokers took more than $4 million in fees even though the trading resulted in losses of more than $4 million.

According to Dennis Klejna, the CFTC’s director of enforcement, Cantor Fitzgerald’s role in the alleged scheme was to transfer $950,000 of the investors’ funds to an account held by Indianapolis-based First Republic Securities--a transfer regulators say it should have known was improper.

In a statement, Cantor Fitzgerald denied any wrongdoing. “The firm’s connection to the alleged scheme was that in 1989 it transferred funds from a customer’s securities account at the direction of such customer,” said the statement, issued in the name of General Counsel Stephen Merkel.

However, the CFTC contends that Cantor Fitzgerald should have known that First Republic was not a legitimate recipient of the $950,000, which properly belonged to its customers.

“They had a sufficient level of knowledge about who this money belonged to that they should not have honored the request,” Klejna said.

The transfer was made at the request of Jerry W. Slusser, a Las Vegas commodities broker who the CFTC says was at the center of the scheme.

One unidentified branch office of Cantor Fitzgerald also made $1.5 million in commissions on securities trading generated by Slusser and his associates, the CFTC said. However, the agency did not charge that the trades themselves were illegal.

The CFTC charged Slusser and First Republic, as well as Cantor Fitzgerald, with violations of the Commodity Exchange Act and of CFTC regulations. Also charged were Edward T. Hamlet of Highland Beach, Fla., and Hans J. Brinks of Berlin. Slusser and Brinks were unavailable for comment Friday, as was a spokesman for First Republic. Hamlet said he would not comment until he had seen the charges.

The CFTC charges are subject to review by an administrative law judge. Violators of the exchange act face fines of as much as $100,000 for each act of misconduct, as well as suspension or revocation of their right to trade commodities.

The brokers returned to the investors just $16.6 million of their $29 million. Some of the difference remains unaccounted for, according to the CFTC, which said most was lost to illicit fees, commissions and trading losses.