Cruttenden Hit With $4.5-Million Action : Securities: Former manager says O.C. brokerage fired him for refusing to break trading rules. Firm’s founder denies charge.
The former head of retail sales for Orange County’s largest brokerage filed a $4.5-million complaint Monday against Cruttenden & Co. alleging that he was fired for refusing to violate securities rules, his lawyer said.
The complaint, filed by Bradley C. Weddon with the National Assn. of Securities Dealers, alleges that company founder Walter W. Cruttenden III knowingly sold low-quality stocks in order to generate large fees on private stock offerings, many for small Orange County companies, said Gary L. Gebler, Weddon’s attorney.
Walter Cruttenden, reached Monday at the brokerage’s Irvine headquarters, denied all of the allegations in the complaint and characterized Weddon, who left the firm in February, as a disgruntled former employee.
“The whole thing is ridiculous. He was fired for cause,” Cruttenden said. He said he did not want to “get into the causes” of Weddon’s departure but said the company has “excellent documentation.”
“When people do bad things around here, we fire them, just like we fired Brad,” he said. He would not elaborate.
The NASD complaint alleges that Weddon, who was hired in August, 1990, was fired earlier this year because he “refused to participate in and tolerate the flagrant violation of NASD and SEC (Securities and Exchange Commission) regulations by Cruttenden management. Cruttenden’s solution, a retaliatory termination of the potential ‘whistle-blower,’ clearly constitutes wrongful termination,” the arbitration action states.
The complaint asks for $500,000 to compensate for lost wages and $4 million in punitive damages.
“I brought my concerns about the activity up to management, and they didn’t seem to care,” Weddon said in an interview Monday. “There was never any indication of them being unhappy with my performance.”
The arbitration action states that, under Weddon’s direction, the brokerage’s retail business doubled from $3 million for 1992 to $6 million for the following year.
The eight-page complaint also alleges that, when the firm handled the initial public stock offering in 1992 for Wilshire Technologies, a Carlsbad company, it “elected to disregard and bury negative information relating to the security,” including earnings statements, which resulted in “substantial monetary losses to public customers who bought based on Cruttenden’s knowing misrepresentation of the company.”
Further, the complaint alleges that founder Cruttenden, compliance officer Dennis Holtorf and others maintained an account to keep up with losses or gains from unauthorized trades in client accounts.
The document also alleges that Weddon made “continued complaints about such conduct at the manager’s meeting prior to his termination.”
Walter Cruttenden denied that Monday and said of Weddon: “If he did know about those things, why didn’t he say anything in the last three years?”
Once the complaint is received by the NASD, the agency will assign a hearing date to resolve the dispute.
