Complaint Not Brokerage’s First, Records Show : Securities: At least four representatives at Cruttenden’s Irvine offices have been involved in arbitration or paid fines.

The complaint filed this week against Cruttenden & Co. was not the first against Orange County’s largest brokerage, records show.

Bradley C. Weddon, the former head of retail sales for Cruttenden, filed a complaint Monday with the National Assn. of Securities Dealers alleging that he was fired in February for refusing to violate securities rules. He is seeking $4.5 million in damages and lost wages.

Information provided by the NASD, the agency that establishes regulations and oversees stock trading on the Nasdaq market, indicates that Weddon’s is the latest of several complaints filed in recent years against the firm or individual employees. At least four of the two dozen registered representatives at Cruttenden’s Irvine headquarters have been involved in arbitration to settle complaints or have paid fines, NASD records show.

“Typically most brokers usually go through entire careers without violating any rules or being involved in any arbitration proceedings or being fined,” said Fredric M. Roberts, a former NASD chairman. “I think two awards or fines against a broker are a cause for concern.”

Walter C. Cruttenden III, founder of the brokerage, acknowledged that some of the brokers have paid fines or arbitration awards but said that they were not unusual nor were the amounts paid abnormal.

“Some of the guys have had some things, as they have at firms around the country,” Cruttenden said Tuesday. “I think our brokers compare very favorable with other firms.’ ”

One of the complaints filed earlier against a Cruttenden broker will be heard July 26 by an NASD arbitration panel in Los Angeles. In that case, Orange County investor Michael Galeck alleges that, though he specified that his money be used to purchase only investment-grade securities, Cruttenden broker Larry Butler instead bought him “highly speculative stock.”

Galeck’s complaint seeks $55,463.65 in damages.

Butler, reached at his office Tuesday, said, “This case has no merit at all. It’s completely false. We will be victorious without a question.”

That complaint was not the first against Butler, 34. In June, 1993, the NASD ordered the broker to pay an investor $3,085 to settle allegations of “misrepresentation, suitability, omission of the facts” concerning an investment deal, agency records show. A month earlier, Butler had paid another investor $877.50 to settle an allegation of “misrepresentation.”

“I had two small problems from an investment two years ago,” Butler said Tuesday. “These were very, very small.”

Other Cruttenden employees have faced recent disciplinary action, NASD records show. Of 463,000 registered brokers and traders in the United States, only 228 were suspended from dealing in securities in 1993, according to the NASD.

One of those was Cruttenden broker Peter J. Conley, who was suspended for a week, records show, after he failed to provide order tickets for securities purchases he had made while working at another brokerage. “The firm was unable to determine into whose customer accounts the securities should have been placed,” the NASD order states. “Subsequently the shares were sold, resulting in a $10,000 loss.”

Another Cruttenden broker, James A. Kelly, was fined $2,500 in 1988 by the Chicago Board of Option Exchange to settle allegations that he had not received written approval to make trades in two client accounts. Kelly, who joined Cruttenden in 1991, also paid $1,000 in 1982 to settle allegations that he made “an unauthorized purchase transaction in a customer’s account” and “executed numerous options transactions in the account of a customer which were excessive in size or frequency.”

And Cruttenden broker Dennis Holtorf paid $1,000 in 1991 to settle a complaint of “misrepresentation and account-related error charges” while he was employed by a Denver brokerage, NASD records show. Holtorf, who was formerly employed by the Securities and Exchange Commission, is now Cruttenden’s compliance officer--the person responsible for making sure employees obey securities laws.

The brokerage itself also has faced allegations of wrongdoing. Earlier this year, Cruttenden paid $650,000 to settle a lawsuit charging that the firm misled investors in Parker Automotive Corp., a Costa Mesa company that made equipment for cleaning car engines.

In 1990, the suit alleged, Cruttenden recruited more than three dozen people in the San Francisco Bay Area to invest a total of $5.3 million in Parker Automotive. The following year, some of those investors filed suit in Orange County Superior Court stating that they were not informed of serious financial troubles at Parker Automotive, which went bankrupt the next year. The lawsuit states that Cruttenden knew, or should have known, about Parker Automotive’s difficulties.

Lawyers for Cruttenden said the brokerage had no knowledge of the problems at Parker Automotive and that it paid the settlement because doing so was less expensive than contesting the lawsuit in court.

This week’s complaint filed by Weddon alleges that Walter Cruttenden knowingly sold low-quality stocks in order to generate large fees on private placements for small Orange County companies.

Cruttenden denies all of Weddon’s allegations and describes them as “ridiculous.”

As for Weddon’s statement that he was fired for refusing to violate securities laws, Cruttenden said that the broker was dismissed because he padded his expense account, did not fairly allocate securities in Cruttenden’s stock offerings to other brokers and, while still at Cruttenden, attempted to start a competing firm.

Weddon’s attorney, Gary Gebler, said that was not the case.

According to NASD records, Weddon has no fines or arbitration awards against him.

Formed in 1984, Cruttenden & Co. has raised more than $40 million in initial public stock offerings in the past three years.

“We feel like we’re doing a good job. We are trying to raise money for Orange County growth companies,” Walter Cruttenden said Tuesday. “And, yes, it’s risky dealing with the small companies, but it’s a heck of a lot more rewarding.”

Lani Woltmann, district director of NASD in Los Angeles, said the agency is examining Cruttenden as part of its annual evaluation of Southern California brokerages.

“We were there in March, and our exam of Cruttenden has not been completed,” she said. “If there is in fact a violation of the public trust, we will act immediately.”

Cruttenden’s Clients

Companies for which Cruttenden & Co. has underwritten public stock offerings:

Offering Company Headquarters Date price Candy’s Tortilla Factory Pueblo, Colo. August, 1991 $3.00 Wilshire Technologies Carlsbad November, 1992 6.25 California Amplifier Camarillo April, 1993 8.00 Harvey Comics Santa Monica June, 1993 7.50 Midisoft Corp. Redmond, Wash. July, 1993 3.50 Odetics Anaheim October, 1993 9.25 Eltron International Chatsworth February, 1994 6.00 Datametrics Corp. Chatsworth March, 1994 2.63 Positive Response Sherman Oaks May, 1994 6.00 Television Sigma Circuits Santa Clara June, 1994 5.50

Tuesday’s Company close Candy’s Tortilla Factory $3.16 Wilshire Technologies 3.25 California Amplifier 3.50 Harvey Comics 9.50 Midisoft Corp. 14.63 Odetics 9.25 Eltron International 8.13 Datametrics Corp. 3.31 Positive Response 6.13 Television Sigma Circuits 5.63

Sources: Bloomberg Business News, Securities Data Co.; Researched by JANICE L. JONES / Los Angeles Times