Top Kidder Broker Will Retire Amid Client, Regulator Pressure : Securities: NYSE is investigating Gregory Wilbur in one more embarrassment for the firm.
Few stockbrokers have received as many accolades as Gregory F. Wilbur of Kidder, Peabody & Co.
The grandson of a Stanford University president, Wilbur in 1992 was featured in a New York Institute of Finance book on “How 10 Stockbrokers Became the Best in the Business.”
In a 1993 cover story, Town & Country magazine chose him as one of the nation’s Top 10 brokers. Local newspapers wrote glowing profiles. He was named Kidder’s “Man of the Year” in 1987 and was a regular member of Kidder Associates, an elite group formed to honor the firm’s top 25 brokers.
But today, The Times has learned, Wilbur--under investigation by the New York Stock Exchange--is being forced to retire from Kidder, the Wall Street brokerage firm owned by General Electric Co. that has suffered a series of recent embarrassments.
Records show that Wilbur, 59, and Kidder so far have paid out more than $3.2 million in settlements and arbitration judgments in response to complaints from 10 of his customers.
Clients accused Wilbur, who works in Kidder’s Palo Alto office, of causing big losses by loading up their accounts with highly speculative, thinly traded stocks--especially Silicon Valley technology issues, in which Wilbur’s clients held enormous stakes. Some clients also accused him of making trades they never authorized and excessively buying and selling securities in an apparent effort to boost his commissions.
In addition, records from the National Assn. of Securities Dealers and the state of Maryland show that when several of the customers complained, Wilbur reimbursed them out of his own pocket, a violation of securities rules. In one instance, the records show, he paid a complaining customer $981,000. Maryland regulators fined him for failing to report the complaints to Kidder or to regulators, as required.
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Asked about the customer complaints, Kidder spokesman Anthony Zehnder said, “We’re not going to deny any of those allegations.” Although he said Wilbur had been “a highly valued employee of the Palo Alto office,” Zehnder disclosed that he had been suspended by Kidder for 60 days last year and confirmed that the company had required him to give up the accounts of individual investors.
“Literally hundreds of retail accounts were in fact taken away from him,” Zehnder said. He would not comment on the reasons for Wilbur’s early retirement.
Wilbur did not respond to numerous telephone requests to both his office and home seeking comment, nor to a faxed request for an interview. His secretary confirmed late Thursday that Wilbur had received the messages and the fax, but said he had left for the day; a woman who identified herself as his wife said she believed he did not wish to comment. Kidder in recent months has been beset by misfortunes that led GE in June to oust the unit’s chief executive.
The firm dismissed the head of its government bond trading desk, Joseph Jett, in April, accusing him of booking $350 million in profits that didn’t exist. (Jett has denied wrongdoing.) Kidder suffered heavy losses this spring on its huge portfolio of mortgage bonds. More recently, Kidder disclosed that it had dismissed a trader in its London office, contending that he had hidden $6 million in losses on European bonds. That trader has also denied the allegations.
Much of Wilbur’s business was based on his vaunted expertise in technology stocks. He was quoted as saying that he went to great lengths to do research on tech companies, visiting their headquarters and interviewing top executives, many of whom became his clients.
“I pride myself on being an expert on Silicon Valley-based companies,” Wilbur told the authors of the New York Institute of Finance “Best in the Business” book. “In general, I rarely invest in companies that I can’t drive to.”
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But in arbitration proceedings, customers accused him of putting much of their money in these stocks, often without permission, and charged that the stocks were so narrowly traded that there was often little market for them besides Wilbur’s other customers.
Ed Horowitz, an expert witness against Wilbur at arbitration hearings, said he had testified that the broker seemed so enamored of several thinly traded companies that his customers at times held most of their outstanding stock--”so much that he lost the ability to ever change his mind on those securities,” Horovitz said in an interview. “He created risks that were astounding for people.”
For example, Wilbur was accused of selling blue chip stocks that had long been held by a client in his 90s and putting most of the man’s funds into thinly traded Silicon Valley stocks. Kidder and Wilbur agreed to pay $1.65 million to settle the man’s complaint, according to NASD records.
Among the stocks Wilbur bought heavily was Silvar-Lisco, a software manufacturer that has since changed its name and which over the last five years has had erratic swings in earnings.
Another was Delphi Information Systems, a company now based in Illinois. Daniel F. Dunne, Delphi’s chief financial officer, said in a telephone interview that the firm regards Wilbur as its “market maker.”
“Ours is a very thinly traded stock,” Dunne said, explaining that anyone who wants to buy or sell the company’s shares usually ends up dealing with Wilbur. The stock, which traded as high as $8 a share in 1990, currently is trading at about $3.25 a share on the Nasdaq market.
Zehnder said Kidder had no comment on why Kidder managers did not supervise Wilbur’s accounts more closely. A Times series published in 1992 found that Wall Street firms often seemed reluctant to discipline big producers.
In published interviews, Wilbur emphasized his connections with Stanford, from which he graduated in 1956 and later obtained a business degree. A spokeswoman for the university confirmed that he has been a prominent fund-raiser for the school. His grandfather, Ray Lyman Wilbur, was the university’s third president, serving from 1915 to 1942.
Sources said the New York Stock Exchange investigation focuses at least in part on Wilbur’s failure to report customer complaints. A stock exchange spokesman said that, as a matter of policy, the exchange will not confirm the existence of pending investigations. NYSE investigations can lead to censure, fines or bans prohibiting brokers from working for member firms.
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The unreported complaints came to light as a result of an investigation by the Maryland Securities Division, which suspended Wilbur’s license in the state for about 10 weeks beginning in April, 1993, and fined him $2,000.
In a document filed with the state, Wilbur’s lawyer in that case, Charles P. Scheeler, confirmed that “Mr. Wilbur privately settled complaints with four clients” between 1985 and 1990.
“He did not report the matters internally to Kidder because he concluded the desire of his clients and himself for confidentiality took precedence,” Scheeler stated.
