Orange Brokerage Seeks Bankruptcy Protection

Montano Securities Corp., an independent brokerage in the middle of an ownership dispute, has filed for bankruptcy protection.

The filing and feud prompted Union Bank to freeze the firm’s 10,000 customer accounts. Montano Securities, based in Orange, has nine offices and 900 brokers nationwide.

Founder Daniel Montano, ousted as president of the firm Dec. 14, filed two days later to reorganize the company under Chapter 11 of the U.S. bankruptcy code.

Montano’s dismissal came after an audit requested by the firm’s minority shareholder, California Quartz Corp., revealed that Montano had understated losses and exaggerated revenue.

California Quartz, which owns the Focus Institute, a Costa Mesa computer school, was seeking to obtain a controlling interest in Montano Securities for $1.5 million. Montano fought the move by filing for bankruptcy.

On Tuesday, California Quartz obtained a restraining order that bars Montano from company business.

“It looked like a good investment,” said David Lopes, California Quartz president who replaces Montano. “It would have been even better if the numbers weren’t so far overstated.”

An audit found that Montano Securities’ revenue had been overstated by about $2.5 million.

Lopes said customers’ accounts should be released in “a day or two” when the firm presents proof to Union Bank that Montano is no longer involved in management.