Rounding Up the Rogues : Justice Department accuses 11 ex-brokers of preying on small investors

Promising a continuing crackdown on unscrupulous stockbrokers, Atty. Gen. Janet Reno has issued criminal indictments against so-called rogue dealers who prey on small investors. The action was taken against 11 former brokers in 10 states. If found guilty, they could face prison sentences.

“Brokers who seldom risked more than dismissal and restitution [of stolen funds] can now expect to be criminally prosecuted and indicted if they cheat their customers,” Reno declared. Her stance should provide a measure of protection--and comfort--to small investors new to the ways of the stock market. Long-time market investors will be no less served.

Lax policing of problem brokers by the securities industry has damaged public confidence. The Securities and Exchange Commission began the investigation that led to the criminal charges after a 1992 series on dishonest brokers appeared in The Times. SEC Chairman Arthur Levitt made removal of problem brokers a top priority.

Among the wrongdoing alleged in the federal indictment: stealing money from customer accounts, forging clients’ signatures on checks and selling fake certificates of deposit and other bogus securities. What is this but high crime? An armed robber goes to jail for taking your wallet and $50. Until now, a larcenous broker usually could steal your life’s savings and walk away.

Some of the alleged thefts, which ranged from $10,000 to $1.2 million, occurred as long ago as the late 1980s. Several of the accused worked for such major Wall Street firms as Merrill Lynch, Prudential Securities and PaineWebber. All have been fired, Levitt said. The biggest case involves Alan E. Handy, a financial consultant and securities salesman in Largo, Fla., who was accused of selling $950,000 worth of counterfeit securities to 42 people, mostly elderly women and widows.

To avoid becoming a victim of a rogue dealer, check out your broker. Never let one act without your authorization. Check monthly statements to verify all transactions. Ask lots of questions. Remember: It’s your money--money it probably took you a long time to earn.