Pier 1 Blames Questionable Trades for Loss : Investments: Firm seeks to recover $20 million. Similar situation has unfolded at PairGain Technologies in Tustin.

Specialty retailer Pier 1 Imports said Tuesday that it suffered a $20-million loss because of a financial advisor who participated in “inappropriate trading” with the company’s cash.

The announcement, which sent the nationwide chain’s stock plunging on Wall Street, comes after a similar situation unfolded earlier this month at PairGain Technologies Inc., a Tustin company that makes telecommunications devices. PairGain said a broker managing one of its investment accounts lost $15.9 million through unauthorized trading.

A financial advisor to both companies was Capital Insight in Beverly Hills, federal officials familiar with the Pier 1 trading loss told Bloomberg Business News. They spoke on the condition that they not be identified.

Capital Insight is run by Jay Goldinger, a well-known stockbroker and investment manager who is widely quoted in the financial media. In a phone interview with The Times, Goldinger’s attorney Brian O’Neill confirmed that Goldinger is an advisor to both firms but he declined further comment.

Goldinger could not be reached.

Fort Worth-based Pier 1 did not disclose the identity of the financial advisor involved, saying only that he was hired to manage excess cash and short-term investments. Pier 1’s board appointed a special committee of outside directors to investigate the circumstances of the loss, which it said won’t materially affect liquidity or operations.

Pier 1, which operates a chain of 690 home furnishings and decor stores, said in a statement that it is exploring its options for recovering the $20 million from “various potential sources,” which it didn’t identify. Pier 1 said it “intends to take all appropriate legal action.”

Pier 1 shares fell $1.50 to $10.50 in Tuesday trading on the New York Stork Exchange. More than 550,000 shares exchanged hands--four times the recent daily average.

In Orange County, PairGain officials have also declined to reveal the identity of the broker involved until their own investigation of the matter is completed. Officials would neither confirm nor deny that Capital Insight was one of the company’s financial advisors.

Charles McBrayer, chief financial officer at PairGain, said the company has shared information about the case with the Securities and Exchange Commission and the Commodities Futures Trading Commission, adding that the company suspects the unauthorized trading involved more than one broker.

“There was more than one money management firm involved in this,” McBrayer said. “What we’re looking at are both civil and criminal liability. It will come clean in the next week or so.”

PairGain’s broker had been instructed to buy and hold U.S. Treasury notes with maturities of one year or less. Such a strategy is “about as conservative as you can have,” McBrayer said, so executives became suspicious last June when the returns being reported on the account outperformed other, more lucrative, investments.

Times staff writers Jesus Sanchez in Los Angeles and Greg Miller in Orange County contributed to this story.