HFormer Broker Fined $429 Million by NYSE

A New York Stock Exchange panel has fined a former Lehman Bros. and PaineWebber Inc. broker $429 million--the largest fine ever against a broker--for allegedly buying worthless stocks on his customers’ behalf in exchange for kickbacks.

But attorneys involved said they doubted that any sum even close to that amount could be recovered.

The three-person NYSE panel said that between 1992 and 1998 Enrique Ernesto Perusquia used his clients’ accounts to invest in stock of companies that were nearly bankrupt, and then falsified his customers’ account statements to hide the fraud.

Perusquia, who worked at Lehman’s Manhattan office and PaineWebber’s Manhattan and San Francisco offices, lost close to $100 million belonging to 12 families, including that of Mexican commercial real estate developer Francisco Lerma, according to Thomas Ajamie, a lawyer at Schirrmeister Ajamie in Houston, which represented the investors. The families originally invested $100 million.

“The New York Stock Exchange was making a statement with the award,” which included about $208.7 million in punitive damages, Ajamie said. Punitive damages are those above and beyond the amount lost by investors. In addition to punitive damages, the panel also fined Perusquia $208.7 million in actual damages and $11 million in attorneys’ fees, according to the NYSE award document.

Ajamie said he didn’t think the $429 million could be recovered. “Perusquia has money, in the tens of millions, not in the hundreds of millions,” Ajamie said.

Earlier this year, Ajamie’s clients settled with PaineWebber, now owned by Swiss bank UBS, Lehman and ChaseManhattan Bank, which cleared the trades for the two firms, Ajamie said. The settlement agreement didn’t disclose the amount paid by the firms.

Perusquia, who lives in Jackson Hole, Wyo., was unavailable for comment.

Bloomberg News