Stanford Brokers Find Work with New Firms

Three of them are now with Wunderlich Securities, and five more have been hired to create a presence in the Memphis market for Oppenheimer & Co.

No advisers based in Memphis or elsewhere have been implicated by the Securities and Exchange Commission, which last month filed civil charges against Allen Stanford and his college roommate, Memphis-based chief financial officer James Davis, for allegedly engineering a massive Ponzi scheme. Memphis-based chief investment officer Laura Pendergest-Holt also faces civil charges for facilitating the scheme, as well as a criminal complaint for obstruction of justice.

Wunderlich CEO Gary Wunderlich said his previous relationships with Jason Fair, Brown Baine and Larry Goldsmith, combined with reputations they had built before they moved to Stanford in 2004, persuaded him to hire them. Wunderlich has about 35 advisers in Memphis.

"Stanford went after and hired some very good people, and they got duped just like their customers," Wunderlich said. "The people we added, their customers seem to be coming over, they understand the situation and realize these guys have been victims just like some of their own clients."

Oppenheimer, based out of New York, announced two weeks ago its intention to move into new markets by hiring Stanford advisers from across the country.

According to the Financial Industry Regulatory Authority, former Stanford Group managing director Scott Notowich is joined by Jon Barrack, Chuck Hughes, C. Lee Brickey and Norman Blake at a temporary office location at 6000 Poplar -- just across the street from the Crescent Center where Stanford's offices were located.

Notowich confirmed the group is now doing business, but referred all other questions to Oppenheimer, which did not respond to multiple requests for an interview.

In a prepared statement, Oppenheimer said it was comfortable that the financial advisers it was hiring "run solid and diversified practices."

In Baton Rouge, La., more than two dozen investors are suing brokers there not for fraud, but for what their attorney says is "based on a negligence theory."

"It's kind of like when a doctor commits malpractice he didn't intend to," said Phil Preis, a veteran attorney who was involved for many years with litigation related to the savings and loan scandals from the 1980s.

The 29-page lawsuit, filed in a Louisiana state court, alleges that Stanford built its operation in Baton Rouge with a plan similar to that employed in Memphis -- making a big splash with donations to nonprofits and luring influential big-money investors in order to attract more investors.

The lawsuit claims that advisers "failed to follow generally accepted standards of due diligence," that the above-market commissions Stanford paid advisers for selling CDs "impacted and impaired their objective evaluation" and that Stanford Group Company "was addicted to the income" from the sale of CDs and could not have operated as a viable company without them.

The advisers based in Memphis have declined comment on specifics of the Stanford situation, but have told their clients they were unaware there was any reason to believe the Antigua-based CDs were fraudulent. While some investors who have spoken to The Commercial Appeal say they no longer trust their advisers, many others have stood by them.

Wunderlich said the fact that many investors are staying with the brokers helped influence him. He did confirm that the company reached an agreement with the brokers that does not follow traditional practice of providing upfront forgivable loans based on the value of assets managed.

"We made a business decision, and we made it knowing they could get sued and that customer complaints would be on their FINRA record," Wunderlich said, referring to the agency that regulates brokers. "Given the relationships I had, they were comfortable coming on with us."

-- Zack McMillin: 529-2564

The Commercial Appeal is still reaching out to investors and employees who have been affected by the Stanford Financial scandal. Investors or former employees can reach reporter Zack McMillin at 529-2564.

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