Impropriety claims fly in brokerage lawsuit
Don Bauder
February 17, 2002
Call it "The Bloody Bout in the Boutique Brokerage."
There is an internecine war going on at Granite Financial Group, and it has spilled out into Superior Court.
Granite Financial, a boutique Del Mar firm, was set up in 1998 by Daniel Schreiber, who left Torrey Pines Securities to go out on his own. It is not a retail brokerage; it was set up to do institutional business and corporate finance transactions.
The firm overall has a good reputation. Its securities analyst, David N. Allen, is one of the better ones in California.
In mid-1999, Darren J. Caris joined Granite as head of marketing, with a contract that extended to Aug. 31, 2005.
Caris invested more than $1 million in the firm, winding up with almost 25 percent of the equity.
On the day after Christmas last year, Caris resigned, complaining strongly of irregularities within the firm. He asked for the return of his capital, equipment and personal belongings.
This month, Granite filed suit in Superior Court, charging Caris with breach of contract, intentional interference with economic relationships, unfair competition, misappropriation of trade secrets, breach of fiduciary duty and other transgressions.
The suit charges that Caris misappropriated confidential information and recruited Granite employees to join him at a new firm and bring their customers along. The suit attaches Caris' business plan as proof that he plans to take Granite employees.
Caris' alleged offenses were "willful, oppressive, malicious and with wanton disregard for Granite Financial's rights," the complaint says.
Granite sought a temporary restraining order, which was denied by Judge Kevin A. Enright. The hearing on a preliminary injunction is in March. Granite also sought to have the documents sealed, but Enright has not acted on that.
Caris intends to set up a brokerage.
"I am getting my regulatory ducks in a row," he says. "It could be as soon as three or four weeks."
The firm will do institutional sales and investment banking.
Caris will not discuss the dispute with Granite and Schreiber. In his court filings, he generally denies the allegations, including claims that he has misappropriated information and wooed employees and clients.
Caris says he set up Granite's trading operation on his own, and Granite owes him $1.2 million. And he says he was locked out.
"Granite is a NASD (National Association of Securities Dealers) entity," Caris says in a declaration to the court. "Part of my reason for leaving Granite was because it is my opinion that Schreiber was becoming involved in illegal trading schemes and is illegally sharing commissions with an individual who has been barred for life from the securities industry. I have reported these concerns to the NASD."
Christian Fessenden, a close friend of Caris, worked for him at Granite as a trading assistant. Fessenden left Jan. 28.
"After Mr. Caris left Granite, I intended to stay on to assist Daniel Schreiber, the CEO at Granite," Fessenden says in a declaration to the court. "However, before Mr. Caris left and with more frequency following his departure, Schreiber asked me to make improper pre-arranged trades. Schreiber would ask me to make trades of certain securities during trading hours ostensibly for an account at Granite."
Those accounts were actually for another dealer, Fessenden says.
"These are improper transactions and may be illegal if Schreiber is holding securities with another broker-dealer," Fessenden says in his declaration.
Schreiber responds: "To say the allegations are absolutely, 100 percent, completely false is an understatement. I do not hold any securities for another broker-dealer. I did not make trades not for an account at Granite."
The Caris/Fessenden statements "are false; they will never be brought as charges," says Donald English, Granite's attorney.
On one point Schreiber and Caris agree: They had a strong disagreement on how to manage the business. |
