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Stockbroker parlayed charm into thriving business, but it all came apart
( Gannett News Service )
DES MOINES, Iowa - Charming, easy-going, devoted to his family -
former clients agree you won't find a nicer fellow than stockbroker
Nick Fegen.
"Nick's the type of guy you grew up playing football with in your back yard," said businessman Mark Rogers. "Nick's your buddy." Fegen, 35, of Waukee, Iowa, parlayed that good-guy personality into a thriving career, assembling a roster of clients that included prominent businessmen and pro football players.
But now more than two dozen ex-clients are pursuing claims against Fegen and five brokerage firms to recover millions of dollars they say they lost while investing with Fegen. The claims, filed with the National Association of Securities Dealer and New York Stock Exchange's arbitration forums, say Fegen engaged in unauthorized and inappropriate trades.
Big-Name Clients Among the claimants are Paul Knapp, chairman of Iowa Realty Co.;
Jonathan Hayes, a former University of Iowa football star now with the Pittsburgh Steelers; Thomas Gratias, a prominent Des Moines-area home builder; and Rogers, founder of the Five Star video-store chain and owner of Legends American Grille in West Des Moines.
Fegen also is facing a $500,000 claim from his father-in-law and
mother-in-law, Ronald and Lou Anna Goslar, and their son, Chad.
Lou Anna Goslar, reached at home in Ute, Iowa, declined to
discuss the case. "This is between the family," she said. "Nick is
family." The Goslars' lawyer, Jack Hudson of Des Moines, said
filing the claim was "very difficult" for them, but "it had to be
done."
Fegen declined to comment. These are not the first woes in his 12-year career. He was fired by two firms, R.G. Dickinson in 1984 and Shearson Lehman Brothers in 1992, and was "permitted to resign" in 1994 from Stifel Nicolaus and Co., according to records from the Iowa Securities Bureau.
Settled Claims
Those records say Shearson paid $160,000 to settle a claim by Owen Gill - a former pro football player and one of Hayes' Iowa teammates - and paid $1.1 million to another ex-client.
Fegen is a broker in Waukee for a Florida firm, Barron Chase
Securities, though Barron Chase president Robert Kirk Jr. said
Fegen hasn't been "actively trading for some period of time." The
Iowa Securities Bureau is investigating Fegen, said bureau attorney
Robert Koppin.
Lawyers for former clients said most of the current complaints
involve stock in an Oklahoma bagel firm called Skolniks Inc.
Skolniks' stock crashed from $14 to less than $1 a share last year,
and the company was placed in involuntary bankruptcy proceedings
last January.
Hayes' complaint accused Fegen of "misrepresentations and omissions of material facts and improper, unauthorized and unsuitable trading." The athlete's complaint says Fegen participated in a scheme to inflate Skolniks' stock price - though it says Fegen apparently believed his customers would benefit from the plan. Fegen owned a significant number of Skolniks shares, according to lawyers for ex-clients, and was named chairman and president of Skolniks last spring.
Wiped Out Savings
Hayes' lawyer, John Miller of Kansas City, said Hayes and his parents lost more than $1 million on Skolniks, wiping out much of their savings.
The Skolniks claims total more than $3 million, said lawyers for
Fegen's ex-clients.The ex-clients also are seeking compensation from firms where Fegen has worked in the past three years: Stifel Nicolaus, D.E. Frey and Co. and Barron Chase. Several claims also target two firms where Fegen allegedly arranged to have clients' accounts traded:
Principal Financial Securities, part of The Principal Financial Group of Des Moines, and a Houston firm named Sanders Morris Mundy Inc.
The firms deny any wrongdoing. Hayes' complaint blasts St. Louis-based Stifel Nicolaus - where Hayes' lawyer says most of the football player's loss occurred - for hiring Fegen after he'd been fired by Dickinson and Shearson.
"Stifel Nicolaus hired Nick Fegen despite his consistent record of
unauthorized and unsuitable trading in customer accounts," the
complaint says.
While the Shearson complaints didn't surface until after Fegen had started at Stifel in early 1992, Hayes' lawyer Miller said in an interview that Stifel should have scrutinized Fegen more
carefully once the Shearson issues came to light. Stifel Nicolaus' lawyer, Kathleen Quinn, said the company did nothing wrong in hiring Fegen. Officials at Smith Barney, which took over Shearson, wouldn't comment.
No High Roller
Although Dallas County records show Fegen's house carries a $251,000 mortgage, acquaintances and clients said he's anything but a high roller. They noted his devotion to his wife and children. Fegen worked for R.G. Dickinson from 1983 to 1984. Records from the Iowa Securities Bureau show he was terminated following a customer complaint over unauthorized trades, although the customer withdrew the complaint.
Fegen worked for E.F. Hutton (which became Shearson) from 1984 to 1992. He was fired in early 1992 following a customer complaint,
according to securities bureau records.
"The (Shearson) branch office manager was uncomfortable with the
manner in which Fegen managed his accounts, and decided termination
was necessary in order to avoid any possible future compliance
situations," the records say.
"Excessive" Trading
The records say Shearson paid $1.1 million to a Charter Oak man named Arthur Gress to settle a complaint that Fegen engaged in unauthorized and "excessive" trading. Gress "trusted him, he believed everything that Nick Fegen ever told him," said Gress' lawyer, James Cavanaugh of Omaha. Fegen even borrowed $50,000 personally from Gress, a violation of Shearson rules, Cavanaugh said. Later, Gress obtained a judgment against Fegen for $7,000 in unpaid interest on that loan, Cavanaugh said. Meanwhile, Shearson paid Gill $160,000 to settle a U.S. District
Court lawsuit over investments Fegen made, according to the securities bureau records. Gill had sued for $240,000.
The records say Fegen, who wasn't named in the lawsuit, said he was merely implementing the investment strategies set out by a financial planner.
Sought Safe Investments
Gill's lawyer, Brent Rosenberg of Des Moines, said Gill had sought safe investments. Instead, his money was put into risky real estate and oil ventures, the attorney said. Right after he was fired by Shearson, the records say, Fegen moved to Stifel Nicolaus' office in Des Moines. There he steered clients to Skolniks stock, said lawyers for ex-clients. "Mr. Fegen liked to concentrate his clients in one stock," Hudson said in an interview. "As to his motivation, I cannot speak to that." Fegen told his clients that such a strategy made him an expert, said Rogers and another ex-client, Robert Pope of Minneapolis. "His big spiel is, he starts working ... usually with one or two companies at a time, really learning the stocks inside out," said Pope, who is among the claimants in the NASD proceedings. Pope said Fegen told him Skolniks was "going to be the next Snapple."
Skolniks at one time said it was selling bagels in about 7,000
supermarkets and convenience stores. It had more than 40 restaurants, including a franchise in West Des Moines.
Part of a Scheme
Skolniks' stock shot up about $10 a share in a year's time and was trading at $14 in early 1994, according to Hayes' complaint. But the athlete's complaint says the price rise was merely the result of a price manipulation scheme by company insiders and a Houston public-relations executive named Arthur Porcari. Porcari was disciplined by the Securities and Exchange Commission last year
in a separate case of price manipulation, according to SEC records.
The Hayes complaint says: "There was clearly no real value to the (Skolniks) stock, only hyperbole from Porcari and insiders.
"Fegen was a willing participant in the scheme ... and apparently believed that he was also an inside trader who would benefit, along with his customers, from the manipulation." The stock plunged to the $1 range in 1994, prompting a still-active investigation by securities regulators in Oklahoma. The company was forced into Chapter 11 bankruptcy in early 1995. Skolniks moved its offices and baking operations from Oklahoma to Arizona. It lost its West Des Moines franchise, among others. Fegen became chairman and president and is "very active" in plotting the company's turnaround, said Skolniks' bankruptcy attorney Richard Bailey of Oklahoma City.
Supports Fegen
Porcari said in an interview that there was no stock-manipulation scheme, and that Fegen acted honorably. Porcari said he thinks Fegen "lost every dime" he invested in Skolniks, which he says is proof of the broker's sincerity. Fegen "believed in what (Skolniks) management told him, he believed in the bagels, he loved the bagels," Porcari said. "And he thought at all times he was doing what was in the best interests of his clients, to get them involved in a ground-floor opportunity."
Even as Skolniks stock price was slipping, Fegen tried to persuade at least one client not to abandon ship. Rogers said he received a call from an upbeat Fegen, who told him the price drop actually represented an opportunity.
"Now, buddy," Rogers recalls Fegen saying, "if you've got any more money, you've got to buy more." Rogers says he rejected the advice.
Copyright 1996, Gannett News Service, a division of Gannett Satelitte Information Network, Inc. |
