continued The broker was making money on the stock that UBS borrowed -- another reason why he didn't want Barinaga to sell, according to the complaint.
So Barinaga makes an interesting observation. The Portland broker didn't want him to sell his e.Digital stock because he told him it would go up. But the broker was also making money from a shorting arrangement that would pay off if the stock went down and was also putting downward pressure on the stock.
At some point, Barinaga learned that Robert Putnam, senior vice president of e.Digital, had been his patient years ago in a small town in Oregon. Barinaga was such a large shareholder in the company that he regularly called Putnam, as well as e.Digital's chief executive. "Putnam would tell me that he was glad I was loyal and not selling the stock," says Barinaga.
But Barinaga discovered that on February 3, 2000, at a time when e.Digital stock had shot up mysteriously, Putnam sold 125,000 e.Digital shares for $10.97 that he had acquired for a dime apiece. The company's chief executive was also jettisoning his shares in big bundles at this time. "Had I known they were selling, I would have bailed out so fast your head would spin," says Barinaga. But at the time, he was having trouble getting his shares from the Portland brokerage and UBS Financial, he says.
Putnam claims those conversations didn't take place. In their discussions, Barinaga "would say, 'What should I do?' " claims Putnam. "I said, 'You are looking at retirement. Diversification is important. You have appreciated assets; you should think about diversifying' " away from the heavy concentration in e.Digital, says Putnam.
Barinaga was no pigeon, and actually "was a sophisticated investor," insists Putnam.
E.Digital has not been sued. The Portland brokerage would not return repeated phone calls, and UBS Financial again refused comment.
But you can bet that the defendants will claim that a retired dentist should have known better.