But he got into trouble pushing cheap, speculative stocks on the elderly. According to allegations made in a San Diego Superior Court lawsuit, Wetzel, while with Torrey Pines Securities, sold conservative bond funds in an 81-year-old woman’s account and put $181,500 in a penny stock. After he took the account to Centex, he sold the penny stock for a $123,000 loss. He loaded her account with an inordinate pile of stock in the former Bank of Commerce of San Diego and rapidly bought and sold stock options. This was generating big commissions for Wetzel but not pleasing the elderly woman, who wrote the firm and instructed it to cease the trading activity.
“Apparently, Wetzel went to this terminally ill lady’s home and had her sign a form letter countermanding the instructions” of her earlier letter, alleged the attorney who pushed the lawsuit. In 2002, an arbitration panel assessed a sum of $110,625 against Torrey Pines and Wetzel and $91,633 against Centex and Wetzel. Torrey Pines and Wetzel paid up. But as late as 2004, Centex, which by that time was closed, had not paid its portion, and neither had Wetzel, according to documents. We have not reached the attorney to determine if the sum was ever paid. Wetzel insists it was.
A similar complaint, filed in San Diego Superior Court in 2004, concerned Philip Boad, who was in his mid-80s when Wetzel took his account to Centex. According to the attorney in the case, Wetzel sold conservative municipal bonds and loaded up Boad’s account with Bank of Commerce stock that eventually was sold for a loss of $212,000. (A former bank official does not remember Wetzel, Centex, or the incident.)
The suit states that Wetzel was engaging in rapid-fire buying and selling of speculative stocks and stock options — hardly appropriate for an elderly gentleman who wanted safety of principal. This old man asked that the trading cease, and Wetzel went to his house and allegedly talked him out of it. An arbitration panel in 2002 told Centex to pay the victim $139,715 plus interest and Centex and Wetzel to pay $163,789 plus interest. In 2004, the money had not been paid. Again, Wetzel says he has settled up, but we haven’t been able to reach the attorney or the old man’s survivors to confirm that.
Centex is a story in itself. Throughout its existence, it had a reputation as a bucket shop. It was shuttered by the National Association of Securities Dealers in 2001 for failing to pay fees from 23 arbitration proceedings. In its 14-year history, there had been 13 regulatory actions against Centex.
Before it was shut, its chief executive, Bruce Biddick, attempted to bribe a mutual fund manager to pay above-market prices for two stocks. The kickback was to be $2 million, and one-fifth of that sum would bounce back to Biddick. The transaction was to be disguised through an entity in that haven of original financial sin, Switzerland. The mutual fund manager, however, turned out to be an undercover Federal Bureau of Investigation agent in a government sting called Bermuda Short. Biddick was sentenced to four months in prison.
Centex had other brokers who ran afoul of the law, including Ron Brouillette, who got nailed for running a pump-and-dump scheme. According to the Securities and Exchange Commission, Brouillette created phony trades to inflate a penny stock, then told lies about the deal to customers. Other Centex brokers were notorious on the San Diego penny stock scene, including Marshall Klein, who pleaded guilty in 2004 to wire, mail, and securities fraud, and Marvin Susemihl, who got into trouble with the Securities and Exchange Commission in a golf promotion.
In 2003 in New York, an associate of the Colombo organized crime family was charged with running a stock scam out of a Centex office.
“Centex was one of those places you try to forget about,” says Wetzel. “I never did deals that Biddick had offered — not one single share. I wouldn’t know Brouillette if I passed him on the street.”
Moore, Wetzel’s former coworker at Centex, has an equally low opinion of the company and its brokers. However, Moore has gone on to financial troubles of his own. He became a salesman for Universal Money Traders, in Solana Beach, which told suckers it could make them huge returns through its trading of foreign currencies. In 2005, the California Department of Corporations slapped an enforcement action on the head of the firm, Mark Todd Hauze, along with Moore and two others. The action “was an error. I was not a principal,” claims Moore.
In 2007, Hauze was indicted on 19 counts of fraud. Moore was not indicted, and the U.S. Attorney’s Office won’t comment on the reason. The U.S. government charged that Hauze was using new money that came in from clients to pay off investors who wanted to withdraw their funds. That is a Ponzi scheme. “I had put my own brother and father into Universal Money Traders,” says Moore. “It turned out it was a very, very poor investment. Myself and my clients lost millions. We had no knowledge of what Mark Hauze was doing.” (The case has not yet been resolved.)
In 2004, Moore went bankrupt with assets of $31,000 and liabilities of $425,000. He owed the Internal Revenue Service, Franchise Tax Board, credit card companies, and collection agencies and had not paid an assessment of $126,000 from a dispute with a customer while he was with Centex.
Wetzel admits that on one occasion, he paid Moore a finder’s fee for steering a client to Maxxum. Old Centex colleagues keep the fires of friendship glowing, it appears.
This isn’t the only time Sanders has been involved with edgy investments. In 2002, after resigning as chief executive officer of United Way of San Diego County, Sanders became president of a company named Virtual Capital of California, set up to exploit high-tech advances. Sanders owned 10 percent. So did William Robert Bradley, cofounder of the scandal-plagued, bankrupt Metabolife, maker of pep/diet pills containing the deadly ephedra.