2 Ex-Employees Say California Firm Asked Them to Make Illegal Trades

institutions has been accused by two former employees of racketeering. San Clemente Financial Group already is under federal investigation because of complaints from some of its credit union clients. Tim Stiffler and Cedric Swirsky charge that their former employer asked them to make illegal trades and sales and to train unfit staff. Also named as defendants are San Clemente executive vice president and senior trader Cooke Christopher; an affiliated company, San Clemente Financial Group Securities, and up to 100 other unidentified employees. "Throughout their employment, plaintiffs were continuously subjected to verbal demands by defendant Christopher to violate federal and state securities statutes, regulations and rules ... and to make illegal trades and sales," said the 17-page complaint, filed Oct. 20 in the California Superior Court for Orange County. The complaint said Mr. Stiffler and Mr. Swirsky quit the firm because they weren't being paid. "The allegations are completely false," Mr. Christopher said. "This is a frivolous nuisance lawsuit." Indeed, Mr. Christopher declared that Mr. Stiffler had approached the National Association of Securities Dealers with the complaints and that the NASD found nothing. A July 14 letter from NASD District 2 supervisor Mark Mooney to Mr. Christopher said: "We have determined that no action against you is warranted and, therefore, this matter is being closed." Meanwhile, the National Credit Union Administration is winding down a nearly two-year-old investigation of the firm. That probe was spurred by a complaint from a West Virginia credit union that San Clemente had sold it an unsuitable certificate of deposit. The credit union and San Clemente said the transaction had been a misunderstanding - after San Clemente repurchased the certificate. However, agency documents viewed by American Banker said other credit unions have also lodged complaints about the broker's practices. Bob Loftus, director of public and congressional affairs for the regulator, said San Clemente has hundreds of credit union clients, and it is investigating less than a dozen complaints. "We're getting toward decision making time," said Karl Hoyle, the agency's executive director. Mr. Christopher said attorneys representing the firm are negotiating with regulatory officials and "working on details of what's going to make NCUA happy about our business."