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A Losing Bet: Stock Gambler Used Theft to Play Market

October 27, 1987|JAMES F. PELTZ | Times Staff Writer

In July, 1986, accountants from Pomerantz Kavinoky & Co. were checking the books of Commodore Products, a Chatsworth maker of bathroom fixtures, when one entry caught their attention.

The books for Commodore's fiscal year ended May 31 showed the company had loaned $40,000 to an unidentified borrower, whom the accountants learned was Commodore's controller, George Stoffmacher, recalled Martin Kavinoky, senior partner of the Woodland Hills accounting firm.

The books also showed that a $40,000 deposit had been made to Commodore's bank to repay the loan, Kavinoky said. But when the accountants tried to confirm the deposit on Commodore's monthly bank statement, they found the May and June bank statements had "mysteriously disappeared," Kavinoky said.

So the accountants asked Commodore's owner, Larry Pallitz, about the "loan." He didn't know what they were talking about. He then called Stoffmacher, who asked for a private meeting.

"He came over to my condominium and we sat by the pool," Pallitz said. "And he informed me that he had taken this money and that it was more than my accountants had picked up so far." Stoffmacher also told Pallitz that he'd "gambled in the stock market and lost," Pallitz recalled.

"I just couldn't believe what I was hearing," Pallitz said. "I was flabbergasted because in the time he worked for me, he was a very personable, very competent management person."

Controller Fired

Nonetheless, Pallitz immediately fired Stoffmacher, who had worked for Commodore for three years.

Pallitz, Kavinoky and court records quote Stoffmacher as saying he was a compulsive gambler in the stock market. And to feed his habit, Stoffmacher, 49, stole more than $100,000 from Commodore, according to the grand theft charge to which he pleaded no contest Aug. 17.

A no-contest plea carries the same weight as a guilty plea in a felony case, except that it cannot be used against the defendant in a civil lawsuit. In exchange for the plea, the Los Angeles County district attorney's office dropped four counts of forgery against Stoffmacher.

On Sept. 18, Superior Court Judge David Perez in Van Nuys sentenced Stoffmacher to one year in jail. But Perez simultaneously stayed the jail sentence on condition that Stoffmacher, a Woodland Hills resident, spend the year getting therapy to prevent his gambling again.

Stoffmacher also must regularly attend meetings of Gamblers Anonymous, a self-help organization he joined before his sentencing, according to his probation report. (Stoffmacher declined to be interviewed for this article.)

Make Restitution

As part of his sentence, Stoffmacher must also make restitution to Pallitz, who sold Commodore Products in March. The exact amount Stoffmacher owes is in dispute. Court records show that Stoffmacher believes it is no more than $110,000; Pallitz claims it is $157,000. A hearing on the matter is scheduled Nov. 19.

There are between 6 million and 8 million pathological gamblers in the United States, experts say. Stoffmacher was one of a growing number of Americans addicted to the financial markets.

"There are more compulsive gamblers in the markets today than two years ago, just based on the bull market of the past two years," said Jean Falzon, executive director of the National Council on Compulsive Gambling in New York.

One stumbling block to getting a true count of the compulsive gamblers is one of definition, she said. What is the difference between investing, speculating and gambling in the market? "We have struggled with that," Falzon said.

Nonetheless, Stoffmacher matched what the experts say is the profile of the compulsive gambler in the financial markets: a man in his 30s or 40s, married, a college graduate, personable and usually a good employee.

Earned $60,000 a Year

Stoffmacher, who had no prior criminal record, earned a bachelor's degree in engineering and a master's degree in mathematics from Northwestern University, according to his probation report. As Commodore's controller, he was earning about $60,000 a year, Pallitz said.

Stoffmacher, who has been married for 23 years, also was popular and admired for his professional abilities, and gave no hint of wanting to gamble in the market so badly that he would steal for it, Pallitz and Kavinoky said.

Stoffmacher would occasionally mention his stock market investments, but "nothing he told me portended anything out of the ordinary," Kavinoky said. He said Stoffmacher also took one of the accounting courses Kavinoky teaches at UCLA, earning an "A" grade.

"We have discovered embezzlements before, and I must tell you this one really hurt and disappointed me," Kavinoky said. "He is an exceptionally bright individual and exceptionally likable."

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