Norman D. Shubert and Daniel H. Steinberg, accused by the Securities and Exchange Commission in a complaint filed in federal court last spring of running a huge boiler-room operation in Woodland Hills, have agreed to a federal order that bars them from the brokerage industry for life.
The SEC order prohibits Shubert and Steinberg, both Calabasas residents, from "association with any broker, dealer, municipal securities dealer, investment adviser or investment company." Shubert, 61, and Steinberg, 37, signed the administrative order without admitting or denying guilt, and it took effect July 29.
Steinberg said the cost of fighting the SEC was one reason he agreed to the ban. "I was left with few alternatives." Steinberg now works at a memorabilia business in Tarzana called American Legacy. "I'm out of the securities industry."
Shubert did not return telephone calls for this story.
The SEC order is the latest, and strongest, regulatory action against the former owners of now-defunct Brokers Investment Corp. in Woodland Hills. And it may have been prompted by reports that Shubert and Steinberg have been involved with a new brokerage called William Lawrence Securities, also in Woodland Hills, which was formed by executives at Brokers Investment as regulators were closing in on that firm.
It was last year when the SEC initially suspected that Brokers Investment was violating securities law. In April the SEC alleged in Los Angeles federal court that Shubert and Steinberg were running a nationwide scam in which Brokers Investment, along with an obscure San Diego firm called U.S. Fiberline Communications, defrauded investors of at least $40 million by selling dubious investments in telecommunications. The SEC said Brokers' salesmen raised $109 million from 6,000 investors by reading sales scripts that talked about annual returns of up to 32%, and that $40 million was pocketed or fraudulently used by Shubert, Steinberg and others.
An SEC investigation is still determining how much money is missing and where it went. Pending that report, expected by year-end, the defendants could be forced to make restitution to investors and pay civil penalties.
In April of this year, Shubert and Steinberg signed an SEC consent order, without admitting or denying guilt, promising not to sell unregistered securities or break any other securities law. And under pressure from the SEC, Brokers Investment shut down last spring.
But as Brokers was winding down its business early this year, William Lawrence was setting up shop in Woodland Hills, just down the street from where Brokers once operated in Warner Center. When William Lawrence opened for business in early spring, Shubert had an office in the back of that brokerage.
Although Shubert and Steinberg had no official titles at William Lawrence, they held a reception for its opening, and Shubert attended regular meetings at the new brokerage, according to an internal company memo and former employees at William Lawrence. The SEC, when asked about Shubert's presence at William Lawrence earlier this summer, simply said he should not be there.
William Lawrence, in materials sent to former clients of Brokers Investment, described itself as a complete brokerage that deals in mutual funds, stocks and other investments. The brokerage was incorporated by Martin W. May in 1991 when he was head of sales operations at Brokers Investment, papers from the secretary of state and court proceedings show. May, 42, is a third defendant in the SEC's lawsuit against Brokers, and is currently negotiating a separate settlement with the SEC, the agency said.
May was secretary and treasurer at William Lawrence, but recently resigned from those posts and is now working as a broker at William Lawrence, said Raymond H. Niesslein, formerly senior vice president at Brokers and now president of William Lawrence.
Niesslein confirmed that former Brokers Investment personnel made the move to William Lawrence early this year, taking with them some active accounts and client lists from Brokers Investment. Niesslein also said that Shubert had maintained an office at William Lawrence.
However, Niesslein said in an interview that Shubert had moved out of William Lawrence's office in early July and that Shubert now has no involvement with the brokerage. Asked what Shubert had been doing at William Lawrence's offices, Niesslein said, "he had a lot of things he had to wind up, and we allowed him to lease some office space."
Niesslein added: "We have a lot of old baggage. We're trying to eliminate it."
It was Shubert who formed Brokers Investment in 1985 as a discount brokerage, and a couple of years later Steinberg and Niesslein joined him. From 1989 to mid-1992, Brokers sold mainly limited partnerships that were supposed to be invested in U.S. Fiberline's projects.