TUSTIN — These are tumultuous times for Frank L. King, co-founder and president of Orange County's largest stock brokerage. Earlier this year, Titan Value Equities Group Inc. landed in the middle of two high-profile controversies that continue to haunt it.
First, there was the fall of Hill Williams Development Corp. Over 3 1/2 years, the Anaheim Hills home builder raised $90 million--a third of it generated from about 1,800 Titan customers--only to file for bankruptcy liquidation in February. Half a dozen lawsuits have since piled up against the brokerage.
Within weeks, a broker for Titan emerged as a key player in a financial investment controversy surrounding the Santa Margarita Water District. State and federal agencies are looking into conflict-of-interest allegations against two former senior managers of the water district, including possible broker kickbacks.
Seventy-year-old King is an amiable, cigar-chomping ex-Marine whose office is decorated with John Wayne and Clint Eastwood posters. Given all the pending litigation, he probably shouldn't be talking to the press, he says. But he figures that he's caught in a bind: If he doesn't agree to be interviewed, he'll look as if he has something to hide.
So on a recent afternoon, King sat down to defend the beleaguered company. "We are proud of our good reputation," he said. "I hope I can make you understand that we're not some wild-eyed beast out here taking advantage of people."
He confidently asserts that his brokerage's name will eventually be cleared of any malfeasance regarding the Hill Williams catastrophe. Hill Williams chief Donald Hill Williams Jr., who was accused last spring by the California Department of Corporations of operating a scam, charmed and misled Titan into believing the developer represented a sound investment, according to King.
And he dismisses evidence of improper commissions taken by a Titan broker as "bookkeeping errors."
Broker Vann Thomas Wesson, of La Mesa in San Diego County, managed $70 million in investments for the Santa Margarita Water District--almost half of the district's $156-million fund reserved for emergencies and future projects.
Two former top water district officials face accusations that they frivolously spent taxpayers' money, took more than $60,000 in gifts from companies they later recommended for district contracts, accepted broker kickbacks and paid Wesson $160,000 in unauthorized commissions.
Wesson, who has strongly denied paying any kickbacks to secure business with the district, declined to be interviewed for this report.
An outside accountant for the district discovered a list of transactions handled by Titan that indicated Wesson earned unreported commissions--an accusation that King shrugs off.
"The district got ahold of an internal statement where we lumped the normal compensation received for that kind of account under a heading labeled 'commissions,' " King said.
On a no-commission account, commonly used for institutional and high-volume customers, brokers make money by selling at retail value securities that were purchased wholesale.
The water district severed ties with Wesson last April, but Titan stands by its man. "He did nothing wrong, yet every municipal district he worked for has let him go because of the publicity," King said. "This has ruined his career."
King said that an "extensive internal investigation" by Titan failed to reveal any inappropriate behavior by Wesson. "We gave the SEC and the FBI a boatload of records, and never heard back from them, so I assume they couldn't find anything, either," he added.
Spokesmen with the Orange County district attorney's office, the Securities and Exchange Commission and the FBI would not comment on the investigation.
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King met Donald Williams in 1989, when the home builder formed the first of four fund-raising partnerships, saying that the money would be used to buy land and build houses.
"He was very professional and came across as being highly religious," King said of Williams, a Mormon. "I talked to people who had done business with him in the past, and they had nothing but praise for him."
Hill Williams continued to solicit money right up until its sudden announcement last January that it could no longer make monthly dividend payments to its 5,000 investors--mostly elderly people enticed by a 15% annual return.
During the 45 months that it raised public dollars, Hill Williams built only about 50 homes, instead of hundreds. When it filed under the U.S. Bankruptcy Code's Chapter 7, all the company had to show for the $90 million it had collected from investors was 30 over-encumbered properties--most of them parcels of raw land in the Southern California desert.
The SEC and the Orange County district attorney's office are conducting a criminal investigation of Hill Williams, which is accused by the California Department of Corporations of running a Ponzi scheme--using new investors' money to meet obligations to prior clients.
