NEW YORK — Ruling that the former manager of PaineWebber Inc.'s Beverly Hills office should have prevented the theft of customer funds, a Securities and Exchange Commission administrative law judge ordered her suspended for six months from acting as a brokerage supervisor.
Patricia A. Johnson, 43, had been in charge of the office from 1984 until mid-1991. In 1987 and 1988, one of her brokers wrote and deposited unauthorized checks, misappropriating $114,500 from the brokerage accounts of three clients, Administrative Law Judge Glenn R. Lawrence said in an April 12 decision that was made public this week.
The judge wrote that Johnson had failed to respond to numerous "red flags" about the broker's activity, including an internal audit that turned up suspicious checks.
"Had she heeded the red flags and asserted proper supervisory controls, she would have prevented most if not all of the misappropriations," the judge wrote.
In an interview, Johnson denied any wrongdoing, strongly disputed the judge's findings and said she will appeal.
The broker, David Zetterstrom, ultimately was fired by Johnson and shortly afterward committed suicide.
Johnson said the judge's decision is unfair because it comes seven years after the incidents occurred. Since then, she said, documents have been lost and "people have had memory lapses."
She added, "I have a clean record, and I take a lot of pride in what I do for my clients."
Johnson currently works as a broker in Smith Barney's Beverly Hills office. Arthur W. Hahn, her attorney, said that since she is not a supervisor there, the decision will not affect her work at Smith Barney; a lawyer for the firm agreed.
In 1993, the SEC imposed an unusually stiff punishment on the PaineWebber Beverly Hills office, banning it from opening new accounts for one month.