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Couple wins $685,000 in deal on bad advice

An elderly Lancaster couple has been awarded more than $685,000 in an arbitration settlement after charging that their former stock broker mismanaged their investments, causing their accounts to lose 95 percent of their value in a little more than two years.

Elwood Weber, 86, and Grace Weber, 75, were awarded the settlement after a six-day arbitration hearing over their charges that former stock broker Edward Carlsen mismanaged their investments by using risky investment techniques and buying high-flying stocks with their funds.

Advest, the brokerage firm that Carlsen worked for before he was barred from the securities business by industry regulators in 2005, and Roger Faulring, Carlsen's supervisor at Advest, also were part of the arbitration case.

Carlsen's high-risk approach to managing the Weber's account was "completely unsuitable" for a retired couple, said Michael McClaren, one of the Webers' attorneys.

"It was a lot of margin, completely unsuitable securities, a lot of technology stocks" said McClaren, who also said Carlsen shunned fixed-income investments, such as bonds, that typically are a cornerstone of retirement portfolios.

Margin involves the purchase of stocks with borrowed money, a practice that is highly risky and can lead to enormous losses if the shares purchased with that borrowed money lose value.

Most of the losses occurred in 2001-2002, when the stock market fell sharply, with technology stocks, which had generated some of the market's biggest gains during the 1990s, taking an even bigger hit.

"It gives [the Webers] back the retirement they once had," McClaren said. "It allows them to get back the quality of life they once had."

Advest has paid more than $3 million in arbitration settlements stemming from accounts handled by Carlsen, he said.

Carlsen's attorney, Paul Stecker, declined to comment. John Snyder, the Boston-based attorney representing Faulring and Advest, now part of Merrill Lynch, could not be reached.

"What happened with the Webers is that they trusted everything Carlsen said," McClaren said. "It's important for all investors to keep an eye on their accounts and monitor their investments."

Carlsen, who was awarded a Silver Star as an Air Force pilot during the Vietnam War, served on the Lancaster School Board for 30 years, including 12 years as its president, before retiring from the board in 2000. He worked at Advest from 1994 until he was asked to resign in February 2005. Industry regulators barred him from the securities business for 18 months beginning in September 2005.

The arbitration award included $513,700 in compensatory damages and interest, as well as $171,500 in attorneys fees and arbitration expenses.


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