A Long Beach, L.I., stockbroker is reported to be the focus of a federal grand jury investigation into stock trades that eventually forced Saperston Financial Group of Buffalo to affiliate with a Chicago broker-dealer.
David Heredia, president of Alexander Troy Consultants Inc. of Winter Haven, Fla., allegedly failed to pay for 2 million of the 3.6 million shares in Vancouver-based H&R Enterprises he bought for clients.
Saperston Financial principal Willard B. Saperston said he doesn't know if Heredia was the customer who reneged on the trades. The firm was forced to align with LaSalle St. Securities Inc. last week due to a lack of mandated net capital.
"I wouldn't know who the underlying customer was because this deal was done as an interdealer trade," Saperston said.
A federal grand jury in New York City has asked the National Financial Service Corp., which cleared trades for Saperston, for all records relating to any trades made by Saperston during September, according to a subpoena obtained by Bloomberg News.
NFSC, Fidelity Management's stock-clearing unit, lost $9 million because of fraudulent trading in H&R Enterprises.
"We believe that Saperston Financial has been a victim of fraud; we fully intend to pursue those persons that authorities believed were involved in this wrongdoing," said Scott Beyerl, a Fidelity spokesperson.
In addition to a federal grand jury, the Saperston situation also reportedly is being investigated by the Royal Canadian Mounted Police and the National Association of Securities Dealers.
The Mounties are involved because the unpaid trades apparently were in the stock of H&R Enterprises of Vancouver, B.C., a Canadian investment company.
Heredia had his stockbroker's license suspended by the NASD on Feb. 10 for failure to pay a $122,000 arbitration award last year to a customer who alleged that he was defrauded.
In 1996, Heredia was barred forever from selling securities in Georgia because of his "extensive disciplinary record," according to the state's securities commission.