Other People's Money

The new king of South Florida philanthropists, Richard Bronson, built his empire on the shady side of Wall Street

"It doesn't sound like they're accusing him of a crime. It sounds like someone who runs a business wants his people to be more productive," counters Nortman.

"Productive" would be one way to describe Bronson's employees. In August 1992 one Biltmore broker telephoned Robert Flickinger, the Minnesota man who had a fair amount of savings from a veterinary supply company he founded. Flickinger claims to have invested in stocks only once before then. "They come across [as] quite authentic," Flickinger says of Biltmore's brokers. "They tell you this is going to disappear quick and you've got to get in on it. They hang on to you. They don't let you hang up."

According to the lawsuit, two Biltmore brokers contacted him. First they sold him a blue-chip stock that earned some money. Then they started selling him other issues, promising that he could take profits whenever he desired. But when he tried to make withdrawals, he says, the traders blocked him. In one memorable exchange, as found in the SEC suit, broker Marc Siden bought for Flickinger $100,000 of stock in a company called Judicate, saying it was "another good investment." The SEC suit claimed Siden didn't mention that Judicate had lost money the last five years in a row. (Siden, contacted in New York City, declined comment.)

The suit stated Flickinger lost $90,000 on that trade alone. After he saw his losses on a report, Flickinger told Siden to sell his stocks. He even wrote a note: "Dear Marc, I do not wish at this time to make any purchases of stock.... I'll have no money to invest until after October '94."

Siden still bought $81,000 of stock in a company called Out-Takes with Flickinger's money, the suit stated. Flickinger claims to have lost more than $300,000 overall and says he nearly lost his 38-year-old business. He adds that he complained to Biltmore's compliance officer -- an employee who is supposed to ensure that the firm abides by SEC and NASD rules -- "but he was in on it."

Flickinger says he has recovered $90,000 from Biltmore.
"As far as we could tell, [Flickinger's] allegation of unauthorized trading was at most a miscommunication," says Nortman, who adds that Siden had his own lawyer during the SEC proceedings.

Another investor, Doug West, who owns a small injection-molding company in Galesburg, Illinois, claims he was bamboozled in similar fashion. And he blames Bronson and Loewenstern. "There's no question these people were following a carefully scripted plan orchestrated by the top guys," he says. Flickinger, West, and others complained to the Miami office of the SEC, which started looking into Biltmore.

In October 1993 the SEC commemorated Bronson's one-year anniversary in Florida with a federal lawsuit alleging that he, Loewenstern, and six Biltmore traders "engaged in a scheme to defraud investors through fraudulent sales practices and market manipulation" in a "boiler room environment." The SEC listed 25 investors who would testify at trial. "The kinds of things Biltmore was alleged to have done weren't technical violations," says SEC senior trial counsel Christian Bartholomew. "These were serious violations of securities laws."

For a year the case was mired in pretrial maneuvers. The SEC tried twice to prevent Biltmore from conducting initial public offerings of stocks. Both times a judge refused regulators' entreaties.

The government attacks didn't faze Bronson. In November 1994 he bought the beachfront Golden Beach villa with its tiled roof and circular driveway for $1.75 million.

In 1995 the SEC settled the first part of its lawsuit against Biltmore. Bronson, Loewenstern, and their company agreed to pay a $1 million "disgorgement," which, according to Bartholomew and Nortman, is reimbursement to alleged victims for allegedly improper trades. Bronson and Loewenstern each agreed to a one-year suspension from supervising traders. They also consented to allowing a consultant to review Biltmore's business practices. An auditor was then assigned to monitor the company. The audits, held every six months, will continue into 1999.

The day after Biltmore settled, Bronson got up on a chair in front of his traders and tossed dozens of $100 bills into the air, according to Link. As the bills fluttered down, "he told them, 'that's how much the [settlement] means to me,'" Link says, reading from notes he took in an interview with a former Biltmore trader. He won't give the trader's name.

Biltmore settled because fighting the SEC suit would have been too costly, Nortman says. "Neither Biltmore nor Mr. Bronson nor Mr. Loewenstern denied the allegation or admitted doing anything wrong."

Bronson, who suddenly had time on his hands, became more involved in Miami society. He donated hundreds of thousands of dollars to the ballet and joined the board in 1995. He even sponsored performances, says the ballet's Susan Fox. In 1996 Bronson met with directors of MoCA, an 18-year-old, cutting-edge museum that expanded that year to a sleek building in North Miami. "He said he wanted to help," says Bonnie Clearwater, then the curator and now director. He was straightforward and humble, she recalls. After Clearwater told him about a planned exhibit of Mexican modernism, Bronson considered the idea for a week and then said he'd fund the show. "It was a substantial [gift]," Clearwater says. "About $100,000."

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