A Star Broker's Trail Of Losses

Enrique Perusquia's clients lost fortunes. Who's responsible?

Donna Bloomfield was a $28,000-a-year assistant in the purchasing department of Ann Taylor in New York when she fell under Enrique Perusquia's spell. It was the fall of 1991, and a friend brought Bloomfield to a Halloween party given by the dashing young Mexican stockbroker at his apartment in midtown Manhattan's swanky Olympic Tower. Soon, Bloomfield and Perusquia were dating. He gave her a $1,000 Cartier handbag that Christmas, and took her on vacations to Switzerland, St. Martin, and Hawaii. For Bloomfield, who grew up on Army bases as the daughter of a career soldier, it was all too enchanting. A little more than a year after they met, Bloomfield and Perusquia were married.

Alas, Bloomfield's storybook romance would not last. Two years after the wedding, the thrice-married Perusquia announced, says Bloomfield, that he didn't love her anymore. He packed his belongings into his new Porsche and drove off. The pair divorced amicably. Bloomfield got the couple's $1.2 million home in Stowe, Vt. Bloomfield immediately sold the house, which she could not afford to keep, and gave the proceeds to Perusquia to manage, a move she now regrets. "I didn't know much about finance," Bloomfield says today. "I didn't know who else to trust."

RISKY INVESTMENTS. A lot of other investors now regret putting their trust in Perusquia. Bloomfield has joined a growing list of individuals who claim that Perusquia put them into risky investments without their knowledge. Bloomfield's attorney, Thomas R. Ajamie in Houston, says he has 12 clients who have lost a total of nearly $200 million with Perusquia. In the largest case, Francisco Lerma, a 69-year-old commercial real-estate developer who lives in Mexico City, claims to have lost $85 million in accounts with Perusquia over a nine-year period in which the broker worked at both a Lehman Brothers predecessor firm and PaineWebber. Lerma's and Bloomfield's cases are now awaiting arbitration hearings before the National Association of Securities Dealers, the brokerage-industry organization that monitors stockbroker conduct. According to documents filed on his behalf at the arbitration hearing, Lerma alleges that Perusquia forged signatures that allowed him to make trades in Lerma's accounts without his approval. Lerma claims that, without his consent, Perusquia stopped all mail regarding the accounts from reaching him and sent false account statements in their place. Lerma claims that he thought the assets were being conservatively invested in U.S. Treasury securities and blue-chip stocks. Instead, his money was invested in Third World bonds and questionable gold-mining stocks. Says lawyer Ajamie: "Enrique Perusquia is a serial financial killer who destroys the wealth of anyone he comes in contact with."

PaineWebber, the most recent major brokerage firm to employ Perusquia, is taking the case very seriously. The New York City firm where Perusquia worked from June, 1994, to March, 1998, has consulted on the case with former Securities & Exchange Commission Enforcement Div. head Gary G. Lynch and former Whitewater Independent Counsel Robert B. Fiske Jr. Lerma's lawyer says that he has been in discussions with the FBI, the SEC, and the U.S. Attorney's Office in San Francisco, where Perusquia worked most recently. Spokespeople for all three organizations declined comment.

Perusquia, reached on his cell phone, referred all calls to his lawyer. Before hanging up, the charming 46-year-old cheerfully told this reporter to "have a great evening." Perusquia's attorney, John M. Ross of San Francisco, declined to comment. In at least one response to the NASD, Perusquia denied all allegations of misconduct made against him and would not elaborate further, citing the Fifth Amendment. Although it could not be confirmed with Perusquia or his attorney, the former broker is believed to be shuttling between homes in San Francisco and Jackson Hole, Wyo.

DETAILED REBUTTAL. In a response to Lerma's claim, PaineWebber on May 19 filed a detailed 88-page rebuttal of the charges. The firm's defense? It says that the fact that Lerma lost money wasn't its fault, that Lerma knew the investments were risky, and that Lerma wasn't really a PaineWebber client. In a situation not unusual for wealthy foreign clients, Lerma's money was held at two Swiss banks, which had agreements to execute trades through PaineWebber. PaineWebber says that even if there were forgeries, the responsibility lies with the Swiss banks that held Lerma's funds. To emphasize that point as well as spread any potential liability, PaineWebber has filed claims against Lehman, Chase Manhattan Corp.'s private bank in Switzerland, and UBS AG. Chase declined to comment. UBS did not return calls. Lehman spokesman William Ahearn says Lehman denies any responsibility for Perusquia's behavior. "We're puzzled that six years after hiring the broker away from us, we are hearing from PaineWebber."

As for Perusquia's ex-wife, Donna Bloomfield, she says she lost $500,000 in the same mining stocks and Third World bonds. Bloomfield claims she instructed Perusquia to be conservative with her money. PaineWebber says only that there is "no merit to her allegations. "

Securities lawyers and brokerage industry officials interviewed by BUSINESS WEEK say PaineWebber may have an uphill fight. "There is a whole history of NASD, SEC, and common law that says that a company is liable for the conduct of its employees--period," says Lawrence A. Cunningham, a securities-law professor at the Benjamin N. Cardozo School of Law at Yeshiva University in New York. PaineWebber says it has no evidence Perusquia did anything wrong.

The picture that emerges from the public filings, however, is one of several parties, from PaineWebber down to Perusquia's clients, who seemed all too willing to let their guard down around somebody they hoped would make them money. Perusquia came from a prominent family in Mexico. His father, Melchor Perusquia, was a confidant of former Mexican President Miguel Aleman. Perusquia pere is rumored to have made a fortune during the construction of Acapulco's resorts in the 1950s.

Success, one client says, went to Perusquia's head. "He became greedy," says the source, a Mexican investment adviser whose three clients lost $5 million with the broker. "He wanted to be in a league like Soros and control companies. The price of gold came down, and because of his lack of experience, it got out of hand."

Of the companies in which Lerma had the largest positions, American Resource Corp. merged with REA Gold, and that company went bankrupt. Another, Northern Orion Explorations, now trades at pennies per share.

Perusquia's mother, reached at her home in Manhattan, says it was all bad luck. "Everybody makes bad investments--George Soros, Warren Buffett," says Margarita Perusquia. "I lost money, too."

PaineWebber seems to have gone out of its way to recruit what it no doubt believed was a star broker who generated big commissions. To lure Perusquia and his clients, the firm established a special relationship with Chase's private bank and created an Asian stock fund specifically for Perusquia's clients. PaineWebber even allowed their broker to collect a fee in the sale of a $21 million private stock placement in a risky mining company. Its filing shows that before doing so, the brokerage firm required Chase to say in writing that the bank was taking all responsibility for the transaction. PaineWebber says that it is not unusual for the company to take such steps to satisfy customers. Chase declined to comment.

Bloomfield, who now lives in Northern California, says she has fired two other money managers since taking her money back from Perusquia in 1997. She now manages her own investments. "I've done better than any professional manager ever has for me," she says.

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