Ball’s back on the Street, unscathed by old scandals

Feb 26, 2007 @ 12:01 am

By Aaron Elstein

NEW YORK — George Ball, who ran Prudential-Bache Securities in the 1980s — when the brokerage firm perpetrated the biggest swindle in Wall Street history — is back.

“I would have regretted it had Prudential marked the end of my career,” said the 67-year-old chairman of Sanders Morris Harris Group Inc., a Houston-based investment bank and wealth manager that is enjoying a growth spurt in New York. “I still enjoy playing the game.”

Among bankers, brokers and regulators of a certain age, Mr. Ball’s name is instantly recognizable.

He served as the No. 2 executive at E.F. Hutton & Co. Inc. from 1980 to 1982. Three years after he left, the now-defunct New York firm pleaded guilty to 2,000 counts of mail and wire fraud in a check-

kiting scheme that occurred during his tenure. After Hutton, Mr. Ball moved to Prudential-Bache as chief executive.

He hoped to turn Prudential into a top-tier retail broker. But those ambitions crashed when regulators charged that the company had defrauded hundreds of thousands of customers by misstating the risks involved in investment partnerships sold by brokers.

Prudential paid restitution and penalties totaling $2 billion — the costliest settlement ever for a brokerage firm.

Although he was never charged with wrongdoing at either E.F. Hutton or Prudential, Mr. Ball resigned from the latter in 1991 and all but vanished from Wall Street.

Today, he is resurfacing as the chairman of Sanders Morris, a small 20-year-old firm that’s trying to build its clout in the nation’s financial capital.

Although Sanders Morris has struggled — it was just about the only U.S. brokerage firm whose profits and stock price fell last year — it has added dozens of investment bankers over the past couple of years, and a fifth of its 558 employees are based in Manhattan.

The unlikely re-emergence of Mr. Ball, who visits New York twice a month to drum up business, highlights one of the rules of Wall Street: Even players who suffer the worst setbacks can make comebacks.

“Ball was never tagged personally with any of the problems that befell Hutton or Prudential, and he has a lot of friends, so he’s still plenty viable in the business,” said Richard Lipstein, a principal at executive recruiting firm Boyden in Hawthorne, N.Y.

Hello, Houston

Mr. Ball owes his career resurgence to his tennis buddy Don Sanders, a former Hutton colleague. Mr. Sanders called shortly after the Prudential debacle and offered Mr. Ball the job of chairman at the fledgling Sanders Morris. Mr. Ball moved to Texas, sold his Park Avenue apartment for $3 million and started over.

His revival rests largely on the fact that people like working with him. At Prudential, he was famous for taking employees to Paul Stuart to buy them expensive suits and writing thousands of odd but endearing staff memos known as “Ballgrams” — including one that famously read, “Losses suck.”

“He is a great communicator, a great motivator of people and has a photographic memory,” said Paul Scura, a former Prudential investment banking chief. “He can remember you, your kids’ names, even your dog.”

Mr. Ball, who started his career in the 1950s as a New York Stock Exchange clerk earning $45 a week, said that his optimistic outlook has sometimes blinded him to the deficiencies of his subordinates.

“I wish I had seen the flaws in the people who created the unsuccessful partnerships [at Prudential],” he said. “I do regret that.”

Mr. Ball is confident that he has become a better manager of people over the years. Nevertheless, Sanders Morris — like his other firms — finds itself in trouble with regulators. Last year, NASD of Washington warned that it plans to discipline the firm for a variety

of violations, including improper commission payments to a hedge fund manager. Mr. Ball, through a spokesman, described the regulatory matter as “routine stuff.”

The firm also may be sued by investors who are unhappy with the performance of a 2005 private placement for a company at which two Sanders Morris managing directors served as directors. Sanders Morris warned that the costs of defending itself in litigation could be significant.

A stiff regulatory fine or a costly legal settlement could send the firm into the red. While most Wall Street firms are minting money and posting strong stock price gains, Sanders Morris’ profits fell by more than half last year, and its shares slipped 21%.

CNS

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