Financial serial killers: Stockbrokers, greed and laziness lurking at every corner

If we have learned anything during the past few years, it is that financial serial killers are lurking in every corner of the financial services industry, from phony hedge fund managers to ethically challenged insurance agents. Enrique Perusquia is another type: the star broker with the corner office who, left unsupervised by his firm, stole from wealthy clients for years. In the following excerpt, co-author Tom Ajamie tracks down the thieving, heavy-hitting broker, who worked at PaineWebber Inc. in the 1990s. Mr. Perusquia’s actions cost one client at least $68 million; in 2002, he pleaded guilty to securities fraud and was sentenced to six and a half years in prison.

Within days of hearing the customers’ plights, I was on a flight to San Francisco to hunt down Mr. Perusquia and hear his side of this unbelievable story of greed. One of Mr. Perusquia’s customers who hired me revealed account statements he had received from PaineWebber. These statements clearly showed that the customer had $130 million in his account. Several days earlier, the customer had received a phone call from the PaineWebber margin department. They told the customer that he actually owed the bank $2 million.

Upon learning this, I thought that there must be a simple and explainable mistake. If a customer has an account statement showing $130 million in the account, how could the client possibly owe $2 million? I was skeptical that the money had just disappeared. I was confident Mr. Perusquia would be able to clarify all this and make it right.

Before heading to San Francisco, I called PaineWebber to ask for Mr. Perusquia’s address. No one had it. I thought it was odd that a major brokerage firm had lost track of its former star, but I had an old address for him, on Green Street, so I started there. When I arrived, I saw a beautiful high-rise overlooking the bay. It’s one of the most exclusive residences in the city. The doorman told me that Mr. Perusquia had moved out of the building about a year earlier. He was living somewhere east of the city, supposedly in a neighborhood called Blackhawk.

I rented a car and headed east. About an hour later, I was in the exclusive master-planned community known as Blackhawk. How to go about finding him now? I asked around at several restaurants and coffee bars for him. Finally someone told me that he lived in a gated community. I drove to the gated area and tried to get by security. They wouldn’t let me pass. I made small talk with the guard and was able to get Mr. Perusquia’s street address. I used that address and eventually found a phone number. I called, and a woman answered. I asked for Enrique. She passed the phone to Mr. Perusquia. I explained that I represented some PaineWebber customers who had been told by the firm that their accounts were missing money. I thought this was just a misunderstanding. Would he meet me now for a cup of coffee? He agreed.

Within 30 minutes, I was facing Mr. Perusquia. Here he was, the PaineWebber heavy hitter. I had been told that Mr. Perusquia had generated more commissions for PaineWebber than any other broker. It was impossible to verify this, but the guy was truly a legend.

A true financial serial killer, Mr. Perusquia immediately tried to charm me and win my trust. Mr. Perusquia parked his black Porsche Carrera several blocks away from the coffee bar so as not to attract too much attention. He then walked up to meet me.

“Hi, Tom, nice to meet you,” he said with enthusiasm, his voice brimming with cordiality. He was thin, handsome and charming. He wore a silk shirt that was neatly tucked into his black trousers. His black leather loafers were freshly polished. His hair was trim, and his complexion was smooth. He offered to buy me a cup of coffee and told me that I looked like a “runner.”

Immediately, Mr. Perusquia was doing what he did well: making a human connection. Offer a man a cup of coffee and find a common interest. In fact, I was a runner. So Mr. Perusquia and I immediately began talking about favorite runs, where they were and so on. High-quality chitchat. Mr. Perusquia then moved to religious backgrounds, hoping to score another common hit. Bingo! We were both raised Catholic. It was apparent that if Mr. Perusquia was accomplished at anything, it was conversation. He knew how to engage the other person, find a common link and create a rapport.

We met over a period of two days. I could tell that he wanted me to trust him. He wanted to show that he was indeed authentic and honest. After that first meeting at the coffee bar, he took me to a Fresh Choice restaurant. This was a company he said he had raised money for — and one of the companies in which he’d invested his customers’ money. When we walked into the restaurant, it seemed like just another salad bar. According to Mr. Perusquia, this was not just any salad bar. This one was special.

“Look, Tom,” he said, his voice proud. “Look at how clean this counter is. And look at how fresh the vegetables are. We put a lot of effort into making this a unique salad experience for our customers.”

“We?” I thought. “Who is “we’?” Mr. Perusquia was an investor in this salad bar, but he was using his customers’ money to make the investment. This wasn’t his restaurant. He was buying its stock, or making a private investment of his customers’ money in the company. None of the staff at the restaurant knew who he was. No one greeted him by name. He didn’t venture into the kitchen, where the vegetables were being sliced and diced and thrown into square plastic containers.

Mr. Perusquia took on the air of an owner. He wanted to make me feel as though I was with the guy who had created the company himself. He was trying to make me feel like an insider, someone who was a part of a company that was growing into something big. The next stop that day with Mr. Perusquia was a large law firm that had a nearby office. Mr. Perusquia told me that the senior partners at this law firm would meet with him at any time because he was such a large investor in some of the law firm’s clients. By that, he meant that his customers were large investors, but clearly, he controlled their money. So he could just show up unannounced at this law firm, and the senior lawyers would drop their pencils to meet with him.

It turned out just like that. We arrived at the law firm. Mr. Perusquia strode into the reception room and asked for one of the senior partners. The guy showed up and embraced Mr. Perusquia. Mr. Perusquia introduced me to the lawyer, then the two of them ducked into a conference room to talk privately about a large investment that Mr. Perusquia (meaning his customers) was making in one of the law firm’s clients. If Mr. Perusquia’s goal here was to show me he wielded some power at large law firms, he accomplished that.

The financial serial killer will tout his exclusive connections to executives, lawyers and other insiders to create an aura of prestige. Part of Mr. Perusquia’s pitch to investors, and me, was the exclusive, inside knowledge he possessed of certain companies. Financial serial killers like to flaunt such connections, real or not. He said that he knew the management of some of the companies personally. That he could talk to management, that he was very connected, that he had the inside connections, that he had very high-level contacts — all this gave him a lot of credibility.

One of these companies was Shaman Pharmaceuticals Inc. Lisa Conte, Shaman’s chief executive, would meet with Mr. Perusquia regularly. Mr. Perusquia invested some of his customers’ money with this company, enough that he had Ms. Conte’s private phone number. This was another one of “his” companies. He spoke like an owner, ticking off all the wonders of the company’s natural drugs derived from plants in the Amazon. He spoke of their miraculous properties, how the ingredients had been used for centuries by the natives and could cure any disease. Mr. Perusquia talked a lot, but he could never explain what happened to my clients’ money. After spending two days with him in his make-believe world, I had a sense that something was wrong. His cloying charm, as well as his grandiose persona and stories, raised far more questions than answers.

My legal team and I unraveled Mr. Perusquia’s fraud over the course of several years. We spent millions of dollars and thousands of hours of time to unearth his complex web of disguised accounts that spanned several countries from Europe to the Caribbean. We traveled, investigated and sent legal subpoenas for documents to a variety of locations as we worked to piece together the fraud: Geneva, Vancouver, New York, Mexico City and the British Virgin Islands, to name a few. We then organized our investigation files and handed them over to the Securities and Exchange Commission, the Justice Department and the FBI.

The SEC took these files, combined them with its own and zeroed in on Mr. Perusquia’s handiwork. “While at PaineWebber, Perusquia used large portions of the PaineWebber Omnibus Clients’ funds to buy stocks and convertible bonds in three gold-mining companies,” the SEC said. “Perusquia accomplished many of the purchases by submitting to the Swiss banks letters that contained unauthorized cut-and-paste, or trace-over, signatures purporting to be client authorizations to transfer funds to buy securities.”

In the end, Mr. Perusquia was just a phony. He didn’t own the restaurants, nor did he create the drugs. He had simply found companies that needed money, and he had given them his customers’ savings. He had taken no risks himself. He was all too eager to put at risk the hard-earned money that his customers had entrusted to him. He had purchased, with other people’s money, all the trappings of prestige: access to a large law firm, the private phone number of a CEO, as well as a Porsche and a home in a gated community.

At his center, Mr. Perusquia was nothing but a con man with an insatiable thirst for the good life. It appears that the only thing that he really did well was forge the signatures of his customers. He also fabricated phony account statements. Mr. Perusquia’s forgery was too perfect, and that’s what got him caught. My legal team and I obtained more than 40 different documents with a client’s signature on them. Then we photocopied the signature from each document onto clear plastic film. We then stacked each signature, one on top of the next. The forty signatures matched perfectly. This is humanly impossible. The only way for your signature to match perfectly each time you write it is to trace it. That is just what Mr. Perusquia had done.

Tom Ajamie, managing partner of Ajamie LLP, is a trial lawyer. Bruce Kelly is news editor of InvestmentNews. This article was excerpted from their book, “Financial Serial Killers” (Skyhorse Publishing Inc., 2010. To purchase a copy of the book at a reduced price, click here.).