Chapman Charged with Fraud; SEC Claims Former B.E. 100s CEO Mismanaged Pension Funds

Article excerpt

A federal grand jury indicted prominent investment banker Nathan A. Chapman Jr., in June, charging that among other things, he schemed to defraud the State Retirement & Pension System of Maryland, shareholders in his companies and the public.

According to a release issued by the United States Attorney, District of Maryland, the 39-count indictment charges the former BE 100s CEO with mail fraud, wire fraud, securities fraud and conspiracy. That same day, the U.S. Securities and Exchange Commission filed securities fraud charges against Chapman, three of his associates and three of his companies. The, civil lawsuit seeks antifraud injunctions, civil money penalties, disgorgement of ill-gotten gains (including salaries, bonuses and commissions) and permanent bars from service as an officer or director of a public company.

Chapman, 45, had the career every member of a new wave of black investment professionals in the '80s dreamt about. After only three years at Alex. Brown & Sons, he left the respected Baltimore based firm in 1986 and opened his own shop before his 30th birthday. In 1996, he bought the Minority Equity Trust, which manages about $175 million of the Maryland pension system. Then in 1999, Chapman merged his broker-dealer firm, The Chapman Co., and his investment advisor company, Chapman Capital Management, to form eChapman, Inc. Chapman Co. was consistently ranked on the BE INVESTMENT BANKS list dating from 1991 until it was dropped in 2003 when BE research noted that the company was lax in filing its quarterly reports with the SEC.

On June 15, 2000, Chapman launched an initial public offering of at $13 a share. But on June 20, its first day on the market, eChapman never traded at higher than $9 per share. Both cases against Chapman allege that in an effort to rescue his failing IPO, he compelled money manager Alan Bond to use state money to buy more than $4. …