Broker to Pay $2.5 Million to Fullerton Family

LOS ANGELES — A Fullerton family has been awarded more than $2.5 million after a broker with Dean Witter Reynolds Inc. allegedly defrauded the family out of their retirement savings.

A three-member American Arbitration Assn. panel in Los Angeles found that Dean Witter broker Erick Gabler, based in the firm’s Whittier office, engaged in speculative short-term trading in volatile technology stocks on margin accounts with Carl and Alicia Cleaver’s account from 1993 to 1995.

“The Cleavers had their life’s savings wiped out by this,” said Bradd Milove, attorney for the Cleavers.

The brokerage contended, in court filings, that the Cleavers were in full control of their accounts, that they made the decisions and that all trades were suitable for them. The company denied that it committed fraud or breached any duties owed the family.

James P. Delphey, an attorney for Gabler and Dean Witter, could not be reached Thursday for comment, nor could officials at Dean Witter, now called Morgan Stanley, Dean Witter, Discover & Co.

The Cleavers had amassed substantial savings through the operation of a family-owned business that mainly contracted to repair fire damage to residences. They entrusted more than $3.9 million in Dean Witter, according to the arbitration award.

Gabler, the Cleavers alleged, encouraged them to invest in speculative short-term trading in volatile technology stocks, borrowing the maximum amount possible to pay for the stock--so-called margin accounts.

After a market downturn in 1995, the Cleavers Family Trust account lost millions of dollars in margin calls, which are demands to pay the amounts borrowed. Milove said the family was wiped out.

The Cleavers alleged that Dean Witter engaged in churning--unnecessary trading to gain fees--and a series of securities violations from recommending unsuitable trades to fraud.

The arbitration panel, without explanation, gave the Cleavers the $2.5 million award plus $34,207 in costs.