Bilking Broker

Paper trading in St. Louis

Safe-deposit box No. 4411 at Boatmen's National Bank of St. Louis was supposed to hold stock certificates as gilt-edged collateral for ten of the largest margin accounts at Stix & Co., a prestigious St. Louis brokerage house. While investigators from the Securities and Exchange Commission looked on, a bank official and an officer of Stix turned matching keys in time-honored fashion. But when the box was removed, it contained a pouch filled with back issues of the Wall Street Journal. Securities worth some $36 million were missing.

The next day, the SEC charged Stix & Co. with securities-law violations. With $36 million unaccounted for, the 69-year-old firm suddenly had a negative net worth of $14 million, and four days after the SEC'S accusation, a federal district judge declared the firm insolvent.

The scandal at Stix began with a routine IRS audit of the firm's senior vice president, Thomas R. Brimberry. Brimberry, 38, joined the firm in 1973 as an $8,000-a-year clerical worker. Five years later, he was promoted to senior vice president in charge of operations, a post he snared when his friend and lawyer, James Massa, bought controlling interest in the firm. The onetime clerk quickly became a high roller, building a home worth some $800,000 in a St. Louis suburb and making frequent gambling jaunts to the casinos of Nassau and Nevada.

Investigators believe that Brimberry's blue-chip life-style was financed with money looted from Stix's clients. Though no indictments have yet been handed up, an affidavit filed in federal court indicates that Brimberry told an Internal Revenue Service agent that he, Massa and Stix President Frederic A. Arnstein Jr. withdrew as much as $100,000 at a time from client accounts and funneled it into shadow accounts. Brimberry then reportedly forged records to cover the withdrawals, removed stock certificates from genuine accounts and forwarded them to banks to serve as collateral for further loans to the bogus accounts. Thus the Brimberry cash from the bank loans allegedly fed the private accounts of Brim-berry and his coconspirators.

The scam was simple to pull off because Brimberry was solely responsible for account transfers when clients bought stock on margin, and he supervised the handling of the firm's stock certificates and cash. Massa, though, denies any knowledge of wrongdoing. Said he: "I didn't know what he was doing over there. Apparently Brimberry's a very smart guy and has the ability to take people in."

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