Defendants abound in new stocks suit

Another lawsuit has targeted Chico-based stockbroker Carl Martellaro, who once oversaw 500 brokers nationwide but was hit with half a million dollars in fines and court judgments after investors claimed their accounts were mishandled by brokers with his First Associated Securities Group (FASG).

In September, Butte County Superior Court Judge Stephen Howell in a tentative decision awarded $76,000 in damages and assigned blame to now-defunct FASG and Ted Bryson, Martellaro’s half-brother and the former branch manager of what is now First Securities USA. (Martellaro had paid a $5,000 judgment in exchange from being dropped from the original civil case.) The plaintiff was Charles Ferrier, an elderly man who lost most of his life savings after a FASG broker allegedly “churned” his stocks—bought and sold them quickly to maximize commissions.

On Nov. 25, Bryson and his wife filed for bankruptcy as consumers, and notified Ferrier’s Paradise attorney, Joe Earley, that they hope to discharge—not pay—the debt incurred by the judgment.

But the case is not over. Earley is now seeking punitive damages on Ferrier’s behalf, and his firm has partnered with attorney David Griffith of Chico in two new pursuits: keeping Bryson from convincing a bankruptcy court to throw out the judgment debt and tracking down assets from other people and companies associated with FASG.

It’s not just Martellaro they’re going after. The suit names his holding companies, his two grown children, Bryson and Martellaro’s nephew, Anthony, whom Martellaro referred to in a 1998 divorce deposition as the man he made president “in order to dodge the lawsuits.”

In that same deposition, Martellaro said he closed FASG and started First Securities USA only because “I felt if I owned two of them and the one that’s getting sued goes bad, I could jump to the other one.”

That move many come back to haunt him. Also among those named in the new suit are FASG, its successor First Securities USA, Bulrush Holdings Corporation, Discount Brokers Association, Martellaro Family Limited Partnership and Brookstreet Securities Corporation (the Irvine firm that hooked up with First Securities USA last spring) and its chief executive officer, Stanley L. Brooks.

The complaint, filed Nov. 8, is “to set aside fraudulent transfers and for damages.” Essentially, the case states that the companies are all related and assets are being held that should rightfully go to debtors.

Earley said that as far as Bryson’s bankruptcy is concerned, he will argue that “the bankruptcy doesn’t allow you to discharge debt that emerged from fraudulent conduct.” The judge did not weigh in on whether the conduct was fraudulent.

Ken Baker, the attorney for Martellaro and Bryson, did not return a call for comment by press time. Bryson’s office related that he is seldom there, so a call was placed to his home, but that also went unreturned.

A “receptionist” who took a call at Brookstreet said that it was actually Stanley Brooks who bought First Securities USA, and so the two corporations “are not intertwined. They share the same address but they are two separate securities.” At any rate, they hadn’t seen the lawsuit and would not comment.

In an unrelated matter, Martellaro was fined $10.000 last summer by the National Association of Securities Dealers after the NASD found he "acted in a principal capacity while failing to be registered with NASD in any capacity."