Originally created 02/19/03

Clients sue stockbroker over losses



Before May 2000, Hazel and Harold Lott's knowledge of financial investments was limited.

"The only choice my husband had to make was A fund, B fund or C fund," said Mrs. Lott, who lives in Harlem, "and Harold chose the A fund because it was the stable one."

When the Lotts, who worked for 25 years at the J.M. Huber Corp. plant in Wrens, Ga., met with Augusta stockbroker William Gibbs, however, they learned more about the market's pitfalls than they ever wanted.

They blame part of that on Mr. Gibbs, the former branch manager for A.G. Edwards & Sons Inc.'s Augusta office.

Mr. Gibbs, who retired and moved to North Carolina a year ago, is the subject of more than 40 pending or planned arbitration cases from former clients, including the Lotts.

Many of those cases make similar claims of misrepresentation, negligence, breach of contract and violations of state and federal securities acts.

The relationship between several former Procter & Gamble Inc. employees, many of whom lost most of their retirement money, and Mr. Gibbs is outlined at length in the current issue of BusinessWeek magazine.

The New York Stock Exchange is scheduled to start hearing the cases in June, but just a few are expected to come up this year, and those who filed complaints expect to get back only a fraction of what they lost.

The Georgia Secretary of State's Office has dozens of complaints on file against Mr. Gibbs from his time at A.G. Edwards. Thirty-six of those cases are awaiting arbitration, while three other complainants have accepted settlements.

The Lotts say Mr. Gibbs helped persuade Mr. Lott, now 64, to quit his job and invest his retirement and profit-sharing plans, worth about $600,000, in the market. They said Mr. Gibbs told them they could withdraw more than $4,000 a month for living expenses and still amass a million dollars in five years.

Technology stocks that Mr. Gibbs put their savings into, such as Cisco Systems and Intel, soon tanked, and almost immediately the Lotts began receiving statements showing their money dropping fast.

"Putting a retiree in five Internet stocks violates every rule you can think of for brokers," said Robert Hagler, an Augusta lawyer representing the couple, who finally transferred their remaining amount, slightly more than $100,000, to another broker.

Reached Tuesday night at his North Carolina home, Mr. Gibbs deferred comment to A.G. Edward's corporate office in St. Louis.

Margaret Welch, a spokeswoman for the company, said A.G. Edwards officials looked forward to presenting their side to the arbitration panels.

"It is important to remember that the market has suffered significant declines and is currently at levels we haven't seen since 1996, with many investment values declining by 50 percent or more," she said.

As they wait for their turn in front of a three-member arbitration panel, the Lotts say they have cut back on most expenses just to continue making their mortgage payments.

"We didn't know about stocks then," Mrs. Lott said. "I've found out a lot more about it since."

Reach Vicky Eckenrode at (706) 823-3227 or vicky.eckenrode@augustachronicle.com.