Hotel Stays, Flights and a $400 Bottle of Wine
December 26, 2010 Updated: Feb 21, 2011
by Emily Alpert
Voice of San Diego
When San Diego County Office of Education employees flew to
Boston to learn more about a company they were considering
doing business with, they didn't need to worry about the bill.
The company paid for their flight to Boston. It also paid for their
hotel stay. And when one of the employees, Dan Puplava,
picked out a bottle of wine from Napa Valley over dinner,
he wasn't really sure who paid, but believes it was either
the company or its marketing company. He thought the
bottle cost $400.
"Here the bottle of wine would be, like, 150 bucks," Puplava
later testified. "Out there it was outrageous."
Puplava manages a program that helps school district and
charter school employees invest for their retirements. Four
years ago, he and supervisor Diane Crosier made the
visit to Aviva, a company they were weighing whether to
do business with, to learn more about its investment
products.
It wasn't their only trip. Between 2006 and 2008, the employees
repeatedly took trips to visit companies the program worked with
or was considering working with, paid for by those same
companies.
Crosier is supposed to publicly report gifts she gets from
companies or people related to her work. Yet the trips aren't
listed on her economic disclosure reports. Ethicists say the free
trips are also problematic because workers could be improperly
swayed by gifts from companies they negotiate with.
"It smells bad," said Jessica Levinson, director of political reform
for the Center for Governmental Studies in Los Angeles.
"They're clearly trying to influence them."
The County Office argues that the free trips did not
compromise its integrity and helped spare resources.
Trips to visit companies are indeed common among other
investment programs run by government agencies, a way to
keep up with vendors and the services they offer. But several
other government programs surveyed by
voiceofsandiego.org don't let companies pick up the tab.
"We don't want to be beholden to anyone," San Diego County
Treasurer-Tax Collector Dan McAllister said. His office runs a
similar program for county employees and pays for its own trips
to see vendors. "We will turn down offers like that because we
never want to leave the impression that there is a conflict."
Boston wasn't their only destination. They took several
other trips on the tab of companies they were visiting: In
Philadelphia, Crosier and Puplava met with Lincoln Financial, a
company they were considering to manage their brokers. In
Ohio they stopped in to see both Meeder Financial, which helps
school employees manage their money, and Nationwide, their
investment platform.
In Dallas they visited Life Insurance of the
Southwest, a company that provided a special kind of
investment plan for the program. In Utah they visited the
company that administers the program, National Benefit
Services. And they repeatedly visited Aviva's marketing
company in Santa Barbara.
After Crosier and Puplava took their trip to Boston, a
committee that they advise agreed to make Aviva
products available to school employees in the program.
But another company they visited, Lincoln, was not ultimately
chosen. Other companies were already working with them when
the trips happened.
Under California law, public employees are allowed to accept
gifts. But some workers in influential positions must publicly
report what they get, from whom and how much it is worth.
California also sets dollar limits on gifts to public employees,
which bar them from taking more than $420 worth of gifts from
each source each year. The rules are supposed to reduce the
sway of money in government and allow the public to keep an
eye on how public officials could be influenced.
In response to questions from voiceofsandiego.org, the
County Office wrote in an email that it believed Crosier
had followed the gift rules. But despite repeated
questions, it would not specifically explain why the trips
could be legally left off the forms. In an email, Crosier
said only that the trips were not included "due to
discussion with legal counsel."
There are some exceptions to the gift rules. For instance, gifts
that are given to a public agency and passed on to an
employee, rather than given directly to them, don't need to be
reported by employees if the agency reports them publicly and
meets other specific requirements.
But when VOSD asked for records that
would show if the trips were given to
the agency rather than the employee, it
didn't provide any. Instead, the County
Office argued that in the past, it just
wasn't required to report gifts given to
the agency. Despite repeated questions,
the agency gave no further explanation
of why it wouldn't have to report those
gifts.
Until recently, the County Office had allowed influential
employees to avoid reporting gifts at all. It only started
reporting gifts after VOSD brought the problem to the
attention of the state Fair Political Practices Commission.
While Crosier must file the forms, the
County Office has not required Puplava
to disclose his gifts or other economic
interests. Local agencies decide which workers need to
report, based on state guidelines that say they must include
employees who influence, make or help to make governmental
decisions.
Some agencies also set their own, stricter rules on gifts. New
rules adopted by the County Office last year say that
employees must not accept gifts that "could in any way
influence, or appear to influence, official decisions" to favor any
person or group the office deals with. But those rules weren't in
effect when Puplava and Crosier took the trips.
The investment program that Puplava manages is offered by a
consortium of dozens of school districts and charter schools,
which have joined together to get employee benefits at a lower
cost. That pact, known as the Fringe Benefits Consortium, is
run by the County Office of Education. The program has more
than $210 million in assets and more than 6,500 participants.
The program says it offers a less expensive investment option
to public school teachers. Attorney Dan Shinoff, who fielded
questions on behalf of Crosier and Puplava, said the
agency had hired good, honest people.
"It's unfair to demonize people who have otherwise done great
things," Shinoff said in an interview earlier this year. "Public
employees have saved millions because of their efforts."
But ethicists said the problem isn't whether Puplava and Crosier
are good people. Taking the gifts could open Crosier and
Puplava up to improper influence that public employees should
try to avoid, they said.
Crosier and Puplava advise the committees that decide which
companies get contracts with the program or what investments it
can offer to employees.
Shinoff said they don't give their opinion on companies.
But La Mesa-Spring Valley School District Superintendent
Brian Marshall, who sits on the executive committee,
said that when vendors are up for approval, Crosier
typically makes a recommendation to the committee.
When the Fair Political Practices Commission considered
changing some of its rules on free travel for elected officials two
years ago, their attorneys wrote that if a trip was truly
necessary, "arguably the government should pay for it as
official travel."
That is what San Diego County does. It pays for trips to visit
companies on county business. (San Diego County is a
separate entity from the County Office of Education.)
VOSD surveyed six other investment programs from Orange
County to New York City and all six said they would pay for
travel when exploring a new company to do business with. Four
of the six would also pay for trips to visit existing vendors as well.
The gift issue is only one of several recent troubles at the
County Office of Education, exposed by recent lawsuits by
former advisers and a former employee.
For instance, Shinoff and another attorney from his firm have
helped screen potential employees who later oversaw work
done by outside attorneys, including those in Shinoff's firm.
Legal and ethics experts cautioned that the practice was fraught
with the risk that employees would feel they owed loyalty to
those attorneys.
Another office employee advises her boss on retaining
attorneys for personnel cases, which routinely leads to work for
her husband's law firm.
The San Diego Union-Tribune has also explored whether
Puplava was improperly pursuing his side business while
managing the investment program.
♦♦♦
The gifts came to light because the program is tangled in a
lawsuit. Nearly two years ago, the consortium run by the County
Office of Education sued a group of investment advisers it had
terminated, accusing them of stealing trade secrets and other
violations.
The advisers sued back, claiming the consortium had
baselessly fired them.
After the Union-Tribune story on
Puplava came out, County Office of Education
employees Dan Puplava and Diane Crosier filed a
defamation suit against one of the advisers, Barry Allred,
and a former consultant, Scott Dauenhauer. Crosier
claimed the two had given false information to a Union-
Tribune reporter "to enact an unethical revenge."
Crosier's suit also argued that private emails between
Allred and Dauenhauer were defamatory, including claims
that did not appear in the newspaper. In one of those e-
mails, Allred said Crosier and Puplava had accepted paid
trips to Boston, Colorado, Utah, Ohio and Santa Barbara.
Attorneys for Allred and Dauenhauer declined comment for this
article or didn't respond to phone calls by deadline. In their
court filings, they attempted to counter the defamation claims by
arguing that the emails about the trips were factual, quoting
Puplava's testimony about his Boston trip.
December 26, 2010 Updated: Feb 21, 2011
by Emily Alpert
Voice of San Diego
When San Diego County Office of Education employees flew to
Boston to learn more about a company they were considering
doing business with, they didn't need to worry about the bill.
The company paid for their flight to Boston. It also paid for their
hotel stay. And when one of the employees, Dan Puplava,
picked out a bottle of wine from Napa Valley over dinner,
he wasn't really sure who paid, but believes it was either
the company or its marketing company. He thought the
bottle cost $400.
"Here the bottle of wine would be, like, 150 bucks," Puplava
later testified. "Out there it was outrageous."
Puplava manages a program that helps school district and
charter school employees invest for their retirements. Four
years ago, he and supervisor Diane Crosier made the
visit to Aviva, a company they were weighing whether to
do business with, to learn more about its investment
products.
It wasn't their only trip. Between 2006 and 2008, the employees
repeatedly took trips to visit companies the program worked with
or was considering working with, paid for by those same
companies.
Crosier is supposed to publicly report gifts she gets from
companies or people related to her work. Yet the trips aren't
listed on her economic disclosure reports. Ethicists say the free
trips are also problematic because workers could be improperly
swayed by gifts from companies they negotiate with.
"It smells bad," said Jessica Levinson, director of political reform
for the Center for Governmental Studies in Los Angeles.
"They're clearly trying to influence them."
The County Office argues that the free trips did not
compromise its integrity and helped spare resources.
Trips to visit companies are indeed common among other
investment programs run by government agencies, a way to
keep up with vendors and the services they offer. But several
other government programs surveyed by
voiceofsandiego.org don't let companies pick up the tab.
"We don't want to be beholden to anyone," San Diego County
Treasurer-Tax Collector Dan McAllister said. His office runs a
similar program for county employees and pays for its own trips
to see vendors. "We will turn down offers like that because we
never want to leave the impression that there is a conflict."
Boston wasn't their only destination. They took several
other trips on the tab of companies they were visiting: In
Philadelphia, Crosier and Puplava met with Lincoln Financial, a
company they were considering to manage their brokers. In
Ohio they stopped in to see both Meeder Financial, which helps
school employees manage their money, and Nationwide, their
investment platform.
In Dallas they visited Life Insurance of the
Southwest, a company that provided a special kind of
investment plan for the program. In Utah they visited the
company that administers the program, National Benefit
Services. And they repeatedly visited Aviva's marketing
company in Santa Barbara.
After Crosier and Puplava took their trip to Boston, a
committee that they advise agreed to make Aviva
products available to school employees in the program.
But another company they visited, Lincoln, was not ultimately
chosen. Other companies were already working with them when
the trips happened.
Under California law, public employees are allowed to accept
gifts. But some workers in influential positions must publicly
report what they get, from whom and how much it is worth.
California also sets dollar limits on gifts to public employees,
which bar them from taking more than $420 worth of gifts from
each source each year. The rules are supposed to reduce the
sway of money in government and allow the public to keep an
eye on how public officials could be influenced.
In response to questions from voiceofsandiego.org, the
County Office wrote in an email that it believed Crosier
had followed the gift rules. But despite repeated
questions, it would not specifically explain why the trips
could be legally left off the forms. In an email, Crosier
said only that the trips were not included "due to
discussion with legal counsel."
There are some exceptions to the gift rules. For instance, gifts
that are given to a public agency and passed on to an
employee, rather than given directly to them, don't need to be
reported by employees if the agency reports them publicly and
meets other specific requirements.
But when VOSD asked for records that
would show if the trips were given to
the agency rather than the employee, it
didn't provide any. Instead, the County
Office argued that in the past, it just
wasn't required to report gifts given to
the agency. Despite repeated questions,
the agency gave no further explanation
of why it wouldn't have to report those
gifts.
Until recently, the County Office had allowed influential
employees to avoid reporting gifts at all. It only started
reporting gifts after VOSD brought the problem to the
attention of the state Fair Political Practices Commission.
While Crosier must file the forms, the
County Office has not required Puplava
to disclose his gifts or other economic
interests. Local agencies decide which workers need to
report, based on state guidelines that say they must include
employees who influence, make or help to make governmental
decisions.
Some agencies also set their own, stricter rules on gifts. New
rules adopted by the County Office last year say that
employees must not accept gifts that "could in any way
influence, or appear to influence, official decisions" to favor any
person or group the office deals with. But those rules weren't in
effect when Puplava and Crosier took the trips.
The investment program that Puplava manages is offered by a
consortium of dozens of school districts and charter schools,
which have joined together to get employee benefits at a lower
cost. That pact, known as the Fringe Benefits Consortium, is
run by the County Office of Education. The program has more
than $210 million in assets and more than 6,500 participants.
The program says it offers a less expensive investment option
to public school teachers. Attorney Dan Shinoff, who fielded
questions on behalf of Crosier and Puplava, said the
agency had hired good, honest people.
"It's unfair to demonize people who have otherwise done great
things," Shinoff said in an interview earlier this year. "Public
employees have saved millions because of their efforts."
But ethicists said the problem isn't whether Puplava and Crosier
are good people. Taking the gifts could open Crosier and
Puplava up to improper influence that public employees should
try to avoid, they said.
Crosier and Puplava advise the committees that decide which
companies get contracts with the program or what investments it
can offer to employees.
Shinoff said they don't give their opinion on companies.
But La Mesa-Spring Valley School District Superintendent
Brian Marshall, who sits on the executive committee,
said that when vendors are up for approval, Crosier
typically makes a recommendation to the committee.
When the Fair Political Practices Commission considered
changing some of its rules on free travel for elected officials two
years ago, their attorneys wrote that if a trip was truly
necessary, "arguably the government should pay for it as
official travel."
That is what San Diego County does. It pays for trips to visit
companies on county business. (San Diego County is a
separate entity from the County Office of Education.)
VOSD surveyed six other investment programs from Orange
County to New York City and all six said they would pay for
travel when exploring a new company to do business with. Four
of the six would also pay for trips to visit existing vendors as well.
The gift issue is only one of several recent troubles at the
County Office of Education, exposed by recent lawsuits by
former advisers and a former employee.
For instance, Shinoff and another attorney from his firm have
helped screen potential employees who later oversaw work
done by outside attorneys, including those in Shinoff's firm.
Legal and ethics experts cautioned that the practice was fraught
with the risk that employees would feel they owed loyalty to
those attorneys.
Another office employee advises her boss on retaining
attorneys for personnel cases, which routinely leads to work for
her husband's law firm.
The San Diego Union-Tribune has also explored whether
Puplava was improperly pursuing his side business while
managing the investment program.
♦♦♦
The gifts came to light because the program is tangled in a
lawsuit. Nearly two years ago, the consortium run by the County
Office of Education sued a group of investment advisers it had
terminated, accusing them of stealing trade secrets and other
violations.
The advisers sued back, claiming the consortium had
baselessly fired them.
After the Union-Tribune story on
Puplava came out, County Office of Education
employees Dan Puplava and Diane Crosier filed a
defamation suit against one of the advisers, Barry Allred,
and a former consultant, Scott Dauenhauer. Crosier
claimed the two had given false information to a Union-
Tribune reporter "to enact an unethical revenge."
Crosier's suit also argued that private emails between
Allred and Dauenhauer were defamatory, including claims
that did not appear in the newspaper. In one of those e-
mails, Allred said Crosier and Puplava had accepted paid
trips to Boston, Colorado, Utah, Ohio and Santa Barbara.
Attorneys for Allred and Dauenhauer declined comment for this
article or didn't respond to phone calls by deadline. In their
court filings, they attempted to counter the defamation claims by
arguing that the emails about the trips were factual, quoting
Puplava's testimony about his Boston trip.
Are SDCOE's Dan Puplava and Diane Crosier leveraging their
positions as public employees into private financial gain?
positions as public employees into private financial gain?
Why This Website
Stutz Artiano Shinoff
& Holtz v. Maura
Larkins defamation
SDCOE
CVESD
Castle Park
Elementary School
Law Enforcement
CTA
CVE
Stutz Artiano Shinoff
& Holtz
Silence is Golden
Schools and Violence
Office Admin Hearings
Larkins OAH Hearing
Stutz Artiano Shinoff
& Holtz v. Maura
Larkins defamation
SDCOE
CVESD
Castle Park
Elementary School
Law Enforcement
CTA
CVE
Stutz Artiano Shinoff
& Holtz
Silence is Golden
Schools and Violence
Office Admin Hearings
Larkins OAH Hearing
Dan Puplava, self-admitted
annuity gamer (related site)
SDCOE
Puplava sues Scott Dauenhauer
for whistleblowing
annuity gamer (related site)
SDCOE
Puplava sues Scott Dauenhauer
for whistleblowing
San Diego Union-Tribune expose of Dan
Puplava
Benefits manager’s work questioned
County employee also acted as a broker
By Jeff McDonald
STAFF WRITER
San Diego Union-Tribune
March 17, 2009
A San Diego County Office of Education employee tasked with
managing a retirement program for thousands of teachers and
administrators supplemented his salary for years with
commissions on outside investments he sold to those same
clients.
Daniel Puplava makes $100,000 to $108,000 a year as the
deferred compensation manager for a consortium that serves
public educators in three counties. At the same time, Puplava
has been allowed to pursue those clients for his private broker
business.
In 2006, Puplava collected at least $355,000 in commissions as
a broker for AIG Financial Advisors Inc., according to
documents obtained by The San Diego Union-Tribune. He was
named to the 2008 Achiever's Council, an honor reserved for
agents of AIG Financial Advisors whose commissions and fees
exceed $250,000 a year.
His attorney said Puplava shared that money with other brokers.
Officials at the county schools office said they knew about
Puplava's broker business and saw no conflict of interest
because he has done the work on his own time.
“It's not unheard of for public employees to have a business on
the side,” spokesman James Esterbrooks said.
The arrangement does not appear to violate federal securities
laws, but it tests the limits of the state education code and has
become one of the main sticking points in litigation involving the
office.
Puplava's work as a broker also appears to have been done at
county offices. Client statements obtained by the Union-Tribune
list Puplava's phone number at the county schools office as his
primary contact.
“It certainly strikes me as an apparent conflict of interest,” said
Ronald F. Duska, director of the Mitchell Center for Ethical
Leadership at The American College in Bryn Mawr, Pa. “It just
sets up incredible temptations for the guy who's supposed to be
acting as a manager.”
Puplava, who is 47 and lives in Escondido, declined to be
interviewed. His attorney, Randall Winet, responded to
questions with a March 6 letter to the newspaper stating that
Puplava has divested himself of his personal clients and
received only a portion of the commissions cited in documents.
“The funds from financial services companies were paid directly
to him, which he then was required to distribute to a number of
brokers working for him,” the letter says.
Winet also said Puplava had “a significant, thriving practice
prior to ever joining the County Office of Education.”
Puplava is a registered broker for SagePoint Financial Inc. in
Phoenix, which until recently was called AIG Financial Advisors.
His full-time job is to manage the deferred compensation
retirement program for the Fringe Benefits Consortium, which
provides access to health insurance, annuities and other
services for school employees across San Diego, Riverside and
Imperial counties.
The consortium was created in 1982 to help school employees
negotiate better deals on health insurance by pooling
resources.
Twelve districts representing 2,500 or so teachers initially
joined the self-insurance partnership, but the client roster grew
to 72,000 as the consortium attracted more districts and
expanded its services.
When the Office of Education hired Puplava in 1997, he was
permitted to keep his “book of business,” or private clients,
county schools officials said.
Puplava also was allowed to grow his client base by soliciting
teachers he met through his county job.
Four years after his hiring, the county schools office was among
the first agencies in the country to organize an umbrella
retirement program for teachers, who as public employees
receive government pensions but often supplement those
benefits by setting up individual investment accounts.
The idea was to give teachers the opportunity to buy
investment products without paying the high fees and
commissions normally associated with individual transactions.
Puplava was put in charge of the deferred compensation
program. He contracted with outside financial advisers to
promote the services, and together they hosted hundreds of
informational seminars outlining the various products and
services.
About 6,000 teachers and administrators have bought
supplemental investment products offered through the deferred
compensation program.
Consortium director Diane Crosier said that after a new
superintendent was hired in 2006, a decision was made to allow
Puplava to keep existing clients but restrict him from accepting
new teachers and educators as customers. But by then, even
incoming Superintendent Randolph Ward had bought an
annuity from Puplava.
Running an outside business is legal for full-time county Office
of Education employees. But according to the California
Department of Justice, a deferred compensation program
manager is supposed to be a neutral party – not someone who
profits from marketing financial products.
“The statute prohibits school employees from acting as sales
agents for 403(b) vendors in return for commissions,” according
to an August opinion from the Attorney General's Office
analyzing the state's education code.
Section 403(b) of the Internal Revenue Service doe allows
public and nonprofit employees to pay into tax-deferred
supplemental accounts to boost their retirement nest eggs,
much like 401(k) programs in the private sector.
Former employees and independent advisers say the U.S.
Securities and Exchange Commission investigated Puplava's
dealings. Crosier said the SEC has looked into Puplava, but
that was more than a year ago and nothing has happened.
The San Diego County District Attorney's Office requested
copies of related civil case files but closed its investigation in
July after finding no evidence of criminal conduct.
The SEC and the District Attorney’s Office declined to discuss
the situation, as did Ward.
In August, the consortium terminated the contracts of six
brokers who had been enrolling and serving clients for years.
Three weeks later, the schools office sued those brokers,
claiming they had stolen clients and business from the
consortium.
The brokers fought back, filing a 26-page cross-complaint last
month that lodged numerous allegations against Puplava,
Crosier and county schools office officials.
Among other things, the cross-complaint says Puplava opened
a partnership with three of the fired advisers – Barry Allred,
Christopher Dougherty and Michael Zeiger – that operated as
FBC Insurance Services.
The partners shared tens of thousands of dollars in fees and
commissions paid by FBC clients, the cross-complaint alleges.
Court papers also say Puplava negotiated a deal with Aviva Life
and Annuity Co. that paid him 30 percent of all commissions the
partnership received from Aviva. In 2006, Puplava personally
collected more than $26,000 in Aviva commissions from
February to October, the cross-suit says.
Citing the ongoing litigation, Crosier declined to address
specific allegations, including why Puplava was permitted to sell
his clients financial products not available under the consortium
when the fired brokers were sued for the same activity.
“There are huge inaccuracies in that lawsuit,” Crosier said.
Kris Kertzman, who worked as a consortium broker from 2002 to
2007 but is not part of the pending litigation, said Puplava's
clients think he “has their best interests in mind because he
works for the county.”
“He's getting paid a salary by the taxpayers to manage the
registered representatives, not to be a registered
representative,” Kertzman said.
Puplava
Benefits manager’s work questioned
County employee also acted as a broker
By Jeff McDonald
STAFF WRITER
San Diego Union-Tribune
March 17, 2009
A San Diego County Office of Education employee tasked with
managing a retirement program for thousands of teachers and
administrators supplemented his salary for years with
commissions on outside investments he sold to those same
clients.
Daniel Puplava makes $100,000 to $108,000 a year as the
deferred compensation manager for a consortium that serves
public educators in three counties. At the same time, Puplava
has been allowed to pursue those clients for his private broker
business.
In 2006, Puplava collected at least $355,000 in commissions as
a broker for AIG Financial Advisors Inc., according to
documents obtained by The San Diego Union-Tribune. He was
named to the 2008 Achiever's Council, an honor reserved for
agents of AIG Financial Advisors whose commissions and fees
exceed $250,000 a year.
His attorney said Puplava shared that money with other brokers.
Officials at the county schools office said they knew about
Puplava's broker business and saw no conflict of interest
because he has done the work on his own time.
“It's not unheard of for public employees to have a business on
the side,” spokesman James Esterbrooks said.
The arrangement does not appear to violate federal securities
laws, but it tests the limits of the state education code and has
become one of the main sticking points in litigation involving the
office.
Puplava's work as a broker also appears to have been done at
county offices. Client statements obtained by the Union-Tribune
list Puplava's phone number at the county schools office as his
primary contact.
“It certainly strikes me as an apparent conflict of interest,” said
Ronald F. Duska, director of the Mitchell Center for Ethical
Leadership at The American College in Bryn Mawr, Pa. “It just
sets up incredible temptations for the guy who's supposed to be
acting as a manager.”
Puplava, who is 47 and lives in Escondido, declined to be
interviewed. His attorney, Randall Winet, responded to
questions with a March 6 letter to the newspaper stating that
Puplava has divested himself of his personal clients and
received only a portion of the commissions cited in documents.
“The funds from financial services companies were paid directly
to him, which he then was required to distribute to a number of
brokers working for him,” the letter says.
Winet also said Puplava had “a significant, thriving practice
prior to ever joining the County Office of Education.”
Puplava is a registered broker for SagePoint Financial Inc. in
Phoenix, which until recently was called AIG Financial Advisors.
His full-time job is to manage the deferred compensation
retirement program for the Fringe Benefits Consortium, which
provides access to health insurance, annuities and other
services for school employees across San Diego, Riverside and
Imperial counties.
The consortium was created in 1982 to help school employees
negotiate better deals on health insurance by pooling
resources.
Twelve districts representing 2,500 or so teachers initially
joined the self-insurance partnership, but the client roster grew
to 72,000 as the consortium attracted more districts and
expanded its services.
When the Office of Education hired Puplava in 1997, he was
permitted to keep his “book of business,” or private clients,
county schools officials said.
Puplava also was allowed to grow his client base by soliciting
teachers he met through his county job.
Four years after his hiring, the county schools office was among
the first agencies in the country to organize an umbrella
retirement program for teachers, who as public employees
receive government pensions but often supplement those
benefits by setting up individual investment accounts.
The idea was to give teachers the opportunity to buy
investment products without paying the high fees and
commissions normally associated with individual transactions.
Puplava was put in charge of the deferred compensation
program. He contracted with outside financial advisers to
promote the services, and together they hosted hundreds of
informational seminars outlining the various products and
services.
About 6,000 teachers and administrators have bought
supplemental investment products offered through the deferred
compensation program.
Consortium director Diane Crosier said that after a new
superintendent was hired in 2006, a decision was made to allow
Puplava to keep existing clients but restrict him from accepting
new teachers and educators as customers. But by then, even
incoming Superintendent Randolph Ward had bought an
annuity from Puplava.
Running an outside business is legal for full-time county Office
of Education employees. But according to the California
Department of Justice, a deferred compensation program
manager is supposed to be a neutral party – not someone who
profits from marketing financial products.
“The statute prohibits school employees from acting as sales
agents for 403(b) vendors in return for commissions,” according
to an August opinion from the Attorney General's Office
analyzing the state's education code.
Section 403(b) of the Internal Revenue Service doe allows
public and nonprofit employees to pay into tax-deferred
supplemental accounts to boost their retirement nest eggs,
much like 401(k) programs in the private sector.
Former employees and independent advisers say the U.S.
Securities and Exchange Commission investigated Puplava's
dealings. Crosier said the SEC has looked into Puplava, but
that was more than a year ago and nothing has happened.
The San Diego County District Attorney's Office requested
copies of related civil case files but closed its investigation in
July after finding no evidence of criminal conduct.
The SEC and the District Attorney’s Office declined to discuss
the situation, as did Ward.
In August, the consortium terminated the contracts of six
brokers who had been enrolling and serving clients for years.
Three weeks later, the schools office sued those brokers,
claiming they had stolen clients and business from the
consortium.
The brokers fought back, filing a 26-page cross-complaint last
month that lodged numerous allegations against Puplava,
Crosier and county schools office officials.
Among other things, the cross-complaint says Puplava opened
a partnership with three of the fired advisers – Barry Allred,
Christopher Dougherty and Michael Zeiger – that operated as
FBC Insurance Services.
The partners shared tens of thousands of dollars in fees and
commissions paid by FBC clients, the cross-complaint alleges.
Court papers also say Puplava negotiated a deal with Aviva Life
and Annuity Co. that paid him 30 percent of all commissions the
partnership received from Aviva. In 2006, Puplava personally
collected more than $26,000 in Aviva commissions from
February to October, the cross-suit says.
Citing the ongoing litigation, Crosier declined to address
specific allegations, including why Puplava was permitted to sell
his clients financial products not available under the consortium
when the fired brokers were sued for the same activity.
“There are huge inaccuracies in that lawsuit,” Crosier said.
Kris Kertzman, who worked as a consortium broker from 2002 to
2007 but is not part of the pending litigation, said Puplava's
clients think he “has their best interests in mind because he
works for the county.”
“He's getting paid a salary by the taxpayers to manage the
registered representatives, not to be a registered
representative,” Kertzman said.
| ... |
Daniel Lee Puplava, Registered Principal of Escondido, California
Misappropriated signature guarantees on client's forms
11/30/2011
Puplava’s non-registered assistant had access to his signature guarantee stamp... to
approve securities business-related transactions and paperwork that required a
signature guarantee stamp...Puplava did not take back his signature guarantee stamp
or take steps to otherwise secure the stamp to prevent its misuse. ..
The findings also stated that Puplava had customers sign blank securities
business-related forms, including non-brokerage change request forms,
mutual fund transfer forms and securities account forms, and retained these
forms in his customer files contrary to his member firm’s prohibition against
this practice.
Misappropriated signature guarantees on client's forms
11/30/2011
Puplava’s non-registered assistant had access to his signature guarantee stamp... to
approve securities business-related transactions and paperwork that required a
signature guarantee stamp...Puplava did not take back his signature guarantee stamp
or take steps to otherwise secure the stamp to prevent its misuse. ..
The findings also stated that Puplava had customers sign blank securities
business-related forms, including non-brokerage change request forms,
mutual fund transfer forms and securities account forms, and retained these
forms in his customer files contrary to his member firm’s prohibition against
this practice.
| San Diego Education Report |
| SDER |
San Diego
Education Report
Education Report
| SDER |
| SDER |
| SDER |