Some well-known local brokerage-industry names have popped behind new windows: Rod Hagenbuch and Richard Capalbo.
Hagenbuch, 62, was most recently senior vice president with Merrill Lynch. Capalbo, 50, was his co-manager, although many will remember him as CEO at Bateman Eichler, Hill Richards (the long-gone regional brokerage) and as market director with Drexel Burnham Lambert.
The dynamic duo this year launched a new firm, Quantum Leap Institute. It has two major business thrusts: professional training and expert witness representation.
"We have had about 800 stockbrokers from Merrill Lynch go through our three-day program," said Capalbo.
Quantum Leap trains brokers not just to think about getting new clients, but about servicing and developing relationships with their best 20 percent of clients.
"The old 80-20 rule seems to apply to stockbrokers too. Twenty percent of your clients give you 80 percent of your business, and vice versa," said Capalbo.
The second business prong is providing expert witnesses to securities-industry arbitrations. Many potential witnesses cannot testify because they work in the industry and are therefore barred. With a small pool, some get tapped over and over again a point plaintiff's lawyers can seize upon, said Capalbo.
"A plaintiff's lawyer can ask an expert witness, 'How many times have you testified on behalf of Prudential? And how much money did you receive? Well, you really work for Prudential, don't you?' " Capalbo said.
Quantum Leap aims to help its clients avoid such scenarios. By building a roster of 36 witnesses nationwide, diversified geographically and by specialty, "We can provide expert witnesses who are fresh," he added.
In spare moments, Hagenbuch and Capalbo are also linking certain high-tech companies to Wall Street, in a sort of boutique investment banking/venture capital operation.
Managing money is tough enough without getting into battles with one's own lawyers. But that's what happened with RNC Capital Management LLC, the Century City-based money management shop, according to a suit filed in Los Angeles Superior Court.
The feud has roots back to March 1998, when a group of five executives led by Bruce Mandel bolted from RNC to form their own money management shop, known as Oakwood Capital Management, also based in Century City. The Westside law firm Jeffer Mangels Butler & Marmaro LLP had worked for RNC since 1992, sometimes reviewing employee contracts and disputes, but had resigned the RNC account in February 1998.
Shortly thereafter, according to allegations made in court by RNC, the new Oakwood firm began soliciting RNC clients and using RNC trade secrets, in violation of separation clauses in employment contracts RNC had with the five executives. RNC sued for $3.5 million in damages, and won a temporary restraining order against certain Oakwood marketing practices. Its suit awaits settlement in arbitration.
Perhaps more galling, from RNC's perspective, is that Jeffer Mangels lawyers emerged in court defending Oakwood, and contending that the employment contracts which they had reviewed for RNC were not valid or did not apply to the Oakwood situation.
RNC subsequently sued Jeffer Mangels, one of L.A.'s largest firms, for breach of fiduciary duties and other miscues.
Jeffer Mangels has since withdrawn as counsel for Oakwood. In a prepared statement, the law firm said, "We deeply regret being drawn into a dispute between RNC Capital Management LLC and Oakwood Capital Management, but that dispute in no way involves the firm of Jeffer, Mangels, Butler & Marmaro LLP. Once all of these matters are viewed in the proper context, it will become evident that JMBM and its attorneys should not have been brought into this dispute."
Speaking of lawyers, Richard Drooyan, former assistant U.S. Attorney in Los Angeles and regarded as one of the nation's top securities lawyers, has left the public sector and hitched on with Munger, Tolles & Olson LLP, the downtown Los Angeles law firm.
"I will be doing some securities litigation, some white-collar (defense) work, and some corporate law," said Drooyan, 48.
Back in the early 1990s, before joining the U.S. Attorney's Office, Drooyan was hired by Michael Milken to handle his defense in an arbitration proceeding instigated by another employee at Drexel. Back then, Drooyan was with Skadden Arps Slate Meagher & Flom, also in Los Angeles.
As ever, Drooyan has joined an interesting outfit. Years back, Munger Tolles (co-founded in 1962 by investor wizard Charles Munger) was known as a high-quality boutique law firm. But the firm has grown steadily to more than 100 lawyers, far beyond the size of a boutique. Still, Drooyan likes the size of Munger Tolles, as opposed to some of the giant firms that courted him.
"At my stage of a career, it is nice to join a smaller firm, where you can get to know everybody, and integrate yourself into the system more easily than at a larger law firm," said Drooyan. "I also have a lot of friends here."
Cellulite, not celluloid
The name Dennis Forst has been bandied about analyst circles in Los Angeles for a long time. The veteran stock watcher has punched the clock at Sutro & Co. Inc., Bateman Eichler Hill Richards, Merrill Lynch and Security Pacific, and was known for covering Hollywood. Now he works at the Century City office of McDonald Investments, an institutional brokerage firm based in Cleveland. But Forst has dumped Tinseltown coverage.
"I wasn't comfortable with the executive compensation, the extravagances, the private deals it got very difficult to figure out if these were good companies for shareholders," he said.
Now, Forst concentrates on hospitality, gaming and lodging. Local stocks he likes are Cheesecake Factory Inc. and Hilton Hotels Corp. Does he eat at Cheesecake?
"Yes, but I try not to let my palette be the judge of a stock," said Forst. "I like to see the numbers. Besides, you could put on weight."
Contributing Reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at email@example.com.
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