Talk about a shakeup. It’s almost all new faces in the upper-management ranks of brokerage giant Merrill Lynch’s Los Angeles-area retail operations.

The short story is that Mike Vorst, who previously ran Merrill Lynch’s mountain district (largely the Rocky Mountain states), this spring became district director for the Los Angeles region, which stretches from Santa Barbara to San Diego.

Under Vorst, such well-recognized names in the local stock-brokering world as Larry Beiderman, Merrill’s former district director, and Rod Hagenbuch, its former downtown branch manager, have exited. Also gone is Richard Capelbo (formerly of Drexel Burnham Lambert), who headed up Merrill’s district marketing from downtown, and Tom Muller, former sales manager.

Branch managers at Merrill Lynch retail offices in Long Beach, Century City, Encino, Santa Monica, Santa Barbara and Beverly Hills, among others, have all changed since Vorst took over.

Even among the ranks of stockbrokers, a bunch fairly hardened to the rule of here today, gone tomorrow, the sweep is regarded as remarkable.

“You would think they would keep somebody,” said one former Merrill Lynch branch manager, who left before all the tumult. “But I guess not. Vorst is known for wanting his own team.”

Vorst, who works out of Merrill’s Irvine office, and Michael Fusco, who now heads Merrill’s downtown office, could not be reached for comment. Vorst, through a secretary, referred calls to corporate headquarters in New York.

Merrill’s New York spokeswoman Susan Thompson said the L.A. picture is not as cut-and-dried as it might appear.

“Biederman, who is in his 60s, has retired with his wife to Florida, where he was building a home, and he is still a consultant with Merrill,” said Thompson. Muller is in New York working on integrating a recent acquisition of a Canadian brokerage into Merrill.

Neither Biederman nor Muller could be reached for comment.

Still, within stock-broker circles, the changes are regarded as another sign that loyalty and performance are not always enough in today’s securities industry.

Hot topic

An item that ran in this space a few weeks back generated more heated response than any in recent memory whether accountants can and should accept referral fees or commissions when placing clients in touch with lenders, investors or others, if the referral results in successful raising of capital.

Following the lead of more than 30 states, the California Legislature this year passed a bill, effective in 1999, that allows CPAs to collect referral fees, also called commissions, if they are fully disclosed to the client. Some CPA firms are plunging ahead; others are moving slowly.

“I think most are taking a wait-and-see attitude,” said Pamela Hunter, a CPA with McDowell, Dillon and Hunter in Long Beach who led a California Society of CPAs team that studied the issue.

To be sure, accounting firms cannot just willy-nilly recommend clients to sources of capital. When fulfilling a “test” function usually meaning an audit they are not allowed to refer the client to a source of capital. However, if the accounting firm is, say, only performing a tax function, it has a green light to refer a client to venture capitalists or investment bankers and collect a referral fee, or “success commission,” if such is disclosed to the client.

Additionally, if an accounting firm is working only for the owner of a business say, handling the owner’s personal taxes and estate planning it could recommend to the owner sources of capital for the business, and collect commissions.

Local financiers and accountants have speculated heavily on the June acquisition of West Los Angeles-based CPA firm Duitch Franklin & Co. by Cleveland-based Century Business Services Inc., a big, national and publicly held consolidator of business services, which claims to have 72,000 medium-sized businesses as clients.

Century Business offers everything from payroll services to insurance to pension planning. The plan is to use Duitch Franklin as a marketing platform for the rest of the parent company’s myriad financial services, including investment banking. And Century is not averse to acquiring several accounting firms in one market.

At Duitch Franklin, partner Steve Franklin last week made no bones about the strategy of aligning Duitch Franklin with Century’s other businesses, and that the firm will refer clients to Century Business services when appropriate.

But he added that his firm has voted not to accept referral fees. “We have elected as a firm not take any referral fees, period,” he said.

Quick takes

Sutro & Co. Inc., the securities brokerage based in San Francisco but with much of its investment banking and research muscle in Los Angeles, is still beefing up its cadre of analysts: It recently lured Patrick Houghton, telecommunications maven, and Natarajan Subrahmanyan, telecom and networking researcher, away from Richmond, Va.-based Wheat First Union brokerage. … So much of Sutro’s administrative, trading and investment banking operations are in Los Angeles that the Wall Street Letter, a weekly publication issued by Institutional Investor magazine, referred to Sutro as “Los Angeles-based” in a recent newsletter. … Irvine-based brokerage Cruttenden Roth recently put a “strong buy” recommendation out on Burbank-based OroAmerica Inc., the nation’s largest distributor of gold jewelry. The company has moved to profitability in the last four years by dumping low-margin businesses, and making good acquisitions, said Cruttenden Roth. … Los Angeles-based Sanwa Bank California last week stressed that it is not planning to stop lending to non-Japanese business customers. Sanwa spokesman Keith Karpe said a wire service erroneously put out a story to that effect a couple weeks back. That led to a similar brief mention in The Western Bank Round-Up, a biweekly newsletter put out by bank analyst Joe Morford of Van Kasper & Co. Karpe, sounding like one assigned to dispel the latest urban myth, last week said, “I don’t know how these things get started. But we are here, and we are lending.”

Contributing Reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].