UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 39029 / September 8, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9122 _________________________ : In the Matter of : ORDER MAKING FINDINGS AND : IMPOSING REMEDIAL SANCTIONS FAHNESTOCK & CO., INC. : AND CEASE-AND-DESIST ORDER : and : : WILLIAM E. BIERLIN, JR., : : Respondents. : : _________________________: I. On September 30, 1996, the Securities and Exchange Commission deemed it appropriate and in the public interest to institute public administrative and cease-and-deist proceedings, pursuant to Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against William E. Bierlin, Jr. ("Bierlin") and Fahnestock & Co., Inc. ("Fahnestock"). In response to the institution of these proceedings, Bierlin has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except for those contained in subparagraphs II.A. and II.B., which are admitted, Bierlin, by his Offer, consents to the issuance of this Order Making Findings and Imposing Remedial Sanctions And Cease- And-Desist Order. II. On the basis of the Order Instituting Proceedings and the Offer submitted by Bierlin, the Commission makes the following findings:<(1)> A. Fahnestock is a broker-dealer which has been registered with the Commission since 1954. Bierlin is associated with Fahnestock and has been associated continuously with Fahnestock and other registered broker-dealers since 1965. Bierlin was also the branch office manager of Fahnestock's Jenkintown, Pennsylvania branch office ("branch office") from 1991 until 1996. B. Wendell Jeffrey Lee ("Lee") had been associated with registered broker-dealers as a representative since 1989 and was employed in this capacity in Fahnestock's branch office from July 10, 1992 through May 27, 1994. Lee was convicted for felony forgery in connection with the misappropriation of funds from two Fahnestock customers and was sentenced to five years incarceration. Commonwealth of Pennsylvania v. Wendell Jeffrey Lee, Docket Nos. 1319-95 and 1478-95. The Commission obtained a permanent injunction against Lee, SEC v. Wendell Jeffrey Lee, 2:95-CV-06088 (E.D.P.A.)(Sept. 27, 1995), and, on May 28, 1996, instituted administrative proceedings against him in connection with this same misconduct which resulted in Lee being permanently barred from association with any broker or dealer. In the Matter of Wendell Jeffrey Lee, Admin. Proc. File No. 3- 9013, 1996 SEC LEXIS 1685 (July 3, 1996). C. From approximately February 1993 through May 1994, Lee willfully violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that Lee misappropriated approximately $262,222 from the brokerage accounts of two Fahnestock customers. As part of his scheme, Lee forged customers' signatures on nine letters of authorization ("LOA's") authorizing and instructing Fahnestock to issue 56 third-party checks, totaling $107,066, which were drawn on the customers' accounts. Fahnestock also issued ten third-party checks totaling $97,300 without any LOA's. All of these unauthorized checks were made payable to Lee's creditors or to a local bank where Lee maintained his personal checking account. In many instances, Lee obtained physical possession of the third-party checks by representing to Fahnestock that he would hand-deliver the checks to the customers. In other instances, Lee intercepted third-party checks by removing sealed envelopes addressed to customers from the firm's outgoing mail bin, which was located in an unsecured area. In addition, Lee caused Fahnestock to make five unauthorized wire transfers of funds, totaling $57,856, out of a customer account and into accounts for his own benefit. <(1)> The findings herein are made pursuant to the Offer submitted by Bierlin and are not binding on any other person or entity in this or any other proceeding. ======END OF PAGE 2====== D. During the relevant time frame, Bierlin was Lee's direct supervisor. From approximately February 1993 through May 1994, Bierlin failed reasonably to supervise Lee, within the meaning of Section 15(b)(4)(E) of the Exchange Act, with a view to preventing Lee's violations described in subparagraph II.C. above. In this regard, Bierlin did not reasonably enforce Fahnestock's compliance and supervisory procedures regarding the disbursement of customer funds and failed to respond reasonably to warning signs concerning Lee's fraudulent scheme. Specifically, Bierlin did not reasonably: (i) enforce the prohibition against registered representatives hand-delivering checks to customers; (ii) review check blotters and the attached copies of the checks; (iii) review and initial all incoming mail; (iv) sign checks and/or initial check request forms for checks in excess of $10,000; (v) ensure that the outgoing mail, including customer checks, was in a secure area inaccessible to registered representatives; (vi) ensure that the support staff at the branch office was trained on the procedures contained in the Compliance Manual pertaining to the issuance and control of customer checks; and (vii) respond to the high disbursement activity in a customer account on the one occasion it came to his attention and to visible indications that Lee maintained a lifestyle that could not be supported by what he earned at Fahnestock. Bierlin knowingly provided erroneous testimony to the Division of Enforcement ("Division") on two separate occasions regarding his compliance with several of Fahnestock's supervisory and compliance procedures. Bierlin, after being informed that the staff had later discovered evidence that he had testified erroneously, obtained new counsel and recanted his previous testimony. E. From approximately February to October 1995, Bierlin willfully aided and abetted and caused Fahnestock's violations of Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-4 thereunder. As part of the conduct described above, between February 1995 and July 1995, Bierlin placed his initials on the branch office's check blotters for the period covering July 1992 through February 1995, thereby causing those records to reflect falsely that he had reviewed them contemporaneously with their creation. Those records were subsequently produced to the Division, with Bierlin's knowledge, pursuant to two of the Commission's investigative subpoenas. III. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Bierlin and impose the sanctions specified therein. Accordingly, IT IS HEREBY ORDERED that: A. Bierlin is suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company for a period of 11 months, effective on the date of this Order; B. Bierlin is barred from acting in a supervisory and proprietary capacity with any broker, dealer, municipal securities dealer, ======END OF PAGE 3====== investment adviser or investment company; C. Bierlin, pursuant to Section 21C of the Exchange Act, shall cease and desist from causing any violation and any future violations of Section 17(a) of the Exchange Act and the rules thereunder; D. Bierlin shall pay a civil money penalty in the amount of $20,000 to be paid to the United States Treasury within thirty days of the entry of the Order. Such payment shall be: (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) delivered to the Comptroller, Securities and Exchange Commission, Operations Center, Mail Stop 0-3, 6432 General Green Way, Alexandria, VA 22312; and (d) submitted under cover letter which identifies Bierlin as Respondent in these proceedings, and the Commission's file number in these proceedings, a copy of which cover letter and money order or check shall be sent to Ronald C. Long, Securities and Exchange Commission, The Curtis Center, Suite 1005E, 601 Walnut St., Philadelphia, PA 19106; and E. Bierlin shall provide to the Commission, within 30 days after the end of the 11 month suspension period described in subparagraph III.A., an affidavit that he has complied fully with the suspension. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 4======