Sheryl Blair Settlement: Claim Filing, Payout, and Aftermath

The D.H. Blair settlement was a 1998 agreement between the New York brokerage D.H. Blair & Co. and a task force of state securities regulators that created a $2.25 million escrow fund to compensate customers who alleged sales-practice abuses in the firm’s microcap stock business. Investors in all 50 states and the District of Columbia could file claims for trades executed between January 1, 1996, and June 30, 1998. The North American Securities Administrators Association announced completion of the settlement on March 31, 2000, confirming the fund had been fully paid.¹

Who Brought the Case

The settlement was negotiated by a multistate task force led by securities regulators from Indiana, Connecticut, and Missouri.¹ Their focus was the sales practices behind D.H. Blair’s high-risk microcap offerings, which the firm had pushed through aggressive cold-calling campaigns.² D.H. Blair had already been sanctioned separately by the New York Stock Exchange and the NASD before this agreement was reached, and it stopped retail sales operations in April 1998.

Who Could File a Claim

Eligibility was open to customers nationwide, but the trade had to fall inside a specific window: January 1, 1996 through June 30, 1998. A customer had to believe the trade was inappropriate and file a complaint about it.¹

D.H. Blair itself was responsible for notifying eligible customers and providing filing instructions. Once a customer received that notice, they had 90 days to submit a claim. Claims went through an expedited mediation and arbitration process run by the NASD’s regulatory arm, and payouts were made on a pro-rata basis from the $2.25 million escrow.³

How Much Was Paid, and When It Closed

The escrow account totaled $2.25 million. NASAA announced on March 31, 2000, that the account had been fully funded and the settlement completed.¹

This fund is easy to confuse with two other D.H. Blair payments from the same period, so the distinction matters if you are trying to trace a recovery. The $2.25 million multistate fund is separate from the $2.3 million in restitution the NASD ordered in a 1997 action over excessive markups, and separate again from the $2.4 million restitution fund associated with the later criminal case.³⁴

Can New Claims Still Be Filed?

No. The 90-day filing deadline ran from each customer’s individual notice, and NASAA confirmed the settlement complete in March 2000.¹⁵⁶

What Happened to D.H. Blair After the Settlement

The multistate settlement resolved the state regulatory piece. The criminal case came later and went much further. On July 27, 2000, Manhattan District Attorney Robert M. Morgenthau announced a 173-count indictment against D.H. Blair and 15 former officers and employees, alleging the firm had operated as a “criminal enterprise” from 1989 to 1998. Prosecutors said the firm manipulated the prices of at least 10 stocks taken public by an affiliated investment bank, used high-pressure sales tactics, stole client data from competitors, falsified records, and misled regulators. More than 50,000 customers had invested with the firm during the covered period.⁴⁷

On March 7, 2002, D.H. Blair & Co. pled guilty to three counts of violating the Martin Act, New York’s state securities law, for market manipulation between 1993 and 1998.⁶ Three top executives entered guilty pleas the same day:

Vice chairman Alan Stahler pled guilty to three Martin Act counts and was sentenced to one and a half to three years in prison on each count, running concurrently. He was automatically disbarred as a New York attorney on conviction.⁸
Vice chairman Kalman Renov pled guilty to three Martin Act counts.⁹
Head trader Vito Capotorto pled guilty to three Martin Act counts under a plea agreement.¹⁰

Chairman Kenton Wood pled guilty in a separate proceeding to one count under the Donnelly Act, New York’s antitrust statute.¹¹¹²⁹¹⁰

A Note on J. Morton Davis

J. Morton Davis ran D.H. Blair for more than 20 years before turning the brokerage over to family members, including sons-in-law Alan Stahler and Kalman Renov. He was not named in the 173-count indictment, and neither was D.H. Blair Investment Banking, the affiliate he continued to run after it was spun off in 1992.⁴ Davis’s own FINRA BrokerCheck record shows at least 11 customer disputes filed between 1988 and 2000, several of which settled, including payouts of $275,000, $219,952, and $130,000 in 2000. Davis stated in broker comments that in many of those cases he was named solely because of his ownership stake and was not required to contribute personally to the settlements.¹³

1
NASAA. State Securities Regulators Announce Completion of D.H. Blair Settlement Agreement
2
Idaho Department of Finance. D.H. Blair Settlement Press Release
3
Idaho Department of Finance. D.H. Blair Settlement Completion Press Release
4
The New York Times. D.H. Blair and Executives Indicted in Fraud Case
5
FINRA BrokerCheck. D.H. Blair & Co., Inc. – BrokerCheck Report
6
SEC.gov. In the Matter of D.H. Blair & Co., Inc.
7
Los Angeles Times. D.H. Blair and Executives Indicted
8
FindLaw. In the Matter of Alan Stahler
9
SEC.gov. In the Matter of Kalman Renov
10
SEC.gov. In the Matter of Vito Capotorto
11
SEC.gov. In the Matter of Kenton Wood
12
SEC.gov. In the Matter of Alan Stahler
13
FINRA BrokerCheck. J. Morton Davis – BrokerCheck Summary