Lawsuit spurs debate on brokers' behavior.

A lawsuit alleging spectacular charges against senior executives in the Century City offices of Cantor Fitzgerald L.P. has raised new questions about racism and homophobia in the securities industry.

The charges by former Cantor Fitzgerald trainee Mark Anderson gained added weight thanks to a video shot by members of the brokerage's management - a video that has been aired nationally on television tabloid shows.

The video depicts two Cantor Fitzgerald officers apparently ridiculing Asians, African Americans and homosexuals.

In the video, the two officers wear bags over their heads - one showing a blackface man, the other an Asian. The pair prances around Anderson's car, which was re-painted to resemble a police black-and-white and emblazoned with the words "butt pirate" and "rump ranger."

The lawsuit alleges that the video - putatively a "training video" to show how brokers can get gay clients - was shown at the brokerage's biennial sales meeting in Dallas in June 1995, to hundreds of Cantor Fitzgerald employees, including a stunned Anderson.

Cantor Fitzgerald is no backwater firm - it has 2,300 employees and touts itself as the world's largest trader of government bonds.

Anderson, who was later fired from the brokerage, then re-hired, and who then quit, alleged in civil court the video was part of a pattern of behavior at the brokerage.

The brokerage contends that the video was part of a slew of office pranks that Anderson participated in, and often initiated.

But to the lay public, the video - a rare and graphic window to the inside mores and sensibilities of a securities firm - paints a picture of an industry virtually uninhibited in its bias against minorities and gays.

"Certainly, Wall Street is a bastion of straight white men, I don't think anybody would challenge that," said Kelly Straighter, professor at Southwestern University Law School, an expert on gay and lesbian issues and a lawyer who has handled securities law cases.

"Gay people in the industry tend to more closeted than in other industries. I suspect there is a reason for that," he said.

Yet industry leaders interviewed said they would not tolerate the activity displayed in the video, and that it is beyond the pale.

"I damn well better not catch anybody here doing that, or they'll have a short career," said Tom Weinberger, executive vice president and head of brokerage Sutro & Co. Inc.'s investment banking operation, based in West Los Angeles.

"Our general counsel (lawyer) is a woman, we have minority bankers, we have women bankers. We hire on ability, and that's it," Weinberger said.

Cantor Fitzgerald denies that Anderson was the victim of harassment, and states that he was often a perpetrator of the same kind of office pranks he now claims injured him.

In a prepared statement, the brokerage said that while the videotaped episode was "sophomoric and showed poor judgment, it was not intended to be malicious or offensive."

But others said the genteel air prevalent in corporate finance circles, or the smoothness of stockbrokers who deal with the public, is not necessarily found on the trading floors of brokerages.

"Industry-wide, you cannot find a woman who wouldn't say there are things that happen on the trading floor we could live without," said Judy Resnick, chairman and co-founder of the Beverly Hills-based Dabney/Resnick/Imperial LLC, a brokerage. "It's still a boys' business, with some locker-room mentality."

Resnick, however, quickly added that each firm is different.

"When I worked at Drexel (Drexel Burnham Lambert Inc., the now defunct junk-bond brokerage), Warren Trepp and Michael Milken ran the trading floor, and they were both gentlemen, and never raised their voices, or said anything demeaning about women," Resnick said.

One lawyer who has represented women in cases against the industry said that his clients feel the industry is sexist.

"There are glass ceilings, my clients have said," said Michael Blumenfeld, of the Century City-based Fierstein & Sturman.

Blumenfeld said he handled cases of racial discrimination, in which he felt his clients had good evidence of racism.

"But I don't know if that means there is an industry-wide problem, or just some examples of racism," he said.

Some industry officials say racist, sexist or homophobic behavior may be most prevalent on trading floors, because they tend to be boisterous, and out of public view. Indeed, the trading floor at Cantor Fitzgerald has blacked out windows, so that trading information could not be glimpsed by outsiders.

The backroom mentality, combined with the pressures of trading, set the stage for inappropriate activity, said Jeff Rollert, managing director of ALM Advisers Inc., a bond shop in Pasadena.

"Look at any industry where people work under pressure, and are not subject to public scrutiny. You will see behavior like this," Rollert said. "It's the difference between inside people and outside people (who deal with the public)."

There is no hard data on the ethnicity or sex of securities industry employees in local firms. Nationwide, about 15 percent of stockbrokers are female, according to industry statistics.

But for even the casual observer in Los Angeles, there is usually a demarcation between what one sees on the street and what one sees on the brokerage's trading floor - a realm that tends heavily toward white males aged 25-50.

"It probably is still a bastion," Rollert said.

But some in the industry say there is no evidence that the activity depicted in the Cantor video is anything but an aberration.

"I have seen no evidence that financial services are better or worse than other industries," said Brian Kleiner, professor at Cal State Fullerton, and an expert witness on sexual harassment. "That's a hard thing to know."

RELATED ARTICLE: Cantor Fitzgerald Lawsuit Raises Questions on Proper Jurisdiction

Among the issues raised by recent allegations of racial and homophobic harassment at Century City-based Cantor Fitzgerald L.P. is one that centers purely on jurisdiction:

Is the National Association of Securities Dealers Inc. the right body to resolve such disputes?

A former Cantor Fitzgerald employee, Mark Anderson, has filed suit in Los Angeles Superior Court, alleging emotional distress, invasion of privacy, sexual harassment and wrongful termination.

Among other things, Anderson says he was mocked in a video that also ridiculed gays and minorities.

Cantor Fitzgerald denies the allegations and said the video "was not intended to be malicious or offensive."

The brokerage did win an initial ruling that Anderson's case must be heard in NASD arbitration, said Debra Walton-Collings, a spokeswoman for Cantor Fitzgerald.

Determining jurisdiction in the still-pending case could be crucial toward the eventual resolution.

Though largely unknown to the lay public, the Washington, D.C.-based NASD is immensely powerful within the industry - indeed, it compels all industry employees into NASD-operated binding arbitrations, in job-related disputes.

Financed by industry, the NASD has been sanctioned by the Securities and Exchange Commission to regulate and monitor brokers and brokerages.

Industry employees must sign an NASD "U-4" form to become licensed - and in so doing, agree to consent to binding arbitration in job matters.

Thus, brokerage industry employees, including those alleging harassment or discrimination, generally do not have recourse to the civil courts and the jury system.

"The U.S. Supreme Court has upheld that these employment contracts are binding," said Michael Blumenfeld, attorney with Century City-based Fierstein & Sturman, who has handled cases before the NASD.

Like many other plaintiff lawyers, Blumenfeld is dubious about the arrangement.

"I can think of no other major industry in which employees cannot seek redress before a jury. These guys (brokers and traders) may wear Armani suits and drive Porsches, but when it comes to employee rights, they have less rights than the counter workers at McDonald's," he said.

The NASD arbitration was primarily designed to handle financial disputes between customers and brokerages, and, to a lesser extent, employee contract disputes between employees and brokerages.

Even defenders of the system acknowledge it was not set up with harassment charges in mind.

Despite court rulings affirming the right of the NASD to compel arbitration in racial or sexual discrimination cases, the NASD is reviewing whether arbitration is the proper course, said Linda Feinberg, executive vice president for dispute resolution at the NASD.

"Our board (of directors) has asked us to look into this.... We are taking a very serious and broad look at the whole issue," said Feinberg.

However, she added that, "As a legal and policy matter what we provide in our forum (arbitrations) is not unconstitutional."

But Blumenfeld is not satisfied that the NASD is the right forum to hear these suits heard. "These are serious enough claims that a broker should have a right to be heard before a jury," he said.

Lawyers for securities firms defend the NASD arbitration system, even for harassment and discrimination charges.

"The NASD arbitration process is a good place to resolve such disputes, because the arbitrators understand the workings of the brokerage community," said Samuel "Skip" Keesal, of Long Beach-based Keesal, Young & Logan, perhaps the nation's premier firm in arbitration. "The arbitrators are just as capable as a lay jury in adjudicating these things."