Wells Investment Securities, president, fined in rewards scandal.

The National Association of Securities Dealers has fined Wells Investment Securities, the nation's largest real estate trust, and suspended its president from his principal capacity for allegedly rewarding investment representatives with lavish vacation-like conferences--all on his tab.

Norcross, Ga.-based Wells was fined $150,000 and its president, Leo Wells, 59, was suspended from acting in a principal capacity for one year.

A Wells spokesman could not be reached for comment.

In a news release issued Monday, NASD claimed that Wells footed the bill for two annual conferences in Scottsdale, Adz. and Amelia Island, Fla., in which broker/ dealer representatives were treated like resort vacationers. NASD rules forbid REIT sponsors from rewarding broker/dealer representatives with non-cash rewards, including entertainment and gifts.

"These practices create point-of-sale incentives that may undermine a representative's ability to objectively recommend suitable investments to customers," NASD officials said in the statement. "These payments directly from the REIT sponsor also could interfere with the ability of the representatives' own firms to supervise their sales activities."

The conferences, held in 2001 and 2002, were represented to NASD by Wells as "strictly educational." But according to the NASD release: "... they actually constituted lavish affairs that did not meet the standards of NASD rules."

According to NASD officials, conference events included a Friday night "sock hop," a "beach bash" and an elaborate dinner at a Civil War fort. The evening featured costumed re-enactment "soldiers," fireworks, fife and drum players, skydivers and cannon fire.

NASD officials said attendees were allowed to bring guests, whose food, transportation, lodging and golf fees were paid for by Wells. Indeed, the officials added, attendees actually received less than 13 hours of sales training and education.

Mary Schapiro, vice chairman of NASD, said the strict regulations were designed to protect customers.

"Our non-cash compensation rules help ensure that members and their representatives make recommendations that are in the best interest of their customers," she said. "This case makes clear that NASD will not tolerate any payment of non-cash compensation that runs afoul of those rules."

The Wells empire has always been unconventional in its practices, sometimes just by adhering to moralist tradition.

Meetings at company headquarters usually begin with a prayer. The company states its goal is "to glorify God and care for people."

But Wells Chief of Staff Randy Fretz told the Atlanta Business Chronicle last year that company employees was not beholden to a religious dogma.

"In general, companies don't acknowledge that employees have a spiritual side of life, and Wells believes that is an important part of who we are," Wells said. "If you are going to create an environment in which people are encouraged to excel and prosper, then there needs to be room for personal growth."

Nonetheless, the emphasis on morality can appear stifling. Declarations of atheism, casual dress and beards and mustaches can result in termination.

However, the Chronicle last year rated Wells the No. 12 "A+" employer in the area.

Some analysts discourage investing in Wells trusts, despite the company's offer of 7 percent returns. Wells' fees are much higher than average trusts and although they claim their investors' money is safer due to their all-cash purchases, investors cannot sell the fixed-price shares on the open market.