Investors sue accountant over concerns about funds

From: Cleveland Plain Dealer, OH
Nov. 22, 2002

Karen Farkas
Plain Dealer Reporter

Akron- For hundreds of audiologists around the country, Bruce Baskin was more than the man who helped them buy hearing aids and other equipment at reduced prices. He was also the man they entrusted with thousands of dollars to invest.

But now the trust - and perhaps millions of dollars - are gone, and Baskin, an accountant, is suspected of taking the money for himself.

How much is gone, and where it went, are now the subject of speculation by former clients of the Bath Township man who retired in July.

About the same time, Baskin threw out a tantalizing hint, according to a lawsuit filed in U.S. District Court in Akron by the investment firm of Merrill Lynch. He told officials at the firm, where the audiologists' money was invested, that "he would be moving to an undisclosed location in Switzerland, and that he would not be returning to the United States."

At the same time, Baskin, who had sole control of the audiologists' investments, directed that an undetermined amount be transferred out of six funds, leaving $1.1 million.

Merrill Lynch won't say how much was moved. But one North Carolina audiologist who joined nine others in a lawsuit against Baskin says he is out at least $70,000, and he is just one of 400 customers in 47 states.

Baskin, 59, and his wife, Barbara, have moved out of their $270,000 Bath Township ranch home, whose contents - including 50 pieces of art and a large collection of elephants from around the world - are to be auctioned off tomorrow. The purchasing cooperative through which Baskin got the money he invested has been closed, and the contents of its Akron office were auctioned off Monday.

Baskin himself could not be reached for comment, but his lawyer and the auctioneer both say he is still in town. Barbara Baskin is an active volunteer in the community. Bruce Baskin was an unsuccessful candidate for Bath Township trustee in 1997.

A lawsuit was filed Nov. 13 in Summit County Common Pleas Court against Baskin and his companies by 10 audiologists and their companies seeking to freeze the profits from the sale of the business. On Monday, Merrill Lynch filed a complaint in U.S. District Court saying it should not be held liable for any funds due to the audiologists.

Lawyers for the audiologists, Merrill Lynch and Baskin would not comment. Audiologists named in the lawsuit would also not comment. Bill Edwards of the U.S. attorney's office could not confirm or deny an investigation of Baskin.

These are the allegations, according to the two lawsuits:

Baskin, a certified public accountant, formed Audiology Co-op Inc. in November 1983 to provide volume-purchase discounts on hearing aids and related equipment and services. He also formed three related companies, all operating from an office on South Arlington Road in Akron.

According to the co-op agreement, members paid a 10-percent markup on items. If the co-op purchased an item for $100, members would pay $110, with $5.50 going to co-op operational costs and the other $4.50 going into a "profit account," later renamed a "deposit account."

In 1997, the amount from $10 that would go to members' accounts dropped to $2.50 because $2 went to advertising and marketing.

On July 1, a press release announced Baskin's retirement, citing "health issues and other personal considerations." He named his successors and said the company would continue.

About then, Baskin contacted a Merrill Lynch office in Akron, requesting a transfer of funds from the six investment accounts with the firm and a letter of introduction to a Swiss bank. He said his wife would not be with him in Switzerland. Baskin was the only one who had access to the investment accounts and did not tell Merrill Lynch that others owned fractional interests in one or more of them.

Carey Pahel, an audiologist in North Carolina, contacted Merrill Lynch in September, saying he believed Baskin was using co-operative assets for personal use and Pahel wanted the $70,000 balance of his investment.

Merrill Lynch said that as of Nov. 15, the balance was zero in two accounts, for Bruce Baskin and Audiology Marketing Inc. One fund, Bruce Baskin TOD Beneficiaries, had $966,306. TOD means transfer on death. Audiology Co-op Inc. had $36,474, Audiology Buying Corp. had $34,875 and the Audiology Co-op had $49,625.

The lawsuit was filed in Summit County Common Pleas Court after members of the co-op learned the company's office contents were scheduled to be auctioned on Monday.

Judge Ted Schneiderman granted a temporary restraining order placing a hold on all auction proceeds. A preliminary injunction hearing is scheduled for Dec. 6.

Rodney Hoskin, who conducted the auction Monday, said Baskin called him about three weeks ago, saying the business had closed.

© 2002 cleveland.com. All Rights Reserved.