State Closes Student Firm; Probes Charges of Fraud

Massachusetts Secretary of State Paul H. Guzzi '64 yesterday ordered Bill Dillon and Co., an investment firm run by Harvard undergraduates, to halt all further business in the Commonwealth pending possible charges of fraud and other business irregularities.

Guzzi charges William P. Dillon '79, founder and president of the company, with violating the anti-fraud provision of the Massachusetts Uniform Security Act by preparing and signing letters from customers authorizing the purchase or sale of securities without the knowledge of the customers.

Described in newspaper accounts as "the youngest stockbroker in the country" when he started the company in 1976, Dillon has offered advice on investments to scores of Harvard students--and even a few faculty members--from his office above Brigham's Ice Cream on Mass. Ave.

The order against Dillon, an economics major who is presently on a leave of absence from Harvard, also alleges that he represented his firm as an independent business and himself as a broker-dealer when in reality his firm was a branch office of the Securities Investment Services Corp. (SIS) of Boston and Dillon an agent of that corporation. He was charged, further, with depositing payments in a Dillon Company bank account over which he alone had control.

Dillon, who says he has fully cooperated with the investigation, denied the charges that he wrote letters for customers without their permission and violated state regulations by depositing payments in the Dillon Co., bank account.

"Whatever errors we made were done inadvertantly," Dillon said. "The business was growing too fast. The people working with me were taking more initiative than they should have."

Guzzi also charged Robert Tillman '78, Carl Kaufman '77 and Brian Desmond, a Boston-area resident, all former Dillon employees, with transacting business from Dillon's office without being registered as agents with the Massachusetts Securities Division of the Secretary of State's Office.

A spokesman for the Secretary of State's Office said yesterday the Massachusetts Securities Division will continue the investigation of Dillon to determine the extent to which he allegedly misappropriated funds and to seek restitution of money owned clients, if necessary.

If the order is sustained at a hearing to be held at Dillon's request, he could face either suspension or permanent revocation of his license. Depending on the outcome of further investigation, the Attorney General's office might press criminal charges against Dillon, the spokesman said.

Al Lewis '78, former research director of Dillon and Co., said last night he will serve the firm's top 50 or so clients when be becomes an agent for SIS. Dillon's other clients will be handled by various Boston brokerage houses.

Regarding the allegations of representing the firm as a separate business entity instead of a branch office, Dillon said that at times people had the impression the firm was an independent brokerage company, "but we didn't hold out a shingle saying we were."

Tillman said last night he was surprised by the charges but expected they would be dropped after further investigation. He denied he ever actually served as a broker for Dillon, although he worked there for several months. Kaufman and Desmond could not be reached for comment.

David G. Hartman, head tutor of the Economics Department and an investor with Dillon, said last night "nothing has ever happened to me to raise any questions at all. Bill has always been very business like."