ON A CHILLY Saturday evening in early December, Monica L. Coleman and John G. Craten threw a coming-out bash for their new financial services company.

And what a party.

Guests were serenaded by strolling violinists and handed champagne as they entered Coleman Craten LLC's lavishly renovated headquarters on a red carpet.

Inside, they feasted on jumbo shrimp, caviar, oysters, roast beef and a sumptuous array of desserts. The brassy sound of big band music blared in the background as flappers danced, summoning images of the Roaring Twenties.

Amid the opulence stood the new firm's brokers, many of them forcing smiles while seething because they hadn't been paid in weeks. They knew what the guests did not -- the gala was a charade and things already were falling apart at Coleman Craten, which had been operating quietly in a start-up mode since the previous February.

Today, less than five months after the party that was intended to make a splash with wealthy investors in Baltimore, Coleman Craten's plan to provide financial services in a stately downtown social club appears on the verge of collapse, and the Maryland securities division has launched an investigation.

By all accounts, the driving force behind Coleman Craten is Monica Coleman. She is described as a hard-working, average broker, according to interviews with more than two dozen former and current employees and former associates. They say she is smart, charming and energetic, known for her generosity to the Gilman School, the Maryland Science Center and Harbor Hospital.

But associates also say Coleman has harbored a deep desire not only to be recognized for her wealth, but also to be respected as a player among Baltimore's social elite.

To build her new businesses, she promised brokers huge signing bonuses and generous salaries, and guaranteed investors in the firm no-risk returns as high as 32 percent in as little as three months. Those promises were not kept, according to lawsuits.

Court records and interviews show that:

Seven lawsuits have been filed against the company, alleging, among other things, fraud. Collectively, plaintiffs say they are owed more than $2.3 million.

Every broker and investment adviser -- seven in all -- hired by the company before the Dec. 5 party has departed, as has co-founder John Craten, who says he was deceived by Coleman, an allegation she denies. Other employees, ranging from the club manager to the in-house counsel, also have left, leaving a handful on board.

The company faces possible eviction from its city-owned home at 7 E. Redwood St. after failing to come up with a portion of a $650,000 security deposit required by the city and falling a month behind in rent payments. "That's the direction we're moving in," said M. J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development agency.

The Florida firm that was executing trades for Coleman Craten severed relations late last month after news of the lawsuits surfaced.

A Tampa, Fla., brokerage backed out of a tentative merger with Coleman Craten hours after it was announced.

"It's a disaster," said a former employee.

People who worked for the firm said they did not want to be identified because they fear lawsuits and retribution.

"There are a lot of friendships that have crumbled because of this scandal," added another former employee.

"This has devastated anyone, regardless of how innocent they are, who had any connection with Coleman Craten," said Alan J. Hoff, an attorney representing Randal Jenkins, a broker who is suing for more than $500,000 he says he is owed.

Monica Coleman also faces foreclosure on her waterfront Pasadena home. According to a lawsuit filed by investors in the firm, Coleman had told them the property had no liens and could be mortgaged as a source of funding.

Coleman and Craten declined several requests for interviews. The Sun declined an offer from Coleman's lawyer, David King, that it submit written questions that Coleman might answer.

In a statement, Coleman said that "at no time was any intentional wrongdoing or fraud committed in our dealings with anyone. We continue to attempt to resolve the current financial difficulties and hope to set the company back on firm footing."

King said the firm remains in business.

"She intends to continue to operate the financial club," he said.

Craten declined to speak with reporters because of pending litigation. "When all the evidence is out, we'll be satisfied with what that shows," said Herbert Better, Craten's lawyer.

The sudden silence of Coleman and Craten follows a blitz for business by the company that began with December's party and continued late into April with an advertising campaign.

Coleman Craten LLC was pitching a bold new concept for investing: Clients would have access to full-service brokers and financial planners. But they could also lounge in overstuffed leather chairs in the Elizabethan-style library, filled with thousands of annual reports and prospectuses; check stock quotes at computer keyboards; hold private meetings in plush conference rooms; and talk investments at the mezzanine bar and restaurant, or over a game of pool.

When Coleman Craten started in February 1998, it operated in smaller quarters downtown, but when Monica Coleman saw the city-owned building at 7 E. Redwood St., the idea for a financial club took hold.

"Baltimore is a very clubby town," Coleman told The Sun last year. "We have the Center Club, the Marketing Club, the Maryland Club; there's a club for everything. So we believe there's a need, and that Baltimore can sustain a financial club, too."

"This was going to be the greatest thing since sliced bread," a former employee said. "It would be an opportunity to pull people in off the street, drink a beer, play pool and do research. At first I thought, ' What the hell is she talking about? ' When I visualized it, it sounded good. What broker wouldn't want to pull people in off the street?"

The company spared little expense in realizing its vision. After reaching a lease agreement with the Baltimore Development Corp. requiring annual rent of $456,510, Coleman Craten ordered more than $1 million in improvements to renovate the lobby, mezzanine, second, third, fourth and fifth floors. There were marble floors, crown molding and mahogany table tops, and Baltimore's financial industry, conservative by nature, took note.

"This thing all seemed too grand to begin with," said Edwin R. Boyer, principal with Asset Strategy Consultants Inc., a Baltimore-based investment consulting firm. "It was too much fluff up front."

Behind Coleman Craten's doors, employees weren't getting paid. Tempers became even shorter after the Dec. 5 party when paychecks bounced as Christmas approached. One employee threatened to throw a computer out the window; others said they were going to quit.

"I don't care what you say, I want my money," an employee told Coleman and Craten.

At times Coleman defused the tension, reassuring employees that the company was backed by a $10 million trust fund. But employees and attorneys say they have been unable to verify the fund's existence.

Coleman and Craten also held meetings intended to allay concerns and convince employees that money was on the way. There was talk of potential outside investors who might come through with capital; there were always excuses for why checks weren't clearing.

At one meeting, Coleman brought in a lawyer from Piper & Marbury to explain the cash crunch.

At a session in a basement conference room next to the bank vault, Coleman stood at a lectern and addressed about two dozen employees seated on folding chairs.

"Monica had tears in her eyes," a former employee recalled. "She wanted everyone to know it was a financial blip, that someone had written a check for $300,000 that bounced."

" 'What am I to do?' " Coleman said, according to another employee. " 'These are tough times. Are you with me, or are you not with me?' "

At another meeting, employees lashed out at Craten, who said he was not to blame for the problems. " 'I'm in this with the rest of you guys,' " he said, according to a source. " 'I feel bad, I wish I could help, but I didn't put any money into this firm.' "

In these meetings, employees were being asked to stake their futures on two very different people.

Craten, 52, had a reputation as a skilled financial planner. He joined Legg Mason in 1985 and became widely respected for producing customized financial and estate plans.

"John just knew financial planning inside and out," said a colleague. With a comprehensive approach and meticulous investment plans, he attracted wealthy clients.

But others saw him a bit differently. About four years ago, he was passed over for a promotion that would have elevated his status and responsibilities at Legg. And colleagues say he didn't exhibit the same energy in his work as Coleman.

Coleman, 42, was driven, colleagues say. Seven years after graduating from Brooklyn Park Senior High School, she spent two years at Catonsville Community college before earning a degree from the Johns Hopkins University in 1984. After a six-month stint at Stuart James Co., a small brokerage firm, she joined Legg Mason in 1986.

Coleman, who worked her way through the University of Maryland's law school at night, was not a heavy hitter at Legg. Her office was next to a noisy conference room where brokers were trained, hardly a choice location.

But Coleman lives comfortably. She and her husband, Richard, a research assistant in the physiology department at the University of Maryland in Baltimore, and their young son reside in a sprawling house in Pasadena with an in-ground pool. Coleman bought the house in February 1994 for $665,000, according to land records, and then transformed it from a New England-style house to a red brick Georgian Colonial.

Parties were important to Coleman. She reserved skyboxes at Oriole Park at Camden Yards to entertain friends, and she once held a birthday party at the Maryland Science Center for her son.

Mark Hamill, who played Luke Skywalker in "Star Wars," greeted guests, a band played music, the IMAX theater showed films and actors were dressed as "Star Wars" characters. "It was something that would blow your mind," one guest said.

Coleman was also known for her philanthropy, and some said she used it to flaunt her wealth. Several years ago, she helped organize a golf fund-raiser for Harbor Hospital. When participants asked if they could contribute, she said no.

"How are you going to raise money if nobody is paying?" one participant asked.

"I just wrote a check for $30,000," the person recalled Coleman saying.

Early last year, Legg Mason officials questioned Coleman after hearing rumors that she had given a large sum of money to someone who was telling other people about it. Legg Mason doesn't allow its brokers to borrow from or lend money to clients. Legg Mason was satisfied by assurances from Coleman and her attorney that there had been nothing improper about the gift.

"He is a nice man, he needed help," Coleman told the Legg senior managers.

Coleman and Craten had worked together for about a decade at Legg. When they formed their own firm, taking with them some of their clients from Legg, it wasn't difficult to recruit people. Coleman's salesmanship and Craten's solid reputation made it look like a winning proposition.

"We had faith in John," said one ex-employee.

Another former employee was struck by Coleman, saying, "She's a dynamic and kind of charismatic person. She really talks a good story."

Coleman flattered the people she recruited. Her parties, philanthropy and apparent wealth gave her cachet. "It was a guaranteed contract," a third former employee said. "Why wouldn't I believe her? The credibility factor was there."

Soon after Coleman Craten moved into 7 E. Redwood, a building that had once served as Legg's home, it became clear that Monica Coleman's world was not what it seemed.

A blizzard of lawsuits started in January. The first was filed by a New York law firm, which said Coleman Craten owed it about $93,000 in legal bills.

Two more followed in March. The Aziz family in Howard County accused Coleman Craten of running a Ponzi scheme, and wanted its $765,000 investment returned with $640,000 in promised interest. Astrid Nielsen Lin, in a similar suit, demanded her $100,000 investment and $203,000 in promised interest.

The same month, trustees for a retirement account that holds the deed to Coleman's house began foreclosure proceedings, saying Coleman owed $650,000 plus $519,999 in interest as of Feb. 24, 1999.

In April, Charles Schwab & Co. accused Coleman Craten in a lawsuit of drawing funds against a bad check. The discount broker seeks $431,000. Constantine Construction sued Coleman Craten, seeking $312,000 for unpaid construction costs. And Jenkins, one of the brokers who left, accused Coleman Craten of reneging on promises to pay him $540,000.

Corporate Securities Group of Boca Raton, Fla., which licensed Coleman Craten's brokers, stopped executing trades because of concerns raised by the lawsuits. The company said it would continue to execute trades for Coleman Craten clients who call it directly.

Clients' money in brokerage accounts, which is handled by CSG, is secure, said Joel E. Marks, vice chairman of the firm. "To the extent that the customers had assets in their CSG brokerage accounts, those assets are intact and protected. They definitely are."

Marks said Coleman Craten "did a limited amount of business with us."

Craten also has left, with his lawyer saying two checks signed by Monica Coleman had bounced.

Baltimore has obtained a $61,620 judgment for late rent and related fees. The city also won a judgment of possession -- a precursor to eviction.

While former employees, regulators and the Baltimore Development Corp. try to sort out Coleman Craten and its assets, investors wonder what's happening.

One person whose mother's retirement savings are invested with Coleman Craten found the Aziz suit frighteningly familiar. For two weeks, she said, she has attempted to get answers from Coleman without much success.

The daughter likes Coleman. "She was always very, very nice. She made you trust her."

But she's also concerned. "We want to know what's going on with my mother's money," she said.

Pub Date: 5/02/99