Cruttenden-Roth Split Becomes Acrimonious

A private spat between two of Orange County’s best-known investment advisors turned public this week when Byron Roth, chairman of Newport Beach-based Cruttenden Roth, accused his partner and former boss of stealing clients and employees for a new Internet venture.

In a lawsuit filed Thursday in Orange County Superior Court, Cruttenden Roth and Irvine-based Fidelity National Financial--which owns an 18% stake in the investment banker--accused the firm’s founder, Walter Cruttenden III, of fraud, breach of contract and breach of fiduciary duty.

Cruttenden, who resigned as chairman of Cruttenden Roth last fall but retains about a 13% stake, declined to comment Friday. A spokesman denied all of the suit’s allegations.

“The lawsuit is baseless,” said Jim Heinzman, a spokesman for Cruttenden. “Instead of blaming someone else for their problems, Cruttenden Roth should concentrate on their own business.”

The suit pits two well-regarded Orange County business leaders--whose names have become synonymous with Orange County’s biggest investment banker--against one another in a battle reminiscent of the high-profile breakup of divorce attorneys Leonard Jacoby and Steven Meyers.

“I love them both,” said Nick Yocca, a prominent Newport Beach attorney who knows both Cruttenden and Roth. “I’m not taking sides. I hope, for the benefit of Orange County, there is a resolution so that both can prosper.”

The suit alleges that Walter Cruttenden laid the plans for his Internet-based underwriting firm, E*Offering, while he was still chairman of the Newport Beach-based Cruttenden Roth, even though E*Offering would compete with Cruttenden Roth for business. Both firms specialize in helping small technology companies raise cash through stock offerings.

“It’s unfortunate,” Roth said Friday. “We wish it had not come to this. But this is not personal. It’s business.”

According to the suit, Cruttenden broke an agreement not to compete with Cruttenden Roth and improperly diverted business opportunities and clients to himself and to his new venture.

Specifically, the suit says Cruttenden “usurped” the opportunity to buy stock in one of Cruttenden Roth’s clients, Costa Mesa-based engineering firm Keith Cos. Those stock rights eventually earned Cruttenden up to $3 million, the suit said.

In addition, before Cruttenden resigned from Cruttenden Roth, he released Keith Cos. from an agreement to use Cruttenden Roth as its underwriter for a planned initial public offering. The company, which went public in July, later hired E*Offering instead.

Roth, who owns a 30% stake in Cruttenden Roth and took over as chairman in November, said he was surprised when his former partner announced plans to launch E*Offering just two months after stepping down as head of Cruttenden Roth. At the time, Cruttenden said he was intending to start a venture capital firm that would invest in start-ups.

The suit, which seeks unspecified monetary damages, does not name E*Offering, which is co-owned by the Internet stock brokerage E*Trade.

As partners, Cruttenden and Roth had always displayed dramatically different business and personal styles, business associates say. Roth, who grew up on an Iowa cattle farm, is known as aggressive and hard-charging. The more laid-back Cruttenden comes from a well-to-do family of investment bankers, beginning with his grandfather who founded the company that eventually became Cruttenden Roth.

Roth joined Cruttenden Roth in 1992 and become chief executive in 1997.

Times staff writer Edmund Sanders can be reached at edmund.sanders@latimes.com.