Online Broker Datek May Buy Out Principal Shareholders

Online broker Datek Online, in a bid to step away from its past problems, plans to buy back stock from its two majority shareholders, according to The New York Times.

The newspaper reported in its Saturday editions that Datek will raise $500 million to buy back stakes from Jeffrey Citron, its former CEO, and Sheldon Maschler, a former trader. The two own a combined 52% of the company.

Such a move could make it easier for Datek to ultimately sell shares in a public offering. The company has been thwarted in previous efforts to do so because of its troubled past, which has even scared away private investors.

The Times noted that the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission are still looking into Datek and its former daytrading unit, which was sold in 1998. Datek Online isn't the focus of the investigations, the newspaper said, quoting people close to the investigations.

Edison, N.J.-based Datek told the Times, "We have entered into an agreement with the principal shareholders to seek to repurchase a substantial portion of their shares." Datek officials couldn't be reached for comment Saturday.

Citron and Maschler played huge roles in making Datek a success. But both were also linked to the problems at the company. Those problems included an investigation into whether Datek took part in a money-laundering operation and questions about offshore transactions and illegal trading practices at the former daytrading unit, the Times reported. Citron left the company last year, and Maschler departed in 1996.

But even more recently, Datek has again run into problems. Last year, the company was fined by the SEC for using customer money to fund its own operations. The company settled the charges without denying or admitting the allegations.

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