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Ex-New York Giant, Once-Jailed Broker Tangle Over Payments, Trades

Stock 'flipping' is part of a dispute involving former NFL player Jim Burt and ex-NYSE floor trader Michael Frayler.

Former

New York Giants

all-pro lineman Jim Burt and a former floor broker convicted of illegal trading at the

New York Stock Exchange

are embroiled in a bitter fight over payments for a seat at the exchange and for so-called "flipping" of stocks there.

The former floor trader, Michael Frayler, claims Burt owes him $50,000 related to a seat the two men once owned together on the exchange, and for trades Frayler carried out regularly for Burt. Frayler also says Burt owes him another $250,000 in lost profits from leasing the seat to others.

Burt, meanwhile, claims he owes Frayler nothing. He said Frayler is trying to extort money from him by threatening to draw him into the ongoing scandal over illegal trading on the floor of the exchange. Frayler was a player in that scandal and served a month in federal prison last year after pleading guilty to illegal trading on the exchange floor.

Both men say they've considered taking their dispute to the U.S. attorney's office in Manhattan, but for different reasons.

"He's trying to extort money from me," said Burt, who was a defensive tackle for the Giants from 1981 to 1988 and won Super Bowl rings with the Giants and the

San Francisco 49ers

. "I have a name around here ...

but I don't even know how to defend myself."

Frayler says that's hogwash.

"Jim Burt is not one of these little guys. He's not going to be threatened," Frayler said. "All I'm asking is the $50,000 owed to me. I'm not stupid. I didn't threaten anyone."


Burt said Frayler demanded the money in two letters in recent weeks and threatened to embarrass him in the media, the NYSE and in front of prosecutors if he didn't pay.

Frayler acknowledged saying that he'd go to the U.S. attorney. But he insists he meant only to retrieve records that federal prosecutors gathered during the investigation of NYSE floor trading, which he says would prove that Burt owes him money.

Burt says his attorney has advised him to contact the U.S. attorney and report Frayler's recent demands for money as extortion. Burt says he has refrained from doing that out of concern that it could send Frayler back to prison, which Burt says he doesn't want.

The disagreement between Frayler and Burt is the latest element to emerge from the floor-trading scandal that the NYSE thought was put to rest a year ago after the

Big Board

reached a

civil settlement with the

Securities and Exchange Commission

concerning its oversight involvement with the illegal trading.

But the matter hasn't gone away. One former floor broker sued the NYSE, claiming the exchange and its top officials not only knew of the floor trading for profit, but actually encouraged the practice because it also boosted Big Board profits.

A federal judge dismissed the lawsuit by that broker, John D'Alessio, who now is appealing that decision. He also is continuing to press the issue in federal court in Manhattan, this time while fighting SEC charges that he violated securities laws by flipping shares for self-profit on the exchange floor.

Frayler also had sued the exchange, but his case was dismissed late last year.

Both the scandal over trading at the NYSE and part of the current dispute between Frayler and Burt involved the practice of flipping stocks.

The term flipping describes a maneuver in which floor brokers carry out a series of rapid trades on a security at prices in the interval between the price bid by purchasers and the price sought by sellers, taking profits in the process. The purpose is to make money off the spread in stock prices, not to actually purchase and hold stock.

The SEC, in August 1998, ruled flipping was illegal when the brokers took part of the profits for themselves. Prior to that, there was considerable disagreement among floor traders and securities regulators about whether such profit-taking was legal.

Burt was never charged with wrongdoing in the trading scandal.

Frayler, who was arrested along with seven other NYSE floor brokers in February 1998 and charged with illegally sharing profits on the exchange floor, pleaded guilty to felony charges and was jailed.

The flipping arrangement between Burt and Frayler is described in an April 1997 memo. That memo (below), pertaining to a second seat that Frayler's company,

Touchdown Securities,

once leased at the NYSE, makes reference to "3,000 shares per day that you

Frayler and Touchdown brokers flip for James P. Burt."


Frayler said he was leasing the first seat from Burt, and had switched it into Burt's name at his request.

Frayler said he had switched the first seat into Burt's name at Burt's request, and was leasing it from Burt. Frayler was leasing the second seat on the exchange from another floor broker, William Higgins.

Although the memo describing the flipping arrangement between Frayler and Burt was signed by Higgins, Higgins said he couldn't recall the document. He said the memo probably was drafted by his attorney, New York lawyer Sheldon Goldstein.

Goldstein refused to comment on the memo.

Burt did not sign the memo, and his name is not listed as a signatory on it. But he acknowledged that Frayler did trade stock for him. "He traded for me," Burt said. "He didn't get anything in return."

Burt, however, said he could not recall if Frayler traded 3,000 shares for him each day, as the memo describes. "I can't say yes or no to that. I don't even know," Burt said. "Flipping, is that trading?"

Burt said a broker he used in the trading arrangement with Frayler could better-answer questions about specifics of the arrangement. But that broker did not respond to several requests for an interview.

Burt said he met Frayler at the

University of Miami

, where Burt

played from 1977 to 1980.

Burt went on to play for the New York Giants, where he helped start a football ritual when he and fellow Giants player Harry Carson doused then-Giants head coach Bill Parcells with a large cooler of Gatorade on the sidelines, according to Gatorade.

Years later, it was Frayler who arranged the purchase of a seat on the NYSE for Burt.

Frayler, who is now on probation, said that while he did flip stocks for personal profit in some circumstances, he insists he shared no part of the profits from the flipping he did for Burt. He also claims he properly recorded, or "clocked," all of the trades he did for Burt, which he said were always purchases and sales of shares in

AT&T

(T) - Get Free Report

.

Burt agrees Frayler did not share in the profits on trades he did for Burt. Burt also says he didn't pay Frayler for the trades. Frayler says he expected a nominal commission based on the number of shares he traded, but that Burt has not paid him.

Douglas Jensen, an assistant U.S. attorney who prosecuted the criminal cases brought against the NYSE floor brokers involved in such flipping, declined to comment on the memo describing the arrangement between Frayler and Burt.

But one New York securities lawyer with experience in cases involving the Stock Exchange, Bill Singer, said the memo's use of the words flip and flipping raises questions.

Although the arrangement between Frayler and Burt may have been entirely legal, Singer said the word flipping generally has a pejorative connotation at the NYSE.

"What do you mean, flip? Lawyers are always afraid to use colloquialisms," Singer said. "Can you flip and not be doing something wrong? I'm not sure there is a way to use flip in a nonpejorative fashion."

Frayler insists that there is. And he vows to keep trying to clear his name over trading he did that he claims was legal. He also still hopes to get back money he says Burt owes him.

Burt doesn't see it that way.

"There's no way I'm going to give him

the money. Every time someone comes and threatens you with something, you're going to give them money?" Burt asked. "I just want him to let it go."