Updated from 1:11 p.m. EST

Securities regulators charged Peter Kellogg, a founding member of the specialist firm

Spear, Leeds & Kellogg

, with making fraudulent stock trades in a medical-equipment company.

In an administrative complaint filed Wednesday, the NASD alleges that Kellogg engineered a series of trades involving millions of shares of

Thoratec

(THOR) - Get Report

through several personal brokerage accounts.

The trades, which involved buy and sell orders from four different accounts, were intended to create "the false appearance of market activity in the stock," according to the complaint. The trades were made over a two-week period in August 2001.

Goldman Sachs

(GS) - Get Report

acquired Spear, Leeds in September 2000. Since the deal, Kellogg has served as nonsalaried adviser to the specialist firm, a Goldman Sachs spokesman said.

Kellogg's attorney, Lawrence Iason, said Kellogg's trades were "lawful and appropriate."

Regulators say Kellogg orchestrated the fraudulent trades in order to enable a company, which owned shares of Thoratec, to recognize a greater-than-normal profit on the stock. The company was owned by Kellogg's children.

Corporate filings report that Kellogg owns 3.7 million shares of California-based Thoratec, or 6.7% of its outstanding stock. Thoratec manufactures cardiac and other heart-related health care products.