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A federal grand jury indicted prominent investment banker Nathan A. Chapman Jr., in June, charging that among other things, he schemed to defraud the State Retirement & Pension System of Maryland, shareholders in his companies and the public.

According to a release issued by the United States Attorney, District of Maryland, the 39-count indictment charges the former BE 100s CEO with mail fraud, wire fraud, securities fraud and conspiracy. That same day, the U.S. Securities and Exchange Commission filed securities fraud charges against Chapman, three of his associates and three of his companies. The, civil lawsuit seeks antifraud injunctions, civil money penalties, disgorgement of ill-gotten gains (including salaries, bonuses and commissions) and permanent bars from service as an officer or director of a public company.

Chapman, 45, had the career every member of a new wave of black investment professionals in the '80s dreamt about. After only three years at Alex. Brown & Sons, he left the respected Baltimore based firm in 1986 and opened his own shop before his 30th birthday. In 1996, he bought the Minority Equity Trust, which manages about $175 million of the Maryland pension system. Then in , Chapman merged his broker-dealer firm, The Chapman Co., and his investment advisor company, Chapman Capital Management, to form eChapman, Inc. Chapman Co. was consistently ranked on the BE INVESTMENT BANKS list dating from 1991 until it was dropped in when BE research noted that the company was lax in filing its quarterly reports with the SEC.

On June 15, , Chapman launched an initial public offering of eChapman.com at $13 a share. But on June 20, its first day on the market, eChapman never traded at higher than $9 per share. Both cases against Chapman allege that in an effort to rescue his failing IPO, he compelled money manager Alan Bond to use state money to buy more than $4.5 million of eChapman at the higher rate, even when it was as low as $7 per share. Prosecutors estimate the pension lost approximately $5 million. Bond was later convicted of cheating clients at his money management firm out of millions of dollars.

"[Chapman] had started the IPO process at the end of [19]99, but had to keep delaying it and reducing the size of it because the interest wasn't that good," explains SEC assistant district administrator David S. Horowitz. "Part of the reason was the market sort of peaked and started to slide, and that has continued until recently." Chapman was fired by the fund last year when its trustees learned about a federal investigation into use of the pension to buy eChapman stock.

Chapman is also alleged to have used more than $400,000 of corporate money for personal use, including gifts for women with whom he is accused of being romantically linked. One of the women, Debra B. Humphries, was a member of the pension system's board of trustees, and allegedly received about $46,000 in gifts from Chapman. Another woman, prosecutors charge, received assistance buying a Nissan Altima and a BMW motorcycle, as well as a $4,000 monthly allowance.

The FBI, the SEC, the IRS and the United States Attorney's Office have teamed up on the investigation and U.S. Attorney Thomas DiBagio has vowed to be as aggressive with Chapman as he would a drug dealer or murderer. If convicted on the SEC charges, Chapman could face fines of up to $120,000 for each penalty, according to Horowitz. Conviction on the criminal charges filed by the state of Maryland could mean up to five years of imprisonment and a $250,000 fine for each count. A securities fraud count for filing false documents with the SEC carries up to 10 years and a $1 million fine. He also could be made to pay restitution to the pension system and other clients.