The Whiz Kid Who Wasn't

By Janice Castro

Even among the legions of successful young investors operating on Wall Street in the headiest days of the bull market, David Bloom, 23, stood out as a precocious hotshot. Armed with little more than a good line and glib self- assurance, the son of a Manhattan pizza-restaurant owner persuaded scores of clients to give him some $10 million so that he could play the stock market on their behalf. For some time, Bloom's clients were satisfied: quarterly reports for their accounts showed savvy trades and fat profits.

What no one realized was that, according to the Securities and Exchange Commission, the financial statements, the fat profits and the entire enterprise were part of an elaborate fiction. Instead of buying stocks for his customers, the SEC charged last week, Bloom used the $10 million to support a lavish life-style. He bought about $5 million worth of paintings, an $830,000 Manhattan condominium and a $2 million vacation house in posh East Hampton, Long Island. Bloom, who also owned a Mercedes-Benz and an Aston Martin convertible, went skiing in St. Moritz, paid up to $500 for a bottle of wine and bought a $195,000 diamond-and-platinum necklace that he said he intended to give to "the woman I marry." Says a former girlfriend: "David Bloom was obsessed with possessions."

Now those possessions are gone. Without admitting guilt, Bloom agreed to an SEC settlement in which he surrendered $8 million worth of paintings, real estate and other assets. Proceeds from their sale will be split among the investors who gave him money. Two days after the settlement, federal prosecutors in Manhattan charged him with mail fraud. If convicted, he could face up to five years in prison.

Bloom's lawyer, Peter Morrison, did not deny the charges, but offered a novel defense. Had Bloom actually put his customers' money into stocks, suggested Morrison, they might be getting less of it back because of the Oct. 19 market crash. So putting investors' money into art and real estate may have been a wise strategy.

Bloom was in fact a shrewd art investor. He bought paintings by Edward Hopper, John Singer Sargent, Mary Cassatt and Willem de Kooning. Among the most expensive: Thomas Wilmer Dewing's Lady in White (worth $750,000) and John White Alexander's Alethea ($660,000). Says Loraine Pack-Liebmann, a Manhattan art dealer: "The kid did well. Many of the works he has bought have appreciated substantially in value." Example: Severin Roesen's Vase of Flowers in Footed Glass Bowl with Bird's Nest, purchased for $175,000, may now be worth $250,000, a potential profit of 43%.

^ Had Bloom kept a lower profile, his scheme might not have come to light for a long time. But he was not satisfied with having it all; he wanted people to know that he had it. One investor says Bloom bragged that his other clients included the Sultan of Brunei and the Bass brothers of Fort Worth. Bloom loved to play the role of philanthropist. To his alma mater, Duke University, he sent two gifts of $10,000 each, which were to be the first installments on a $1 million pledge. He also gave the school two paintings, valued at $58,500. SEC officials said they first became curious about Bloom, who never registered with the agency as an investment manager, after reading several articles about him. The New York Times Magazine included him in a story about art collectors and showed a picture of his richly appointed, art-filled apartment.

Growing up in Manhattan, Bloom attended Trinity, a prestigious private school, where he is remembered vaguely as a quiet, "reliable" boy. He went to Duke in 1982 and formed an investment club with another freshman. The two raised $8,000 from about 20 fellow students to buy stocks. They turned a profit of about $2,500, and Bloom's reputation as a whiz kid was born.

In 1986, after earning a bachelor's degree in art history, Bloom began to play the role of a big-time investment adviser back home in New York City. He set up a corporation called Greater Sutton Investors Group, with luxurious 35th-floor offices just off Fifth Avenue. As word spread among family friends and acquaintances of his prowess as a trader, he pulled in most of the $10 million within two years. He invented detailed records of trading activity on behalf of his clients. Everyone got good news. One client's statement, for example, reported that Bloom had bought shares in Apple Computer at 40 and sold them at 52 1/2. On the few occasions when a client wanted to cash out, he simply dipped into another investor's account for the funds.

Bloom's friends cannot explain why he misused his obvious talents. Says Jake Phelps, director of the Duke University Union: "The really sad thing is David could have made that money honestly. I'd like to find out what was going on in his head." One clue may be a quotation he chose to put next to his high school yearbook picture. It was from F. Scott Fitzgerald's The Rich Boy: "We are all queer fish, queerer behind our faces and voices than we want anyone to know or that we know ourselves."

With reporting by Janice C. Simpson/New York