An executive of Bache Group Inc. yesterday accused the Wall Street brokerage house of falsifying the records of its silver trading transactions last year and overstating its profits in reports to shareholders.
Bache arranged for one of its subsidiaries to buy silver from the parent company at inflated prices in order to cover up losses the company incurred when silver prices collapsed last March, Irving J. Louis Jr. charged in a lawsuit filed against Bache in U.s. District Court in Manhattan.
The petition identifies Louis as president of Bache Metals Co., a senior vice president of Bache Groug Inc. and the owner of 8,000 shares of Bache stock.
A Bache spokesman said Louis had announced his retirement from the company.
The lawsuit says that as president of Bache Metals, Louis was entitled to a percentage of the metal subsidiary's profits. Louis said he would have earned $734,500 as his share last year if Bache had not depressed Bache Metals' earnings deliberately.
Louis asked the federal courts to order Bache to pay him his share of Bache to pay him his share of Bache Metals' profits and also demanded court action on behalf of himself and all other Bache stockholders to end the alleged falsification of company records.
Bache officials issued a statement late in the day saying the lawsuit is "soley for the financial benefit of Mr. Louis and the complaint has no merit whatsoever."
"Our records have been available to the appropriate authorities," the statement continues. "We categorically deny these accusations."
A Bache representative said Louis's charges are not related to investigations of the company being conducted by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Federal agencies in recent months have subpoenaed massive files of Bache records.
The lawsuit notes that under federal laws, Louis, as an officer of the firm registered with the CFTC, is liable for any false reports the company makes, and says he could be prosecuted for any falsification.
Louis contends that Bache's earnings for the three months ended April 30, 1980, were overstated by $2.3 million, or 25. 8 percent, and that other Bache earnings also were overstated.
The lawsuit traces a long series of events that began last spring when silver prices collapsed and many speculators, including the Hunt brothers of Texas, were unable to cover their debts to Bache.
Nelson Bunker and W. Herbert Hunt turned over several million ounces of silver to Bache's broker-dealer division to settle their obligations, the lawsuit alleges. The Bache brokerage division then sold the silver to Bache Metals Co.
In setting the price of the silver sold by one division to the other, Bache officials "falsely charged such higher prices in order to shift improperly to Bache Metal Co. large expenses which Bache broker-dealers had incurred," the lawsuit alleges.