Donahue Securities Inc. will be liquidated under federal supervision because no deal to buy the company was reached before a court hearing Tuesday.

        One suitor had offered $485,000 for the downtown brokerage — well below the $4 million to $5 million that federal attorneys and company officials had hoped would help repay wronged clients.

Donahue

        Donahue Securities' founder and former president, Stephen G. Donahue, 52, is accused of stealing $6 million from those clients. Investigators from the U.S. Securities and Exchange Commission say Mr. Donahue used the money — which clients thought they had invested — to pay business and personal expenses, including a Florida condo, nine acres for a new Clermont County home and his own taxes and investments.

        Mr. Donahue resigned as president of the brokerage and an affiliated financial planning firm, S.G. Donahue & Co., late last month, just after SEC investigators say he admitted the 12-year scheme to them, the FBI and federal prosecutors.

        The goal of the SEC civil action is to ensure that the 123 personal clients of Mr. Donahue are repaid.

        No other parts of the Donahue companies, including clients of other planners, or pension and retirement plan operations, were affected by the scheme, which investigators say had gone on since Mr. Donahue started the brokerage in 1989.

        But it's still unclear how those operations will fare in the continuing liquidation proceedings.

        In court Tuesday, U.S. District Judge Sandra S. Beckwith appointed Douglas S. Tripp, a lawyer with Frost Brown Todd, as trustee to oversee the Donahue Securities liquidation.

        She also appointed lawyer Michael R. Barrett of Barrett & Weber as trustee over all of Mr. Donahue's personal assets, including S.G. Donahue & Co., the planning firm he started in 1981.

        Both Mr. Tripp and Bill Holzmann, director of corporate services at the Donahue companies, said proceedings will be complicated because Donahue Securities and S.G. Donahue & Co., while separate legal entities, are so intertwined that it's unclear which one owns which company assets, including everything from client files to office furniture.

        Mr. Tripp said determining such ownership will be the first step in the liquidation proceedings, which will now proceed in U.S. Bankruptcy Court.

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