HIGH FINANCE: Caf

In cafe society, Broker J. (for James) Arthur Warner, 52, has long cut quite a figure. A wavy-haired frequenter of Manhattan's Stork Club and other elegant pubs, he numbered among his friends such leading lights as Walter Winchell, Ginger Rogers and Cinemogul Joseph Schenck. By cafe society standards, Warner really arrived two years ago when his second wife, a beauteous Hollywood B-movie player named Kay Buckley, walked out after exactly 21 days of marriage, with a wedding present of $100,000 in cash.

In Wall Street, Warner had arrived long before. The son of a Boston house painter, he worked his way through New York University, graduated with honors, and in 1932 set up a brokerage house of his own in Manhattan, later branching out into New England. Specializing in "over-the-counter" securities, J. Arthur Warner & Co. flourished, became one of the nation's biggest dealers in unlisted securities, with assets of $8.8 million.

But for Warner, 1951 was a bad financial as well as marital year. Acting on complaints from some of his customers, the Securities and Exchange Commission started investigating him and his company, turned over its findings to the Justice Department. Last week in Boston, a federal grand jury returned a 70-count indictment, against Warner, two of his office managers and seven of his salesmen.

Core of the indictment: Warner and his associates had traded "customers in & out, and in again, at frequent intervals . . . and at net losses to the customers." J. Arthur Warner & Co. had thereby indulged in the "fraudulent practice known ... as 'churning,' by means of which a large part of the customers' invested capital was taken ... in the form of repeated commissions, charges and profits."

A favorite Warner & Co. trick, said the indictment, was to advise customers to buy stocks that were about to declare a dividend, then trade them out when the stock went ex-dividend, without explaining that the price had fallen by the amount of the dividend. Thus the customers broke even in the market but actually lost money because of Warner's commissions.

The grand jury, did not undertake to estimate how many of J. Arthur's customers had been bilked of how much. But five of them have already filed suit to recover a total of $270,000.