Re: AS Goldmen news articles (continued)
ALL THAT GLITTERS IS NOT GOLDMEN
These days if you're one of the thousands of defrauded investors trying to contact the offices of A.S. Goldmen & Co., Inc. just leave a message at Body By Boris in Red Bank, New Jersey. According to the NASD, that's where this broker-dealer is now receiving its mail. But don't expect to find any of the former Goldmen brokers at that address. The firm, which once maintained offices in New York City; Iselin, New Jersey; Los Angeles, California and Naples, Florida, is now inactive. Understandably so. On July 8, 1999, the New York County District Attorney, Robert Morganthau, issued indictments against A.S. Goldmen and 33 individuals, charging that the brokerage firm had engaged in massive securities fraud. According to prosecutors, A.S. Goldmen, its brokers and other affiliated persons have bilked thousands of investors out of almost $100 million. Morganthau also initiated civil proceedings seeking to recover these funds.
Indicted along with the firm were its President, Anthony Marchiano, his twin brother, Salvatore (the firm's Head Trader), A.S. Goldmen's Vice-President, Stuart Winkler, and more than 20 former A.S. Goldmen employees.
The charges run the full gamut of securities offenses, including high pressure cold calling, the sale of stocks at inflated prices, price manipulation, and refusal to obey customer sell orders. The indictment also alleges that "nominee" accounts were created by A.S. Goldmen employees in the names of their friends and relatives in order to evade rules which prohibited employees of the brokerage from investing in initial public offerings. The accounts were apparently funded by the Goldmen employees, who later shared in the profits.
According to the indictment, A.S. Goldmen's efforts to evade regulators were devised by Winkler, the firm's Chief Financial Officer, who worked as an examiner for the NASD between 1979 and 1986. Winkler, who reportedly joined A.S. Goldmen in 1989, allegedly used his experience at the NASD to divert attention from the regulators.
In a related case the SEC instituted administrative proceedings against Goldmen and sought a cease and desist order charging the firm and eight employees with securities law violations.
The New York indictment would seem to be the final nail in the coffin for a brokerage firm which has run afoul of regulators throughout the 1990's. If A.S. Goldmen is truly gone, it leaves behind quite a legacy. And if you're one of the fortunate individuals who never opened an account with this outfit, chances are you will never hear of A.S. Goldmen again. But there is an equal likelihood that former Goldmen brokers (at least the ones who have escaped indictment) will resurface at other brokerage firms, once again utilizing their well-honed sales skills on unsuspecting customers. The history of A.S. Goldmen is, therefore, an instructive cautionary tale.
A.S. Goldmen began operating in 1988. Even before the New York arrests, its final demise was signaled in May of this year when NASD Regulation's National Adjudicatory Council found that the brokerage firm engaged in fraud and market manipulation in connection with its domination of the market for warrants of Innovative Tech Systems Inc. The NASD ordered A.S. Goldmen and its President, Anthony Marchiano to pay a $150,000 fine and make restitution of $500,000 to the firm's customers (this decision cut in half the amount of restitution originally ordered by NASD District 10's Business Conduct Committee). Marchiano was also required to requalify as a securities principal and censured for his failure to supervise. Goldmen's Vice-President, Stuart Winkler, was suspended from the securities business for two years and fined as well. Stacy Meyers, the firm's head trader at that time was also sanctioned.
The NASD sanctions resulted from A.S. Goldmen's conduct in connection with a July 1994 Initial Public Offering for Innovative Tech Systems. Prior to that IPO Innovative had issued warrants as part of a bridge financing (Companies about to go public often arrange for bridge financings through their underwriters so that they will have sufficient funds to operate until the offering is completed. The people who offer the bridge financing generally receive securities from the company in return for providing these funds). In this case, the NASD found that, within two hours after the IPO began trading, Goldman had purchased most of the 1.3 million warrants from the bridge lenders at substantial discounts from the market price. Goldmen then artificially inflated the price of warrants to $2.00, a 700% increase over the initial offering price.
NASD Regulation considers markups of over 5% to be excessive and markups of over 10% to be fraudulent. 700%? That's in a class all by itself.
The NASD order was merely one more blemish on A.S. Goldmen's complexion. Other highlights? Since 1991 the State of Missouri has issued four separate orders directing the brokerage firm to cease and desist from its practice of selling unregistered securities to residents of that state.
In December 1997 the State of Massachusetts suspended Goldmen's registration in that state for five years, charging the firm with selling over $890,000 in unregistered securities.
In May 1995 the State of Maine issued a Notice of Intent to Revoke the Broker-Dealer License of Goldmen for refusal to execute customer orders and unauthorized transactions.
In February 1999 the State of Delaware suspended Goldmen for a period of five years from selling any security that was not listed on the New York Stock Exchange.
In April 1998 the NASD sanctioned Goldmen for its failure to comply with required reporting and bookkeeping practices.
A.S. Goldmen's brokers came up with a few creative ways to violate the securities laws on their own. In July 1997 the NASD found that six Goldmen brokers had used imposters to take their qualifying securities license exams. The NASD fined the six brokers and barred them from the securities industry.
Customer complaints? The NASD reports 79 arbitrations filed against the brokerage firm through the end of 1998.
That's not all. The recent New York indictments apparently had their genesis in April 1998, when Morganthau's office, with the assistance of Florida law enforcement officials, raided A.S. Goldmen's offices in Iselin, New Jersey and Naples, Florida (as well as Marchiano's Naples estate).
The Naples office of Goldmen is now closed, but the presence of the firm in that prosperous community will not soon be forgotten. It seems that Goldmen became involved with local officials and businesspeople as the investment banker for a project known as Stadium Naples, a proposed golf course stadium project. When rumors of Goldmen's sales practices began to surface, the community started to question the involvement of the brokerage firm in the community project. Once the New York District Attorney's Office raided the firm's offices, Goldmen's involvement in the project ceased. But the investigations continue. In a letter to the Florida Department of Law Enforcement on May 14, 1999, Governor Jeb Bush directed a review of "any possible violations of Florida's criminal laws involving the brokerage firm of A.S. Goldmen & Co that are not already being addressed by a current New York grand jury investigation."
And what if you invested in one of the companies taken public by A.S. Goldmen in the 1990's? We looked at prices as of July 8, 1999:
Apparel Technologies, Inc. (APTX) ? 3/256;
Cinema Ride Inc. (MOVE) ? 33/256
Cinemaster Luxury Theaters Inc. (LUXY) ? $3 9/16
Perma-fix Environmental Services, Inc. (PESI) ? $1 _;
Datatrend Services, Inc.(DATA) ?$5 9/16;
Millenium Sports Management Inc. (MSPT) ? 23/32;
Country Star Restaurants Inc. (KAFE) ? no quote available;
Innovative Tech Systems Inc. (ITSY) ? no quote available;
Adrenalin Interactive Inc. (ADRN) ? $4.00;
Imatec Ltd.(IMEC) ? 1 13/32;
Independence Brewing Company - (IBCO)- no quote available;
Innodata, Inc. (INOD) ? 9 1/8
And the apparent winner?
Winfield Capital Corp. (WCAP) ? 25 13/16;
Winfield Capital is an interesting story in itself. Several Winfield directors and officers have served on the boards of directors of other companies underwritten by Goldmen. And, according to a July 1998 proxy statement filed by Winfield Capital, Marchiano owned 500,000 shares of that company, or 9.95% (including 150,000 shares held by Gas Motors, Co., a Connecticut car dealership owned by Marchiano
One thing's for certain, former A.S. Goldmen salespersons will soon reappear in the brokerage community. It's happened already. In June of this year federal prosecutors in New York's Eastern District arrested 85 people, including some who were allegedly connected to organized crime, and charged them with swindling investors out of $100,000,000. Reportedly, 12 former Goldmen brokers were among those named in the indictments.
And just how do you make sure that your broker is not among the A.S. Goldmen alumni? Check him or her out with the NASD at nasdr.com. You just can't be too careful.
¸1999 Stock Patrol.com. All rights reserved.
stockpatrol.com
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Securities Act of 1933
Release No. 7698 / July 7, 1999
Securities Exchange Act of 1934
Release No. 41601 / July 7, 1999
Administrative Proceeding
File No. 3-9933
PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED AGAINST A.S. GOLDMEN & CO., INC., ANTHONY J. MARCHIANO, STUART E. WINKLER AND FORMER REGISTERED REPRESENTATIVES OF GOLDMEN
The Securities and Exchange Commission announced today the institution of administrative and cease-and-desist proceedings against A.S. Goldmen & Co., Inc. ("Goldmen"), a registered broker-dealer. Also charged in the proceedings are:
Anthony J. Marchiano ("Marchiano"), of Naples, Florida, Goldmen's president and sole owner; Stuart E. Winkler ("Winkler"), of Morganville, N.J., Goldmen's financial and operations principal; John T. Diasabeyagunawardena (a.k.a. John Abbey) ("Abbey"), of Metuchen, N.J.; John P. DelCioppo ("John DelCioppo"), of Naples, Florida; Christopher M. DelCioppo ("Chris DelCioppo"),of Tampa, Florida; Vincent J. Lia ("Lia"), of Naples, Florida; Duane P. Taylor ("Taylor"), of Naples, Florida; and Charles Trento ("Trento"), of Forked River, N.J. Abbey, John DelCioppo, Chris DelCioppo, Lia, and Taylor, were all registered representatives in Goldmen's Naples, Florida office. Trento was a registered representative in Goldmen's New Jersey Office.
The order instituting proceedings charges Goldmen, Marchiano, Winkler and the former registered representatives with five interrelated schemes that occurred between July 1994 to June 1998:
First, from April 1997 to April 1998, Goldmen, Marchiano and Winkler violated the registration and prospectus delivery provisions of the federal securities laws by conducting an unregistered offering of over 3 million shares of the common stock of Millennium Sports Management, Inc. ("Millennium"), a publicly-traded New Jersey corporation, and by failing to deliver Millennium prospectuses to Goldmen's retail clients who bought Millennium stock during the unregistered offering. Goldmen realized net proceeds of at least $7.5 million through the sale of Millennium stock during this period.
Second, from July 1997 to June 1998, Marchiano, Abbey, John DelCioppio, Chris DelCioppio, Lia, and Taylor engaged in a scheme to sell Millennium common stock to retail clients using a variety of fraudulent and deceptive sales practices. Under Marchiano's direction, Goldmen's Naples, Florida office became a "boiler room" that sold Millennium common stock through an aggressive cold-calling campaign involving high-pressure sales tactics, misrepresentations and omissions of material facts, baseless price predictions, unauthorized purchases, and an undisclosed no net-selling practice.
Third, from July 1994 to February 1997, Goldmen and Winkler violated the antimanipulation provisions of the federal securities laws. During at least six initial public offerings ("IPOs") underwritten by Goldmen, Winkler placed IPO securities into at least four nominee accounts. Winkler then had Goldmen immediately repurchase the securities after the IPOs at a substantial profit and resell them to bona fide investors at yet higher prices. While these IPO securities were in his nominee accounts, Winkler had Goldmen commence market making activities in the securities. The antimanipulation provisions of the federal securities laws prohibited Goldmen from engaging in such market making activity while IPO securities remained under Winkler's control in the nominee accounts. The Winkler nominee accounts made at least $253,500 from this scheme.
Fourth, during the same period, Goldmen, Winkler, and Marchiano violated the antimanipulation and antifraud provisions in a similar scheme designed to resolve client complaints. Winkler and Marchiano placed IPO securities into the accounts of complaining clients during various IPOs underwritten by Goldmen and controlled the repurchase and resale of the securities, guaranteeing those clients a profit. While these securities remained under Winkler's and Marchiano's control in the client accounts, Goldmen commenced making markets in the securities. In one instance, Winkler and Marchiano placed nearly 30 percent of the IPO warrants into the accounts of complaining clients. This scheme also violated the antifraud provisions by creating a materially false impression of the nature and extent of investor interest in the offerings and aftermarket for the IPO securities.
Fifth, from July 1994 to May 1997, Trento engaged in a pattern of fraudulent sales practices. These practices included: the use of nominee accounts to hide his financial interest in certain sales of securities; engaging in fraudulent cross-trading; making baseless price predictions; executing unauthorized and unsuitable trades; and engaging in an undisclosed no net-selling practice.
In addition to the schemes described above, Winkler is charged with instructing certain Goldmen employees, including Goldmen's compliance director, to falsify, conceal and destroy various required books and records, including trade blotters, trade tickets, and customer complaints. The order alleges that Winkler did so to conceal from regulators, among other things, evidence of sales practice abuses, as well as other violations of federal and state securities laws.
The order charges that, as a result of this conduct, Goldmen willfully violated Sections 5 and 17(a) of the Securities Act of 1933 ("Securities Act"), Sections 10(b) and 17(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rules 10b-5, 10b-6, 17a-3, and 17a-4 thereunder. Marchiano willfully violated Sections 5 and 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rules 10b-5 and 10b-6 thereunder. Winkler willfully violated Section 17(a) of the Securities Act, Sections 10(b) of the Exchange Act, and Rules 10b-5 and 10b-6 thereunder, and willfully aided and abetted or caused violations of Section 5 of the Securities Act, Section 17(a) of the Exchange Act, and Rules 17a-3 and 17a-4 thereunder. Abbey, John DelCioppio, Chris DelCioppio, Lia, and Taylor willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. Trento willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and willfully aided and abetted or caused violations of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder.
The Division of Enforcement thanks the New York County District Attorney's Office, the National Association of Securities Dealers (NASD), and the New Jersey Bureau of Securities for their assistance in the investigation.
This proceeding has been instituted pursuant to Section 8A of the Securities Act and Sections 15(b)(4), 15(b)(6), and 21C of the Exchange Act. A hearing will be held before an administrative law judge to determine whether the allegations against the proposed respondents are true, and if so, to determine what remedial sanctions are appropriate and in the public interest, and whether the proposed respondents should be ordered to pay disgorgement and/or civil penalties.
sec.gov
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