Here are some scam stocks to avoid, if you haven't seen already:
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The Wall Street Journal -- October 11, 1996
Big FBI Sting Collars 45 Penny-Stock Figures
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By Deborah Lohse and Frances A. McMorris
Staff Reporters of The Wall Street Journal
In what was described as "the largest single set of arrests ever made in the securities industry," 45 penny-stock promoters, brokers and company officers were charged with securities fraud after a nationwide sting found allegedly rampant bribery of brokers in small stocks.
Mary Jo White, U.S. Attorney in Manhattan, said the sting operation, run by the Federal Bureau of Investigation, revealed a "widespread and unlawful practice" of penny-stock promoters bribing brokers to put customers in small stocks in order to run up the prices and benefit insiders.
More chillingly, the cases suggest that the stock market's near-record levels are causing more crime against small investors. William McLucas, head of enforcement for the Securities and Exchange Commission, said the explosion in popularity of stock investing, with nearly $6 trillion in U.S. stocks traded last year, has drawn scam artists out of the woodwork. The growth "has increased the opportunities for the con men and the crooks," said Mr. McLucas.
Ms. White said the defendants -- including four officers of public companies, with the rest spread about evenly between current or former brokers and promoters -- face jail terms of five to 50 years and fines of as much as $250,000 for each count if they are found guilty.
FBI agents posed as unscrupulous brokers at a phony brokerage firm they set up in New York. They claimed that they managed the accounts of wealthy customers and wanted to invest their customers' assets in blue-chip stocks as well as some speculative investments, such as non-Nasdaq over-the-counter stocks, according to the 19 separate criminal complaints. The agents also told the defendants that they would be willing to accept money and other compensation in exchange for selling certain securities to customers.
According to the government, the alleged payments generally were made by and through stock promoters, who, sometimes working with officers of the companies whose stocks were being touted, paid the brokers as much as 40% of the price of the stock being sold to customers. Many of the shares were in thinly capitalized companies trading at under $5 a share.
Agents spent between $5,000 and $15,000 per transaction, prosecutors said. Not all of the defendants were part of the same scheme, prosecutors said.
The complaints were announced by a contingent of authorities from Ms. White's office, the FBI, the SEC and the National Association of Securities Dealers, who jointly participated in the crackdown.
Ms. White said the evidence uncovered in the sting "reveals a sordid picture of greed and indifference to the investing public."
Because the operation is continuing, James K. Kallstrom, assistant director in charge of the New York office of the FBI, would give few details of the sting, except to say that so far, the government had spent "hundreds of thousands of dollars" in buying stocks. The government also received in excess of $100,000 in cash and stock payments from various promoters.
On top of the criminal charges, the SEC brought 22 administrative proceedings against 28 of the people charged, and the NASD brought a series of actions against brokers involved.
This crackdown represents a renewed effort by regulators to bring criminal action against the kinds of offenses that might in the past have been handled by imposing civil administrative actions or barring the players from the industry. But, said the SEC's Mr. McLucas, in cases like those uncovered in the sting, "civil sanctions and civil remedies are not enough."
Mary L. Schapiro, president of the regulatory arm of the NASD, which runs Nasdaq, said the NASD is continuing its own crackdown on abuses in the small-cap stock market. She says she expects more actions like the one disclosed this week against Sterling Foster & Co., a Melville, N.Y., brokerage firm that the NASD charged with manipulating three small stocks and pressuring investors into buying shares while profiting from undisclosed short sales and deals with insiders. Sterling Foster denies the charges.
The stocks involved in the sting cases brought yesterday included four Nasdaq Stock Market-listed stocks: Alpha Solarco Inc., Foxmoor Industries Ltd., Princeton American Corp and Cam-Net Communications Network. The others trade over-the-counter, largely on Nasdaq's OTC Bulletin Board, a loosely regulated electronic trading forum. Among these other stocks involved were: San Diego Bancorp, Command Credit Corp., International Investment Group, LBU Inc., Pollution Controls International Corp., Golf Ventures Inc., Spaceplex Amusements, Interactive Information Solutions Inc., Churchill Technology Inc., Debbie Reynolds Hotel & Casino Inc., Grayhound Electronics Inc., U.S. Asset Corp., Integrated Healthcare Systems Inc., Crystal Broadcasting Co., Continental Orinoco Co., Grafix Time and World Wide Stone Corp.
The nationwide crackdown comes as Nasdaq's regulators are trying to beef up investor protection. Two high-profile government investigations harshly critical of trading practices on Nasdaq were settled in recent months. Both the NASD and many of its biggest dealers are being forced to beef up their enforcement of trading rules as the result of those investigations. And the Nasdaq Stock Market recently changed its advertising campaign from one that emphasized the companies that list there to an investor-education campaign.
Thirty-six of the defendants had been arrested by yesterday evening, with some being released on $50,000 bond. The remainder were expected to be arrested soon thereafter.
The defendants charged are:
Roland Acevedo of New York; Alfred P. Avasso of Suffern, N.Y.; George Badger of Salt Lake City; Steve Bingaman of New York; Ira Blackey of Williamsville, N.Y.; Thomas J. Browne of Forest Hills, N.Y.; Daryl Buerge of Canada; Richard Cedrone of Del Ray Beach, Fla.; Cary Cimino of New York; Dale Eyman of Phoenix; John Fasano of Hauppauge, N.Y.; Bartholomew Haring of Brooklyn, N.Y.; Theodore Heitzman of Carlsbad, Calif.; Garry Hrycyk of New York; Richard Langley Jr. of Los Angeles; Michael Lapp of Coral Springs, Fla.; Gerald Larder of Englewood, Colo.; Norman Lescht of East Brunswick, N.J.; Miron Leshem of Boca Raton, Fla.; William Lucas of West Hempstead, N.Y.; Richard Mallion of Sunrise, Fla.; James Manas of Belle Harbor, N.Y.; Gamal Ashraf Marwan of Los Angeles; Gerald Cash McNeil of North Bergen, N.J.; Gary Mitchell of Denver; Robert Mitchell of Denver; Gregory John Mouen of New York; Timothy Murray; Edward Padnos of Highland Park, Ill.; George Panagiotou of Lodi, N.J.; Joseph Pignatiello of Coral Springs, Fla.; Jeff Pokross of New Jersey; Alexander Ruge of Canada; Blake Marshall Russ of Boca Raton, Fla.; Mark Anthony Savage of Brooklyn, N.Y.; Robert Schulman of Armonk N.Y.; Andrew Scudiero of New York; Sy Siegel of Los Angeles; Bertram Slutsky of Newton, N.J.; Jeffrey Szur of Bayhead, N.J.; Jeff Trenk of New Hyde Park, N.Y.; Dean Christopher Verrigni of Wappinger Falls, N.Y.; Trung Vugia of Stamford, Conn.; Edward Williamson of Wichita, Kan.; and Allen Wolfson of Salt Lake City.
Four of those charged are officers of publicly traded companies, including Mr. Badger, chairman of Golf Ventures, who allegedly paid 20% in shares to undercover agents to sell 2,000 shares of his company's stock for just over $5 a share. Mr. Badger had been enjoined by the U.S. District Court in Utah from violating securities laws, according to the complaint.
Other company officers, according to the complaints, include Mr. Eyman, chairman of Princeton American; Mr. Lucas, chairman and chief executive of Command Credit; and Mr. Buerge, officer and director of Cam-Net Communications Networks.
The majority of the individuals charged, and their lawyers, couldn't immediately be reached for comment, except for Mr. Cimino's lawyer, Michael Bachner, who said, "It is our intention to vigorously contest the charges," adding that he believes Mr. Cimino will be "exonerated." Mr. Bingaman's lawyer, |
