D.H. Blair Brokerage, Former Employees Indicted on 173 Counts of Stock Fraud
By COLLEEN DEBAISE
Dow Jones Newswires
NEW YORK -- D.H. Blair & Co.'s retail-brokerage unit and 15 of its
officers and employees have been indicted on stock-fraud charges, two
years after the unit ceased operations.
The 173-count indictment, announced Thursday by the Manhattan District
Attorney's office, outlines a scheme in which D.H. Blair brokers allegedly
used high-pressure sales tactics to generate commissions and manipulated
stock prices for "massive" illegal profits.
Among those charged were Kenton Woods, the former chairman of Blair's
retail firm; Alan Stahler and Kalman Renov, the firm's vice chairmen; Vito
Capotorto, the head trader of the firm; and Alfred Palagonia, its
top-producing broker.
The 15 individuals all have been taken into custody and are expected to be
arraigned later Thursday in New York State Supreme Court.
The indictment of Blair was expected following the breakdown of
negotiations between the district attorney's office and Blair executives.
At a press conference, Manhattan District Attorney Robert M.
Morgenthau said the probe into Blair was an "outgrowth" of the
investigation into A.R. Baron, a small brokerage concern formed by former
Blair brokers that collapsed in 1996 amid allegations it cheated investors
out of $75 million.
Mr. Morgenthau wouldn't put a figure on possible investor losses in the
latest case, but said Blair manipulated at least 10 initial public offerings
during a 12-year period of criminal conduct.
He estimated that 50,000 people invested money with Blair before its
ceased retail operations in 1998. Many suffered "severe" economic losses
as a result. A tugboat pilot from Brooklyn, N.Y., lost money she had
saved to buy a house, about $45,000, and a retired New York
Philharmonic trumpet player from Florida lost $250,000 from his IRA and
trust accounts, he said.
In recent months, three former Blair brokers have pleaded to securities
fraud that cost investors tens of thousands of dollars.
In August 1997, the firm agreed to pay $2.3 million in restitution to retail
customers for alleged excessive markups in connection with several public
offerings after a regulatory probe led to censure and fines of $2 million.
The district attorney said the investigation into Blair began in the fall of
1997 and is still continuing.
Besides the top officials, 10 Blair brokers have been charged in the case:
Robin Breitner, Alex Dewar, John DiBella, Steven Frantz, Richard
Gaydos, Raymond Hernandez, Richard Molinsky, Darren Orlando,
Andrew Schandler and Richard Smith.
Authorities said many of the brokers made multimillion-dollar salaries while
employed at Blair. Mr. Palagonia was the highest-earning salesman,
reportedly generating as much as $13 million in gross commission in one
year.
All of the defendants have been charged with enterprise corruption, which
is punishable by up to 25 years in prison.
Blair and its former employees are charged with manipulating stock prices
-- including securities being offered in IPOs -- for the benefit of the firm,
certain favored customers, brokers and others associated with Blair.
Among the IPOs that Blair fraudulently sold were Amerigon Inc., Telepad
Corp., Premier Laser Systems Inc., Interactive Flight Technologies Inc.,
Sepragen Corp., Food Court Entertainment Network Inc., Titan
Pharmaceuticals Inc., Digital Video Systems Inc., Conversion
Technologies International Inc. and Advanced Aerodynamics & Structures
Inc., according to the indictment.
Blair's retail-brokerage unit and investment-banking operations separated
in 1992. The investment-banking unit, which continues to be run under the
name D.H. Blair Investment Banking Corp., is not under investigation,
authorities said.
In a statement, D.H. Blair Investment Banking said it is "in no way involved
in the action brought by the DA" and stressed that it has been "an entirely
separate company" from D.H. Blair & Co. for the past eight years. |
