"The SEC alleged that Rosen, a trader working from a south Florida branch office of J. Alexander Securities Inc., also conspired with Huttoe and others to obtain an exclusive supply of SOE stock at favorable prices to support his fraudulent and manipulative trading."
SEC Ties Florida Penny Stock Trader to Huttoe Fraud
Washington, Jan. 31 (Bloomberg) -- Florida penny stock trader Jerome ``Jerry'' Rosen accepted a bribe from former Systems of Excellence Chairman Charles Huttoe to manipulate that company's stock in the mid-1990s, the Securities and Exchange Commission alleged today.
The SEC alleged that Rosen, a trader working from a south Florida branch office of J. Alexander Securities Inc., also conspired with Huttoe and others to obtain an exclusive supply of SOE stock at favorable prices to support his fraudulent and manipulative trading.
As the J. Alexander trader exclusively responsible for the firm's SOE market-making, Rosen, 47, sold stock short to other market makers only to cover his sales at no risk with stock supplied by Huttoe and the others, the SEC said in a civil lawsuit the agency filed today in a Miami federal court.
By controlling the supply of stock in the market, Rosen was responsible for preventing ``the economic forces of supply and demand from establishing a legitimate price for SOE stock and causing unsuspecting investors to pay higher prices for it,'' the SEC said in a news release.
Rosen's lawyer couldn't be reached for comment on the alleged activities, which the SEC said took place in 1995 and 1996.
Long Investigation
The case is an outgrowth of a long-running investigation by the SEC into the shares of SOE, a maker of teleconferencing products that filed for Chapter 11 bankruptcy protection in 1997 and was subsequently liquidated. The company's technology was used to distribute video of the 1997 swearing-in of Congress.
Federal prosecutors in 1996 accused Huttoe of netting $12 million in illegal profits from SOE shares inflated by touting. He was sentenced to 46 months in prison after pleading guilty to securities fraud and money laundering.
Law enforcement officials have since accused many brokers and promoters of touting the stock in return for payment from Huttoe. Others have been accused of profiting from the sale of unregistered shares into the manipulated market. The SEC said it has collected about $15 million in ill-gotten gains from various defendants in its investigation of SOE.
The complaint against Rosen alleges that he made $112,468 from his fraudulent SOE market-making activities and got $503,496 more from the unregistered resale of SOE stock he received as a bribe from Huttoe.
``Rosen has a long disciplinary history dating back to his first days in the industry,'' the SEC's lawsuit said. In 1991, he was censured and fined $5,000 by the National Association of Securities Dealers for excessive markup violations, the SEC said. In July 2000, the NASD fined him $32,000 and charged that he had harassed another market maker, the agency said.
Other Defendants
The SEC also named Joseph D. Radcliffe, William A. Calvo III and their company, Diversified Corporate Consulting Group, as defendants in the lawsuit. The agency said Radcliffe and Diversified were among those supplying Rose with SOE stock. The SEC also alleged that Radcliffe, Diversified and Calvo also resold SOE stock through unregistered transactions for about $2.45 million in unlawful profits.
Without admitting or denying the SEC's allegations, Radcliffe agreed, among other things, to pay $539,719 representing his ill- gotten gains plus interest and a $75,000 fine, the SEC said. He also agreed to hand over the appraised fair market value of a 1996 Lincoln Towncar in his possession.
``Mr. Radcliffe had no interest in protracted litigation with the SEC and chose to put the matter behind him,'' said his lawyer, Richard Morvillo of Washington.
A lawyer representing Calvo and Diversified declined to comment. Calvo, a lawyer, was disbarred from the practice of law in Florida in 1994, the SEC lawsuit said.
The SEC alleged Rosen and Radcliffe were in contact with Internet publisher Theodore Melcher, who touted SOE stock in his ``SGA Goldstar Whisper Stocks'' newsletter. Melcher agreed last July to pay at least $2 million to settle SEC charges against him, which he neither admitted nor denied.
The SEC said today that sometimes Melcher tipped Rosen in advance of his touts, and that sometimes Rosen and Radcliffe would call Melcher and direct him to tout SOE on a specific day.
Jan/31/2001 17:46 ET
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