8/26/97 J.B. Oxford Consultant Kott Is Focus Of Fraud Suit In
Florida
By Rebecca Buckman
Staff reporter
NEW YORK -(Dow Jones)- As the investigation into discount
brokerage firm J.B. Oxford & Co. continues, so does a Florida
fraud lawsuit against Irving J. Kott, a consultant used by the
firm.
The activities of Kott, a convicted Canadian stock swindler,
are among those at J.B. Oxford that federal authorities are
looking at, a source close to the probe told Dow Jones Tuesday.
J.B. Oxford is the main unit of J.B. Oxford Holdings Inc.
(JBOH), based in Beverly Hills, Calif.
Kott also faces legal troubles in Florida, where
small-business owner James Meadlock has sued him and a Canadian
firm Kott allegedly controlled - the Hariston Corp. (HRSNF) -
for buying his business under what Meadlock charges were
fraudulent terms.
More broadly, the Florida suit demonstrates the kind of
controversies Kott has attracted in his career as a stock
promoter, particularly with regard to Hariston. The Vancouver
company, which now trades for just pennies a share, recently
transformed itself from an oil, gas and minerals concern into a
multimedia-software company.
In his lawsuit against Hariston and Kott, filed last year,
Meadlock charges that he was was duped into believing Hariston
was a strong, promising company whose shares would grow in
value.
That's why He and his mother sold their Melbourne, Fla.,
commemorative-coin and trading-card business to Hariston in 1993
for 150,000 shares of Hariston stock, Meadlock's lawyers said.
Kott told Meadlock that Hariston's shares - then trading for
$6 a share - would hit $22 within a year, according to the suit.
The company touted investments such as a grocery-store chain in
Poland and a Montana company that could supposedly extract
precious metals from ground water, the suit said.
"He was led to believe this was a great deal and a great
company, (but) the stock never did anything," said Thomas Neal,
one of Meadlock's attorneys. The lawsuit alleges breach of
contract, fraud and negligent misrepresentation.
A lawyer for Michael Kott, a son of Irving Kott who is named
with his father as a defendant in the suit, said the complaint
is meritless and Meadlock simply made a bad business decision.
"It's just, 'Oh, gee, my stock went down, I think I'll sue
somebody,'" said Samuel "Clay" Reiner, a Miami lawyer who is
representing Michael Kott.
Reiner, who said Meadlock was a sophisticated businessman,
plans to file a motion for summary judgment soon.
Meadlock's suit also names former Hariston Chairman Joseph
Duggan as a defendant. Although the Kotts never served as
officers or directors of the company, they "were in a position
to manipulate and control the actions of Hariston through
Duggan, or through other individuals," the suit alleges.
Florida lawyers representing Hariston in the case didn't
return calls seeking comment.
Reiner, however, said Michael Kott worked as a consultant for
Hariston and now spends most of his time running the business
Meadlock used to own, called Highland Mint. Reiner said he
didn't know where Irving Kott was.
J.B. Oxford, Irving Kott and Hariston have been linked
before. One flap arose three years ago when reports surfaced
that a former J.B. Oxford brokerage unit called Reynolds
Kendrick & Stratton Inc. aggressively sold shares of Hariston at
the same time major Hariston investors served on the brokerage
firm's board.
After that fact and Kott's role in bringing those investors
to Reynolds Kendrick were disclosed in a 1994 Business Week
article, the firm shut down the brokerage unit and changed its
name.
Kott, who in 1976 was convicted of stock fraud and paid a
fine of 500,000 Canadian dollars, also reportedly sold Hariston
shares at a Dutch brokerage firm he controlled, according to a
December story about him in Time magazine.
Kott couldn't be reached for comment.
More recently, Hariston has sold off its Metanetix Corp.
division - the Montana metals-extraction business - as well as
its oil and gas interests. In its second quarter ended June 30,
the company reported a loss of $463,089, or 4 cents a share, on
revenue of just $789,935.
When contacted last week about the current federal
investigation of J.B. Oxford, Hariston officials referred calls
to New York lawyer Stanley Arkin.
"At the present time, we don't understand there are any
concerns about the conduct or actions of Hariston," Arkin said.
Officials with the U.S. Attorney's Office in Los Angeles and
the Securities and Exchange Commission have declined to provide
any details about the probe. But J.B. Oxford said in a press
release last week that the SEC had served subpoenas on the firm
and some of its employees. |
