Robert and Cynthia,
HJ Meyers has attracted the interest of the Massachusetts State Securities Division,
which recently filed a $1 million civil suit against the broker, alleging boiler-room
sales tactics. Here is a portion of a 22 August article in the Boston Herald, "State
Moves To Ban HJ Meyers":
"State securities regulators moved yesterday to ban the stock brokerage H . J . Meyers
& Co. from Massachusetts and to recoup more than $1 million for Bay State investors
who allegedly lost money on stocks the firm had recommended."
"In a civil complaint, the Massachusetts Securities Division alleged that Meyers ran a
"boiler room" where sales people employed "dishonest, unethical and other fraudulent
high-pressure sales tactics" to hawk stocks by phone."
""This is a significant case," said Secretary of State William Galvin, who oversees the
securities unit. "We're talking about millions of dollars of investors' money here.""
"The state is also seeking a $50,000 fine to cover the cost of its investigation."
"Meyers' Boston attorney, Janis Berry of Rubin & Rudman, denied the allegations and
said Meyers will contest them."
Another Herald article on the same date, "Buyers of Palomar Medical Burned", stated
that PMTI shareholders were hardest hit. Here are portions of that article:
"H.J. Meyers' Massachusetts customers got burned on one stock above all others,
according to state regulators: Palomar."
"In its civil complaint against Meyers, the state Securities Division alleged that
Meyers sold vast quantities of Palomar stock to investors without disclosing the
risks - or Meyers' financial ties to the company."
"Customers of Meyers' Boston office owned $9.5 million worth of Palomar Medical
Technologies Inc. stock in April 1996 - more than the value of all the other stocks
they owned combined, the complaint alleged."
"According to the complaint, 785 customers of Meyers' Boston office owned more than
864,000 shares of the upstart Beverly company in April 1996."
"In October of that year, "H.J. Meyers customers alone accounted for over 22 percent
of all transactions in that security," the complaint alleged."
"The state complaint details many Palomar loans, including an unsecured note for $1.1
million to Meyers Chief Executive James Villa, made Dec. 31"
Out of respect of copyright, that is all I will post. That last line reminded me of
these passages that appear in several of Palomar's SEC filings:
"As discussed in Note 2(m), the Company has a $500,000 equity investment
in a privately held technology company. A director of the Company's underwriter,
H.J. Meyers is also a director of the investee company. In addition, through
December 31, 1995, the Company loaned this director unsecured notes totaling
$1,988,709 in connection with the exercise of stock warrants (see Note 5(e)).
Subsequent to year end, the Company loaned this director an additional unsecured
note totaling of $1,062,500 in connection with the exercise of stock warrants.
The notes bear interest at 7.75% per annum and are due on demand. The Company
has also loaned this director, $500,000 subsequent to year-end, under the same
terms as the notes described above. This director repaid $2,146,096 of these
notes on March 26, 1996." - FY'95 10KSB, filed 22 Aug 96
Also:
"The Company has a $500,000 equity investment in a privately held technology
company. A director of the Company's underwriter, H.J. Meyers, is also a
director of the investee company. In addition, at December 31, 1996, the Company
had unsecured notes receivable from this director totaling $1,059,548, of which
$604,653 was in connection with the exercise of stock warrants (see Note 5). In
1996 the Company loaned $500,000 to an affiliate of the underwriter. This amount
was paid back in full as of year end. Subsequent to year end, the Company made a
deposit of $450,000 towards the purchase of a publicly traded affiliate of the
underwriter and prepaid the underwriter $200,000 relating to future investment
banking services. Both the deposit and the prepayment are refundable upon
demand. Also subsequent to year end, the Company loaned $500,000 to the
underwriter which has been paid back in full." - FY'96 10KSB, filed 11 Apr 97
So it appears that PMTI made about $3.5 million in unsecured loans to HJ Meyers'
CEO during 1995-96, most of it for the purpose of exercising warrants. It certainly
appears that HJ Meyers may have had more than the usual incentive to hype the stock.
HJ Meyers and the other accused parties have the presumption of innocence until
proven guilty, so it will be interesting to see how this case plays out. According
to a Wall Street Journal article of 22 August, "the Securities Division said it has
received inquiries from other states about the Meyers case", and "many other states
are empowered to follow the lead of a state that succeeds in revoking
the licenses of firms or brokers."
This should serve as a warning to investors to thoroughly read the SEC filings, and to
ask LOTS of questions before investing in any company. And I agree with you Robert,
that the advice of brokers is not to be trusted. In my research into laser hair removal,
I have found a lot of unrealistic advice emanating from brokers - and not limited to
Palomar, leading me to conclude that none of them are trustworthy.
Ted Molczan |
