I think Barron's is barking up the wrong tree here, but Auric's gonna love it:
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What a murder victim told Barron's about skulduggery on
Wall Street
By Bill Alpert
The recent murders of two stock promoters at a mansion in Colts Neck,
New Jersey, struck a serious chord at several publications, including
Barron's, because one of the victims, Maier S. Lehmann, had been trying for
nearly two years to get journalists to publicize his account of wrongdoing on
Wall Street. Whether his campaign had anything to do with his murder, we
don't know. But we can relay the portions of his account that we have been
able to check out.
Lehmann's main goal seemed to be to interest prosecutors and reporters in
the financial dealings of one of his former business associates, Judah L.
Wernick of Woodmere, New York. In September, Wernick, 36, was
indicted by federal prosecutors in Manhattan in a racketeering and stock
fraud case that involved the notorious stock promoter Randolph K. Pace.
Both dispute the charges. In August, the National Association of Securities
Dealers censured and fined Wernick, who consented (without admitting or
denying guilt) to findings that his brokerage firm, Patterson Travis, improperly
underwrote stocks and failed to act on customers' trading instructions.
It was late 1997 when Lehmann came
to Barron's with his detailed allegations
about Wernick. Lehmann felt that he
was owed money by Wernick, and
admitted that grudge upfront. What
Lehmann told Barron's, and any
regulator who would listen, was that
Wernick was the latest in a long line of
front-men for the legendary stock
swindler Robert E. Brennan. Wernick
denies this, but evidence shows that
Wernick and Brennan have worked together in the past and that many of
Brennan's former associates have been involved in questionable deals with
Wernick.
Brennan, you may recall, burst onto the national stage in the 1980s with TV
commercials that showed him stepping from his helicopter and inviting
would-be clients to "come grow with us." But Brennan's brokerage, First
Jersey Securities, was later found to be a "massive and continuing fraud" on
small investors, according to the federal judge who upheld a $75 million SEC
judgment against Brennan.
Contacted last week, Wernick said he hadn't spoken to Lehmann in four
years. Although he said he knew nothing about the murders beyond what he
had seen in news reports, Wernick went on to speculate that the murders
could have been some sort of retaliation motivated by Lehmann's activities in
the four years since the two parted company.
Lehmann, who was 37 when he died, did have a criminal record. He pled
guilty in 1995 to filing false insurance claims, and helped federal prosecutors
bust others involved in that scam. Then, earlier this year, Lehmann agreed to
pay $630,000 to settle Securities & Exchange Commission civil charges that
he and nearly 30 others deceptively promoted shares of Electro Optical
Systems.
Lehmann often seemed to be in the
know about unusual happenings
related to small stocks. Last
December, for example, he told
Barron's that two convicted Russian
racketeers were threatening
investors they suspected were
shorting a stock associated with
Ivana Trump (The Ivana Channel,
Part II, December 14, 1998).
The other Colts Neck murder
victim, Alain A. Chalem, age 41, has never been charged with any
wrongdoing, though he did work at A.S. Goldmen & Co., a brokerage firm
the Manhattan District Attorney indicted in July, along with many of its
brokers, for allegedly bilking investors out of more than $100 million.
Goldmen officials deny the charges, and their lawyer said in court that the firm
was forced to cut a deal with the mob to stay in business. Prosecutors decline
to say whether Chalem or Lehmann helped them build the case against
Goldmen. In any event, the fact that the two promoters had crossed paths
with mob figures can only add to the list of possible suspects in the murder
case.
In what appeared to be a cold-blooded execution, Chalem took one bullet in
the chest and five in the head, while Lehmann took one in the leg and three in
the head. At the time of their demise, Chalem and Lehman were running an
Internet stock-promotion scheme out of the Colts Neck mansion.
As for Wernick, his first known contact with Brennan came around 1990. At
the time, Wernick was a rookie stockbroker living in a Queens co-op
apartment, but he wanted to be an investment banker. Toward that end, he
found a Texas sawmill that needed cash and introduced the mill's owners to
an associate of Brennan. In the name of raising capital, Brennan's man merged
the sawmill into a shell company called Nacoma Consolidated. When the
stock subsequently surged skyward, Brennan sold $29 million of the Nacoma
shares he controlled, according to a civil racketeering suit filed by New
Jersey's attorney general.
In a related deal, involving a stock called Future Funding Corp., New Jersey
regulators say Brennan improperly pocketed $70 million in profits, thanks
largely to trades executed by Wernick. For some of the Future Funding
trades, Wernick took the unusual step of using his wife's maiden name, calling
himself Judah Pion. Wernick was not named as a defendant for his part in
either the Nacoma or Future Funding deals, but the state's pleadings detail his
prominent role in the scams. Wernick told Barron's that the trades in question
were executed by his firm and not by him. Brennan recently settled the
attorney general's charges on these matters by agreeing to pay $45 million
without admitting wrongdoing.
In an interview with Barron's, Wernick insisted that he has had nothing to do
with Brennan since 1991. Lehmann said otherwise. What there can be no
question about is that Wernick continued to run with other members of
Brennan's crowd. According to an SEC civil suit still pending in Manhattan
federal court, Wernick in 1994 was working at a firm called S.B. Cantor &
Co., and while there he rigged stock trades in cahoots with Leonard Greer,
who ran the brokerage L.C. Wegard. In their pretrial depositions, Wernick
and Greer denied any wrongdoing. Here's the Brennan connection: New
Jersey regulators charged that Greer financed Wegard with $12.5 million in
loans from Brennan's charitable foundations.
The SEC eventually shuttered Wegard, and federal prosecutors in New
Jersey indicted many Wegard brokers. Greer was not indicted.
In 1994, Wernick moved to Patterson Travis, a then-moribund firm owned
by David Travis, a Colorado man who was recovering from a heart-bypass
operation. In a Manhattan skyscraper, Wernick set up a branch office for the
firm. On paper, the operation was run by Travis, and the firm's prospectuses
modestly describe Wernick as "office manager." But Lehmann alleged that
Wernick ran the firm, and documents, customers and employees corroborate
this claim.
Many of the brokers working under Wernick at Patterson Travis were
Brennan alumni. Wernick's sales manager, for example, was Richard Laus,
the ex-brother-in-law of Brennan, who had run sales at the outlaw firm
Hibbard Brown. Wernick's operations officer was Marshall S. Maddox,
formerly the finance chief at L.C. Wegard.
When investment banking clients needed an
auditor, Wernick sent them to Brennan's
accountant, Dennis M. Gaito, who was indicted
in September of this year by the U.S. Attorney
for the Eastern District of New York. Just a
few weeks ago, according to an FBI affidavit
unsealed with Gaito's indictment, a hidden
camera videotaped Gaito telling a stock
swindler how to hide fraud proceeds in
Singapore and Monte Carlo. The alleged
scheme resembles one that bankruptcy
examiners say Gaito devised in the early 1990s
to put some $25 million of Brennan's money
beyond the reach of U.S. courts. Wernick says
he recommended Gaito to clients because Gaito
was an expert in working with shell companies. Wernick added that he hasn't
dealt with Gaito in four years.
Lehmann went to work for Wernick at Patterson Travis. Lehmann and his
wife, Tamar, lived in Woodmere, New York, where they were friends and
neighbors of Wernick and Wernick's wife, Jan. Many mornings, the two
drove in together to the Patterson Travis office in a sleek tower on
Manhattan's Battery Park.
Wernick insisted to Barron's that Travis runs Patterson Travis, and that the
Brennan alumni were "great" employees who just needed a break. "If you're
down and out," said Wernick, "I'm your best friend. No matter if you're
Jewish, black, white, green, yellow. I'm your friend."
Wernick was incredulous at any suggestion that he was a front man for
Brennan. "I have no relationship with him today," said Wernick. When we
asked Brennan if Wernick and Patterson Travis were fronting for him, he said,
"That is preposterous and absurd."
In talking to Barron's, Lehmann contended that Wernick's first underwriting
at Patterson Travis, for a Florida-based direct-marketing firm called ML
Direct, was a scam. That charge is supported by other Wernick employees
and by the U.S. Attorney for the Southern District of New York, who
indicted Wernick in September for conspiracy and stock fraud. Prosecutors
charge that the ML Direct underwriting was arranged by Randy Pace, whose
Rooney Pace firm was barred from the securities business by the SEC in the
1980s. At Pace's 27th-floor suite on Lexington Avenue in Manhattan, the
indictment says, Wernick joined a secret conspiracy that enabled the Pace
gang to dump $24 million of worthless stock on the public. Like Pace,
Wernick has pled not guilty.
At Patterson Travis, Wernick did two deals with Colin Halpern, another
Brennan associate. In 1994 Halpern merged the Domino's Pizza franchise for
Ireland and Britain into a shell controlled by Wernick. This publicly held shell,
called Crescent Capital, was one of the Brennan-controlled stocks under
SEC investigation in the early 1990s when it came into Wernick's hands.
Wernick said Brennan sold his holdings in Crescent by the time Halpern came
along.
The second stock offer Wernick underwrote for Halpern, in 1995, involved a
firm called Red Hot Concepts, which owned a Chili's restaurant franchise.
This outfit was at the heart of fraud charges brought in 1997 by the New
Jersey Bureau of Securities against a group of former Brennan associates who
were working at the New York-based brokerage firm Americorp Securities,
which is now defunct. The administrative complaint says that the Americorp
brokers bid up Red Hot shares and then foisted them on the public at inflated
prices. The beneficiaries included offshore customers at Patterson Travis with
addresses in the well-known money-laundering haunts of Mauritius and the
Isle of Man.
It's impossible for us to say if Lehmann's campaign to expose skulduggery on
Wall Street was in any way connected with his violent death. But federal
investigators are taking a look, as are New Jersey prosecutors assigned to the
murder case." |
