Here's the details on the Randolph Pace indictment, that's broadening to include Senator Robert Torricelli (D), R. Harriton (former Pres os Bear Stern Securities) and his son Matthew along with our Mr. Judah Wernick.......add a bit of murder to the mix and this one is likely to get messy. Definitly worth a movie script.....don't think the Hollywood writers could be this creative on their own.
Mad2
Copyright 1999 The New York Times Company
The New York Times
September 3, 1999, Friday, Late Edition - Final
SECTION: Section C; Page 2; Column 4; Business/Financial Desk
LENGTH: 1074 words
HEADLINE: Ex-Broker Faces Broader Federal Charges
BYLINE: By GRETCHEN MORGENSON
BODY:
Randolph Pace, the man who prosecutors say was the mastermind behind a big securities fraud in the early to mid-1990's, was charged yesterday with directing a wider conspiracy that involved three brokerage firms, the manipulation of 11 companies' stocks and $200 million in illegal profits.
Mr. Pace, a former brokerage firm executive, has been under indictment since November on charges of manipulating the shares of six companies through Sterling Foster, a defunct New York securities firm that prosecutors say he secretly controlled. But according to a 26-count superseding indictment brought yesterday by Mary Jo White, the United States Attorney for the Southern District of New York, Mr. Pace's fraudulent activities were much more extensive. Previously, prosecutors had said that Mr. Pace and Sterling Foster had defrauded investors of $100 million.
Now they say that Mr. Pace, 53, and Alan Novich, 52, a longtime associate, also enlisted the aid of eight individuals, including employees and top management at VTR Capital and Investors Associates, two defunct brokerage firms, to help manipulate the stocks and reap illegal gains. Prosecutors say Mr. Pace, a founder of Rooney Pace Inc., a defunct brokerage firm, tried to conceal his involvement because he had been barred from the securities industry. Nevertheless, prosecutors say that he controlled Sterling Foster and VTR Capital, a firm that had offices in New York, Colorado, Florida, Georgia and Pennsylvania.
In a statement, Ms. White said, "Today's charges should serve notice that any violations of the Federal securities laws, even the most creative and complex schemes, will be uncovered by law enforcement and aggressively prosecuted."
Robert G. Morvillo, the lawyer representing Mr. Pace, said that his client intended to plead not guilty to the charges.
The actions cited by prosecutors took place from 1995 through 1997 and began with the issuance to Mr. Pace and his associates of cheap "founders" stock in companies about to go public in offerings underwritten by VTR Capital and Investors Associates. Prosecutors say that before the offerings, Mr. Pace and his colleagues agreed to sell their shares to the underwriters at prearranged prices, resulting in substantial profits to the insiders. Then shares in the companies were sold to the public by brokers using abusive sales practices, such as misrepresenting facts about the companies and their prospects to pump up demand for the stock. This created illegal profits for the firms selling the shares. Most of the companies' share prices subsequently collapsed.
The companies whose shares were underwritten by VTR Capital and Investors Associates were Interiors Inc., a company that made picture frames; Compare Generiks, a distributor of over-the-counter drugs; Perry's Majestic Beer, a brewer; Decor Group, a maker of sculptures, and Superior Supplements, a manufacturer of dietary supplements.
Also named in yesterday's indictment were Warren Schreiber, 43, a former broker with VTR Capital; Vincent Grieco, 33, co-manager of the Melville, N.Y., office of Investors Associates; Judah Wernick, 35, a principal of Patterson Travis, a brokerage firm with offices in New York; Robert Landau, 57, an investor in three of the offerings, and Nancy Shalek, 44, chairman of three of the companies. VTR Capital and Investors Associates were charged, as well.
Co-conspirators named in the indictment were Lawrence Penna, 55, the former president and chief executive of Investors Associates; Herman Epstein, 58, compliance director of the firm, and Douglas Mangan, 37, a former supervisor at the firm's Melville, N.Y., branch. Phone calls to Mr. Schreiber, Ms. Shalek and Mr. Landau and Mr. Novich were not returned last night. The others could not be reached.
The Securities and Exchange Commission, in a separate announcement yesterday, said that it had filed a civil securities fraud case against Mr. Penna, Mr. Epstein and Mr. Mangan, saying the executives had made more than $33 million in illegal profits through the fraudulent underwritings and manipulations. The men settled with the S.E.C., neither admitting nor denying the accusations. Investors Associates was the subject of 47 regulatory actions before it closed last year.
Six individuals involved in the Sterling Foster case have already pleaded guilty to Federal charges and have agreed to forfeit $32 million in illegal gains. These people include Adam Lieberman, former president of Sterling Foster, and Hartley Bernstein, a securities lawyer who was close to Mr. Pace.
Securities lawyers say that the new charges against Mr. Pace turn up the heat on him to identify other individuals who may have been involved in any fraudulent activities.
Mr. Pace is a close friend of Richard Harriton, the former president of Bear Stearns Securities Corporation, the subsidiary of the Wall Street firm that processes trades for smaller, less well-capitalized brokerage firms. Mr. Harriton resigned from Bear Stearns last month after being accused by the S.E.C. of securities fraud for his role in the failure of A. R. Baron, a brokerage firm that defrauded investors of $75 million. Bear Stearns cleared A. R. Baron's trades. Mr. Harriton is fighting the S.E.C. charges.
Mr. Harriton's son Matthew was closely involved in three of the five companies whose shares, prosecutors say, were manipulated by Mr. Pace and his colleagues. Matthew Harriton was either a director or the recipient of founders' stock or was both in Decor Group, Perry's Majestic Beer, and Superior Supplements. Mr. Harriton did not return a phone call seeking comment.
Mr. Penna of Investors Associates has been a major Democratic fund-raiser and contributed $10,000 in 1997 to the Democratic Senatorial Campaign Committee. Senator Robert G. Torricelli, Democrat of New Jersey, was co-chairman of the committee at the time. Investors Associates contributed $50,000 to Mr. Torricelli's campaign against Richard A. Zimmer, a Republican, in 1996, according to The Star-Ledger of Newark. Mr. Torricelli invested in the initial stock offering of Compare Generiks, one of the offerings prosecutors said was manipulated, making $52,446 profit in 24 hours, according to The Star-Ledger. Mr. Penna was Mr. Torricelli's account executive on the transaction, the paper said.
Senator Torricelli could not be reached for comment last night, nor could Mr. Penna.
nytimes.com
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