I think your right.....wasn't CCSI the focus of a article in Barrons a year or so ago.
By the way here's the resolution of the Wegard case (recognize any of the guy's mentioned?)
Copyright 1997 Bergen Record Corp.
The Record (Bergen County, NJ)
November 14, 1997; FRIDAY; ALL EDITIONS
SECTION: NEWS; Pg. A04
LENGTH: 657 words
HEADLINE: U.S. INDICTS 8 BROKERS WITH TIES TO BRENNAN
SOURCE: Wire services
BYLINE: JEFFREY GOLD, The Associated Press
DATELINE: NEWARK
BODY:
Federal authorities on Thursday indicted eight stockbrokers with
ties to sanctioned financier Robert E. Brennan, accusing them of
employing fraudulent sales practices to push low-cost stocks in a
"boiler room"operation from 1991-95.
Brennan is not accused in the 96-count indictment, which adds
federal criminal charges to civil actions brought earlier by New Jersey
officials.
Federal prosecutors do not state how much money was lost by the
thousands of investors who bought stocks through now-defunct L. C.
Wegard & Co. Inc., which was based in New York City and had branches in
Princeton, Pennsylvania, New York, Illinois, and Rhode Island.
State authorities have charged that Wegard and another closed
brokerage, Hibbard Brown & Co. Inc., were secretly controlled by
Brennan, whom they accuse of making illegal profits of more than $ 100
million at the expense of individual investors from 1988 to 1995 by
manipulating the prices of penny stocks.
The federal indictment does not allege price manipulation, and the
prosecutor handling the case, Assistant U.S. Attorney David M.
Rosenfield, said federal authorities could not discuss whether they were
investigating Brennan.
However, acting First Assistant U.S. Attorney Joseph G. Braunreuther
said:"The investigation into Wegard's activities is continuing. We
anticipate that our evidence will identify additional individuals who
are involved in the securities fraud."
The indictment charges that the eight Wegard brokers, including
national sales manager Michael McDermott and several branch managers,
directed efforts to mislead customers to buy certain high-risk stocks.
The"Wegard stocks", about two dozen speculative securities pushed
by the brokerage's sales force, cost 10 cents a share to $ 13 a share,
Rosenfield said. All traded"over the counter,"except for an AMEX
issue, International Thoroughbred Breeders Inc., a company founded by
Brennan.
This year, Brennan was forced to sell his controlling stake in
International Thoroughbred Breeders, which operates two horse tracks.
McDermott, of Clarksburg, is the only defendant in the federal case
also charged with Brennan and others in the lawsuit brought by New
Jersey authorities.
Brennan and his now-shuttered company, First Jersey Securities Inc.,
became nationally known in the mid-1980s through television
advertisements in which Brennan stepped from his helicopter and urged
investors to"come grow with us."
Last month, the U.S. Supreme Court refused to hear Brennan's appeal
of a 1995 ruling ordering him to pay what is now $ 78 million for
"flagrant and deliberate"violations of securities laws.
That judgment prompted Brennan and First Jersey to file for Chapter
11 bankruptcy protection.
Formerly a resident of Brielle and Colts Neck in Monmouth County,
Brennan recently moved to Juno Beach, Fla.
All eight charged in the federal indictment face charges of
conspiracy and securities fraud. Each charge carries penalties of up to
five years in prison and a $ 250,000 fine. The suspects and the number of
counts they face:
Michael McDermott, 37, 23 counts.
David Nelson, 36, Olathe, Kan., branch manager in Mount
Prospect, Ill., and Tarrytown, N.Y., 11 counts.
Samuel Delpresto, 30, Jupiter, Fla., formerly of Colts Neck,
co-branch manager at Mount Prospect and assistant branch manager in
Princeton, 11 counts.
Mark McDermott, 34, Glendale Heights, Ill., formerly of Toms
River, 10 counts, co-branch manager in Mount Prospect.
Gary Smolokoff, 37, Perrineville, nine counts, New York City
branch manager.
Curtis Marchand III, 30, Denver, Colo., assistant branch
manager in Mount Prospect, six counts.
Palmer Myers, 29, Hillsborough, 12 counts, assistant branch
manager in New York.
Richard Blumette, 38, Parlin, 17 counts, a manager at the
Princeton office.
LANGUAGE: English
LOAD-DATE: November 14, 1997
Copyright 1994 Forbes, Inc.
Forbes
View Related Topics
October 10, 1994
SECTION: ON THE COVER; Pg. 42
LENGTH: 1464 words
HEADLINE: The game's the same, the name's different
BYLINE: By Amy Feldman and Neil Weinberg
HIGHLIGHT:
First Jersey and Hibbard Brown bilked investors out of tens of millions of dollars. But that's history, isn't it? Oh, yeah?
BODY:
IN JANUARY 1993 retiree Harold Wiant did a very dumb thing. Without bothering to check the firm's credentials, he agreed to let a broker at L. C. Wegard & Co. set up a retirement account. Instead, Wegard's Bensalem, Pa. branch manager, Lawrence Weil, set up a regular account and filled it mostly with penny stocks to the tune of $ 200,000. Three months later Wiant figured out what was going on and liquidated the account, by which time he'd lost $ 95,000, according to charges filed by his attorney with the National Association of Securities Dealers.
That's just one horror story of many about New York-based L. C. Wegard, once owned by Victor and Lillian Wegard. But the Wegards sold out in 1991 to a gang that traces its lineage through Hibbard Brown & Co. all the way back to the notorious Robert Brennan of First Jersey Securities (FORBES, Oct. 26, 1992).
First Jersey, once a penny-stock network with over 1,000 brokers, sold its 35 branches in 1987 but is still a registered broker-dealer. Brennan, its mastermind, still lives on a grand scale, still shows himself to the world as a philanthropist, though he is now on trial for bilking investors by excessively marking up worthless or near-worthless penny stocks. After FORBES exposed Brennan's machinations in July 1984, many First Jersey brokers moved to Hibbard Brown, which peddled many of the same stocks. Hibbard and a related bucket shop, F. N. Wolf, were effectively banned from retailing penny stocks this summer by the NASD for excessive markups similar to First Jersey's (Aug. 15).
And now L. C. Wegard. As they did from First Jersey to Hibbard, many of the same slicksters have now moved from Hibbard Brown to L. C. Wegard's seven offices. No surprise Wegard is flogging many penny stocks once sold by First Jersey and Hibbard.
"It's a mirror image of what happened when First Jersey went under," says Stanley Van Etten, a longtime broker at First Jersey and F. N. Wolf, who later testified against his former bosses. "First they change their name so John Public and John Regulator think it's a new organization. Then they say to the suckers, 'Mr. Jones, we're starting over. Sell all your stocks. We'll make it all back.'"
Under its new ownership, Wegard has hired a slew of former First Jersey and Hibbard Brown brokers, including branch managers, and begun flogging a number of stocks with ties to Robert Brennan. Among them are Chefs International, Great American Recreation and Primedex Health Systems (see table).
Do we have a deal for you . . .
Company name/business
Underwriter Wegard's Recent Annualized
most price gain/loss
recent from
recommended Wegard's
price and price
date
Chefs International First Jersey 5 3/4 in 7/8 -86%
Operates 9 restaurants. Robert 10.93
Brennan owns 39%.
Consolidated Techonology Hartzmark 5 1/2 in 7/8 -100
Electronics, finance. Formerly & Co. 7/94
Sequential Information
Systems.
First Chesapeake Financial Hibbard * 8 in 7/8 -99
Mortgage lending Brown 7/93
Futurebiotics LC Wegard 4 1/2 in 3 1/8 -98
Spinoff of PDK Labs 8/94
Great American Recreation First Jersey 1 1/4 in 1/8 -94
Operates NJ recreation 12/93
park and ski area.
Lafayette Industries LC Wegard * 6 in 9 90
Store fixture firm. 5/94
Bought from bankruptcy.
LuxCel Group Westfield * 10 in 6 1/2 -65
Moneylosing wireless Fin, LC 8.93
communications firm. Wegard
PDK Labs Hibbard 1 3/4 in 1 1/16 -98
Vitamin maker. Brown 7/94
Primedex Health Systems Rooney 2 5/8 in 13/16 -91
Operates 8 medical clinics. Pace 4/94
Brennan formerly controlling
shareholder.
Process Equipment Westminster 6 1/2 in 3/16 -83
Stainless steel Securities 8/92
products maker.
* Denotes units. First Chesapeake: 2 common shares, 2 warrants. Lafayette: 1 common share, 1 warrant. LuxCel: 5 common shares, 1 warrant.
Sources: Former L. C. Wegard brokers; Standard & Poor's; Bloomberg; company prospectuses.
Wegard makes out like a bandit flogging junky stocks at huge markups. Investors get mauled.
"Wegard has become a virtual clone of Hibbard and First Jersey," according to a court document filed by the New Jersey Bureau of Securities. Neither the Securities & Exchange Commission nor the New Jersey Bureau of Securities has been able to put the Brennan gang out of business.
Brennan denies any involvement in L. C. Wegard beyond a friendship with its president. "This is part of a fantasy [by the New Jersey regulators] to try to create the illusion that these companies have anything to do with me," Brennan told FORBES.
But facts suggest otherwise.
In 1991 a former PaineWebber broker, Leonard Greer, bought Wegard with a $ 500,000 loan backed by a private Brennan firm. Greer did well: In the months surrounding his purchase of Wegard, he netted $ 1.7 million from related private transactions with Brennan's firm, according to documents filed by the New Jersey Bureau of Securities.
One month after the purchase, Greer named Michael McDermott head of sales at Wegard. McDermott had climbed the ladder at First Jersey and had run a Hibbard office. Greet quickly expanded the firm from around 20 brokers to well over 100, including at least 26 former Hibbard brokers. Among the more notorious: 6 brokers who were fined for boiler-room sales tactics and whose licenses were briefly suspended in Kansas. When 3 of them were rebuffed by New York, they scampered to Pennsylvania, which approved them.
Of Wegard's remaining 100-plus brokers, most are green college graduates. They earn 8% or 9% commissions if they push featured stocks but peanuts if they simply fill a client's order. Among the recruiters: William Amwake, who was barred from the securities business following his conviction for criminal conspiracy while a vice president at First Jersey.
Wegard targets individuals with the three-call pitch. On the initial cold call, the broker introduces himself and asks if he may call back if he has something hot. The second call informs the sucker the broker may soon have a hot tip. The "closing" call includes "price predictions . . . false and misleading statements; and omissions of material fact," say the New Jersey Bureau of Securities documents. The bureau has been investigating Wegard since 1991.
One recent stock of the month? Futurebiotics Inc., a $ 5 million (1993 sales) distributor of vitamin supplements based in Hauppauge, N.Y.
Futurebiotics is an offspring of PDK Labs Inc., long a Hibbard, and recently a Wegard, favorite. On Aug. 19 Wegard sold 1 million units (two shares and two warrants) of Futurebiotics at $ 6.25 each. Futurebiotics, PDK'S vitamin distribution business, buys all its products from PDK at a guaranteed 15% profit to the parent.
No sooner were the units safely tucked into client accounts than Futurebiotics' stock went south. The stock closed its first trading day at 4 1/4, or 61 times earnings. The next day it fell to 2 3/4 and hardly budged until volume surged again in late September. Underwriter Wegard fared much better, siphoning off $ 812,500, or 14% of the total money raised.
Then there's Primedex Health Systems, Inc., long a Brennan favorite when named CCC Franchising. The Newark, N.J.-based clinic operator, of which Brennan had been a controlling shareholder until recently, lost $ 11 million last year on revenues of $ 35 million. The Los Angeles County District Attorney is probing possible criminal violations and in June searched offices at Primedex, First Jersey, Wegard, Hibbard and F. N. Wolf. As recently as March, Wegard's Princeton office was flogging Primedex at 2 5/8; it recently closed at 13/16.
Wegard's brokers often jack up prices 100% or more, buying at one price and soaking customers for twice that, according to the New Jersey Bureau of Securities documents. The NASD prohibits "excessive" markups, which in most cases means more than 5% over cost. The bureau estimates Wegard made $ 12 million selling $ 33 million in stocks from September 1991 through April 1993.
Wegard President Leonard Greer insists everything is above board. "We have no thoughts pertaining to what may have occurred at other firms," says Greer. "There's nothing here that can't stand up to appropriate scrutiny."
Will regulators shut Wegard? Eventually, they probably will. The SEC and state regulators are investigating. In May, for example, Connecticut charged Wegard with unethical practices, and the firm signed a consent decree to settle. But don't bet that the protean Brennan gang won't simply reappear under another name.
GRAPHIC: Cover Photograph and Picture, no caption, by Rob Kinmonth
LANGUAGE: ENGLISH
LOAD-DATE: October 07, 1994
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