DON BAUDER
Stock market has its shady side
May 25, 2002
Troy M. Peters, who is now out of jail on $200,000 bond, was a lieutenant of notorious short seller Amr I. (Anthony) Elgindy.
Peters' previous record in the stock market was not distinguished, either.
He served in an investment banking post for San Diego's Hampton-Porter, which abruptly departed its headquarters at 101 W. Broadway last year and is presumed to be out of business.
But this firm, which specialized in very speculative securities, still faces pending hearings with aggrieved shareholders.
There is an arbitration beginning June 3 in Houston. Peters is one of the defendants.
San Diego attorney Ronald A. Marron represents a Texas couple who ran a Christian bookstore and summer camp. Steven and Jenifer Crosby of New Braunfels, Texas, say they got a cold call from a Hampton-Porter broker who told them they could make good returns using conservative investment strategies, putting most of the money in a diversified mutual fund.
The trusting couple transferred $1.2 million to the firm.
They learned that their broker would be putting them on margin – that is, they would be buying stocks with borrowed money. Initially, the value of their account rose to $3.2 million, they were told, but $1.2 million of that was on margin.
They were uncomfortable. They flew to San Diego and said they wanted the margin cut in half in six weeks, then reduced incrementally until it was gone. Then, they wanted their money put in conservative mutual funds, as initially promised. But that did not happen, according to their complaint.
The Hampton-Porter broker put the Crosbys heavily into El Segundo's En Pointe Technologies, an e-commerce stock that got above $47 before the tech bubble burst in 2000, and yesterday closed at $1.05.
Hampton-Porter liquidated two of the couple's mutual funds that were worth a little over a million dollars, "but they kept them in En Pointe Technologies," says Marron.
"Troy Peters was the investment banker for Hampton-Porter," says Marron. "He handled En Pointe's proprietary account at Hampton-Porter."
The Crosbys are seeking $1.25 million in the arbitration.
After the brokerage seemingly disappeared, Peters went with two other employees, Kelly Hobbs and James Green, to First Geneva Securities, according to Marron. I determined from government sources that Peters had formerly worked at First Geneva, and I found that Hobbs and Green are still there, but I could not reach them for comment yesterday.
Neither Peters nor his lawyer returned phone calls yesterday.
Patrick Keegan of the law firm of Krause & Kalfayan has a lawsuit in federal court against Hampton-Porter. "It alleges a conspiracy between the officers and directors of En Pointe and Hampton-Porter and their principals to engage in a pump-and-dump scheme of En Pointe stock," says Keegan.
"Troy Peters is not specifically named, but I will amend the complaint to add him as a defendant," says Keegan. In a pump-and-dump scheme, insiders with cheap shares inflate a stock through hyperbole, then sell out at huge profits.
According to the indictment unveiled this week, Peters and Derrick Cleveland, who was also charged, assisted Elgindy in the operation of Pacific Equity Investigations and its newsletters and Web sites.
Peters, Cleveland and Elgindy used derogatory information "to extort cheap or free shares of stock from the insiders of targeted companies in exchange for agreeing no longer to short sell the companies' stock or spread negative information about the companies," says the government's complaint.
Once Elgindy and Peters decided their "extortionate demands" were satisfied, they told subscribers "that they should stop short selling, cover their short positions by buying stock and refrain from further dissemination of negative information regarding the targeted company," charges the government.
Short sellers borrow stock, sell it, and then hope to replace it later at a lower price. When they cover their shorts, they are buying the stock to replace that which they have borrowed.
Peters also assisted Elgindy in manipulating shares, says the government.
According to a former Hampton-Porter broker, who is an information source for Marron, Peters was talking with Elgindy while still working at the brokerage.
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Don Bauder: (619) 293-1523; don.bauder@uniontrib.com
Copyright 2002 Union-Tribune Publishing Co. |
