NASD Probing Organized Crime Links to 9 Brokerages (old line scam)
Washington, March 18 (Bloomberg) -- The National Association
of Securities Dealers told Congress it's investigating nine
brokerages and 19 small companies for possible organized crime
links and other securities violations.
''Organized crime is included, but our look is much broader
than that, at any violation of securities rules or criminal
behavior,'' NASD Regulation Inc. spokesman Michael W. Robinson
said today.
NASD Regulation President Mary L. Schapiro addressed the
possible presence of organized crime in a speech today in
Florida.
''We believe the presence exists, and it's disturbing -- but
we also believe it to be extremely limited,'' Schapiro told the
Securities Industry Association Compliance and Legal Conference
in Orlando.
Schapiro told Rep. John Dingell, a Michigan Democrat, last
month that the industry body is investigating all the securities
firms mentioned in a Business Week article about organized crime.
Dingell's staff released a copy of the Feb. 28 letter today.
Nine Brokerages
While 15 firms were cited in the Dec. 16 Business Week
article, Robinson said that the NASD inquiry covers only those
alleged to have organized crime ties. Nine brokerages were linked
to mobsters in the article. Among them were Sovereign Equity
Management Corp. of Boca Raton, Florida; PCM Securities Ltd. of
New York; Monitor Investment Group of New York and Euro-Atlantic
of New York.
Sovereign compliance director Thomas Hands said the firm
''vehemently'' denies Business Week's ''irresponsible
allegations.'' The magazine confused firm customers with people
who control the brokerage, he said. The other eight firms cited
in the article did not respond today to requests for comment or
couldn't be reached.
Schapiro also said in her letter that NASD Regulation is
investigating and reviewing trading activity in the stocks of 19
companies listed on the Nasdaq Stock Market or the OTC Bulletin
Board run by Nasdaq. All these companies were mentioned in the
Business Week article. Their stock was either underwritten or
sold by many of the firms under investigation, the magazine said.
Among the companies cited are Reclaim Inc., Santa
Monica, California-based Osicom Technologies Inc., Novatek
International Inc. and Albuquerque, New Mexico-based Solv-Ex
Corp.
Osicom Denial
Osicom chief executive Par Chadha said today: ''Our
inclusion was a total reckless, careless (act) on the part of
Business Week.'' He said none of the firms cited in the article
traded in his company's stock ''to any significant extent.''
''We are being set up by short sellers,'' said Chadha, whose
company makes fiber-optic products. Even so, Toluca Pacific
Securities was the third largest trader in Osicom shares in
October, accounting for 8.5 percent of the total traded that
month.
Six other companies -- Fun Tyme Concepts, Alliance
Broadcasting, TJT, Solv-Ex, Cable & Company Worldwide, and
Innovative Medical Services -- denied any knowing involvement
with mob figures.
''We certainly have the symptoms, with our price rising
dramatically at our IPO (in December 1995) and falling
dramatically shortly afterward,'' said Scott Beechie, TJT's
controller. ''But our company has absolutely done nothing
wrong.''
Innovative Medical Services chief executive Michael Krall
said his company's stock couldn't have benefited from Monitor's
trading, as Business Week suggested. The brokerage went out of
business two months before Innovative Medical's IPO, he said.
Monitor couldn't be reached for comment.
International Nursing Services received a January document
subpoena from a federal grand jury in New York, said company
president John Yeros. ''They made clear we weren't the target or
subject of the investigation,'' he said. The U.S. attorney's
office in New York declined comment.
NASD Inquiry
Schapiro's letter said the NASD had been investigating all
but one of the brokerages and many of the companies before the
Business Week article was published.
''Since that time, we initiated an investigation of the one
remaining firm and conducted a review of trading activity in the
remaining securities,'' her letter said.
Following the magazine article, Dingell asked the NASD,
Securities and Exchange Commission and Justice Department to
report on their efforts to halt organized crime in U.S. stock
markets. Both the SEC and NASD asked to give Dingell private
briefings. The Justice Department hasn't yet responded to the
request, a Dingell spokesman said.
Schapiro, in her speech today, said the NASD has formed a
task force headed by Barry R. Goldsmith, executive vice
president, to share organized-crime information with the FBI.
Two brokerages not under investigation said today they were
recently questioned by investigators about stocks they may have
traded.
Sharpe Capital Inc. chief executive Larry Hoes said the FBI
asked him about trading in as many as 50 companies, but Hoes said
he told investigators his firm traded in only three of those
stocks.
D.L. Cromwell Investment Inc. president Lloyd Beirne said
the SEC requested information on 16 companies, but Beirne said
his firm hadn't traded any of those stocks.
The SEC and FBI declined comment.
The first public report of investigators' interest was a
Bloomberg News article in October, which said the FBI was trying
to determine if organized crime families helped 46 stock
promoters charged with penny-stock fraud that month.
Business Week reported in December that organized crime was
defrauding investors by driving share prices up and then dumping
the stock on investors who were the target of cold calls.
In February, the New York Times reported that investigators
were looking into possible fraud by the Genovese, Gambino and
Colombo crime families in initial public offerings of small
stocks.
Business Week reported this week that Philip Abramo, a capo
in the DeCavalcante crime family, controls Sovereign Equity
Management, which exploited its initial public offering of SC&T
International Inc. to profit at the expense of investors. Abramo,
Sovereign and SC&T denied many of the allegations.
Lists of Brokerages, Companies
The firms identified in the December Business Week article
as having possible organized crime ties are:
Euro-Atlantic of New York
Falcon Trading Group
Greenway Capital Corp.
Landmark International Equities in Long Island, New York
Monitor Investment Group of New York (Firm ceased operations
in June)
PCM Securities Ltd. of New York
Sovereign Equity Management Corp. of Boca Raton, Florida
State Street Capital Markets
Toluca Pacific Securities Corp.
The companies identified in the article are:
Affinity Entertainment Inc. of Tampa, Florida
Beachport Entertainment Corp. of Los Angeles
Cable & Co. Worldwide of New York
Celebrity Entertainment Inc. of Palm Beach, Florida
Crystal Broadcasting, which changed its name to Alliance
Broadcasting Group in December
First Colonial Ventures Ltd. of Los Angeles
Fun Tyme Concepts of Staten Island, New York
Global Spill Management Inc. of Norristown, Pennsylvania
Innovative Medical Services of El Cajon, California
International Nursing Services Inc. of Denver
Mama Tish's Italian Specialties (Public offering postponed
in November; acquired by J&J Snack Foods in January)
Novatek International Inc. of Columbus, Maryland (Filed for
bankruptcy in October)
Osicom Technologies Inc. of Santa Monica, California
Reclaim Inc. (Delisted from Nasdaq in January 1996)
SC&T International Inc. of Phoenix
Solv-Ex Corp. of Albuquerque, New Mexico
T.J.T. Inc. of Emmett, Idaho
U.S. Bridge of New York
--Neil Roland and Lynne Marek in Washington newsroom (202) 434-
1820 and Dylan Ratigan in New York (212) 318-2606 and David Evans
in Los Angeles (310) 827-2348 /ch/ge
Story illustration: For graph of recent stock activity in Osicom:
FIBR <Equity> GP D; To see market makers in Osicom during October
1996 and their relative activity levels: FIBR <Equity> MKAC <Go>,
then tab to ''Date'', enter 10/96 and hit <Go>.
Company news:
7127Z US <Equity> CN Herzog, Heine
ROOF US <Equity> CN Reclaim
FIBR US <Equity> CN FIBR
NVTKQ US <Equity> CN Novatek
SOLV US <Equity> CN Solv-Ex
SOLVC US <Equity> CN Solv-Ex
FUNT US <Equity> CN Fun Tyme
CCWW US <Equity> CN Cable & Co.
AFTY US <Equity> CN Affinity
BPRT US <Equity> CN Beachport
CLEB US <Equity> CN Celebrity Entertainment
CLEBD US <Equity> CN Celebrity Entertainment
CBCE US <Equity> CN Crystal Broadcasting
FCVL US <Equity> CN First Colonial
GEGIE US <Equity> CN Global Spill
GSMI US <Equity> CN Global Spill
FILM US <Equity> CN Hollywood Productions
PUR US <Equity> CN Innovative Medical
PURE US <Equity> CN Innovative Medical
NURS US <Equity> CN International Nursing Services
MAMA US <Equity> CN Mama Tish's
SCTI US <Equity> CN SC&T
TJT US <Equity> CN TJT
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-0- (BN ) Mar/18/97 17:31 |
