ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, October 11, 1996 TAG: 9610110046
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Bloomberg Business News
U.S. agents posing as stockbrokers moved Thursday to arrest 45 people in a crackdown on fraudulent securities sales.
Prosecutors said the three-year investigation uncovered a ring of stock promoters - including officers of at least four publicly traded companies - who bribed brokers to get them to tout certain shares. So far, 36 people have been arrested in the case and nine more arrests will follow, Mary Jo White, the U.S. attorney in New York, said at a press conference in New York. The arrests are the most ever in a stock fraud case.
``The gloves are off in the fight to protect this nation's financial markets,'' White said.
Investigators set up an undercover brokerage firm in Manhattan manned by FBI agents to nab the defendants. It was the first time the FBI has used such a front to go after stock fraud, said James Kallstrom, director of the FBI office in New York.
While providing few details about the sting operation, Kallstrom said stock-promoting brokers and executives typically found the FBI brokerage through word of mouth.
Most of the stock promoters were individuals who acted on their own to push small stocks that trade on the OTC-Bulletin Board run by the Nasdaq stock market.
Among the Wall Street firms for which some of the accused brokers worked were Merrill Lynch & Co., Dean Witter Discover & Co., and Gruntal & Co., the charges said. The company chairmen targeted in the investigation currently head Salt Lake City-based Golf Ventures Inc., Phoenix-based Princeton American Corp., and Garden City, N.Y.-based Command Credit Corp.
The states in which the promoters worked were New York, California, Florida, Utah, Colorado, New Jersey, Illinois, Hawaii, Arizona and Virginia. Others worked in Toronto and Vancouver, Canada.
Among the stocks illegally promoted, in addition to Golf Ventures and Princeton American, were New York-based Interactive Information Solutions Inc., Carlstadt, N.J.-based LBU Inc., Phoenix-based Pollution Controls International Corp., Phoenix-based Alpha Solarco Inc., and Garden City, N.Y.-based Command Credit Corp.
The bribes often amounted to between 30 and 40 percent of the value of the stock sold, paid either in cash or stock, White said.
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