Reid Is Arrested, Cited for Failure to Make Payments

Texas businessman Thomas W. Reid has been arrested and cited for contempt of court for failing to compensate two securities firms that allegedly lost $159,700 in a securities-fraud scheme he conceived, according to the Securities and Exchange Commission.

Reid, of Grandview, Tex., agreed last March to compensate E. F. Hutton and City Securities Corp. in return for the SEC dropping a suit against him.

At the time, he also consented to obey securities and anti-fraud laws, although he did not admit any wrongdoing.

He was cited for contempt by U.S. District Judge John H. Keenan in New York for failing to make payments to the companies and for statements suggesting that he would be unable to raise the money, according to Ira L. Sorkin, administrator of the SEC’s New York regional office.

Reid was accused of manipulating the stock of First City Properties, a Los Angeles real estate company, in a so-called free-riding scheme.

The SEC alleged that Reid and associates placed large orders for the stock that they did not intend to buy.

They hoped that the price of the stock would drop when their brokers dumped their unsold orders back on the market and that they could purchase it at the lower price, then profit on the stock’s rebound.

Sorkin said Reid was arrested at his home in Texas on Dec. 5 and has not yet appeared before Judge Keenan.