Thousand Oaks Firm Named in SEC Suit : Magna Technologies Called ‘Sham,’ Accused of Stock Manipulation
A defunct Thousand Oaks company and seven individuals are being accused by federal authorities of “massive manipulation” of the company’s stock in 1985 in a scheme that brought one of them at least $1 million, the Securities and Exchange Commission said Thursday.
The company, Magna Technologies, once boasted of having patents or plans to market a number of offbeat products, including a 45,000-volt “stun gun” for protection against muggers, an “insta-cup” to make instant soup, a device to help sexually impotent men and a hand-held, battery-powered pain reliever. The SEC, however, described Magna as a “sham company” that operated mainly in order to manipulate its stock price.
According to the SEC, the manipulation scheme pushed the stock price from less than 75 cents a share in March, 1985, to more than $9 six months later. The stock price then collapsed, falling back to less than 75 cents. Magna is no longer in business, authorities said, and the stock is no longer traded.
Court Order Sought
The SEC is seeking a court order to prevent the defendants from violating securities regulations and to force them to give up any profits acquired illegally.
In the civil suit, filed late Wednesday in U.S. District Court in Los Angeles, the SEC alleged that the stock was manipulated primarily by two of the defendants, investor Jacob Rubenstein, 43, of Agoura Hills, and Magna’s former chairman, Dr. Robert A. Gutstein, 50, an Agoura Hills plastic surgeon who lives in Thousand Oaks.
Rubenstein could not be reached for comment. Jonathan Schwartz, a Marina del Rey attorney who said he represents Gutstein, said the physician was “set up” by professional stock promoters. “He was made a dupe,” Schwartz said.
The SEC said the two men secretly obtained control of Magna stock before the manipulation began and alleged that they were assisted by Herbert Stone, a New York stockbroker who was named in the suit for his role as the “lead market maker in Magna’s stock.”
Stone, who could not be reached for comment, is scheduled to be sentenced next Thursday on an April 1 conviction in U.S. District Court in New York for manipulating the stock of European Auto Classics of Great Neck, N.Y.
According to SEC attorney Dennis R. Dumas, Magna went public in late 1984 or early 1985 when Rubenstein and Gutstein spent $44,000 to buy Bashney Biscuit, a company in Florida with publicly traded stock but no operations, and merged it into Magna.
The SEC said the two men arranged for stock to be transferred to at least 10 friends, relatives and associates who then opened accounts at brokerages around the country. Magna’s stock price was raised, the SEC said, through prearranged trades in which one associate would buy stock at one brokerage firm and another would sell shares at a separate firm.
Once Magna’s stock price rose, the SEC said, Rubenstein reaped at least $1 million by disposing of stock through Stone, who was then working at Norbay Securities, a New York City brokerage now being liquidated.
Also allegedly assisting in the stock manipulation and named in the suit was Florida stockbroker David Siegel.
Three of the associates who the SEC said opened accounts to trade Magna stock--Lawrence Ruben, Stephen Dulyea and Jerome Feinstein--were also named in the suit. They also could not be reached Thursday.
The SEC’s Dumas said Dulyea had agreed to abide by the court’s final judgment in the case.
