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Charges Added in Newport Securities Case

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Times Staff Writer

Federal prosecutors filed a new racketeering indictment in the Princeton/Newport Partners securities fraud case, increasing the number of felony counts to 68 from 35 and adding charges that the firm’s top executives engaged in illegal trading through the U.S. unit of a British investment house.

The five officials of Princeton/Newport, a small securities firm with offices in Princeton, N.J., and Newport Beach, were first indicted in August. The firm has since gone out of business, citing the pending racketeering charges.

The case centers on an alleged scheme by the five to generate illegal tax losses through phony stock trades. Much of the allegedly illegal trading took place in transactions with Drexel Burnham Lambert Inc. But the new indictment also charges that the officials made similar trades through S. G. Warburg, Rowe & Pitman, Akroyd Securities Inc., a subsidiary of London-based S. G. Warburg Group. The Warburg unit isn’t charged with any crimes in the indictment but is listed as a “co-conspirator.”

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The case has received wide attention because it is the first time the U.S. attorney’s office in New York has used the racketeering statute against the principal owners of a securities firm. The law, the Racketeer Influenced and Corrupt Organizations Act, or RICO, allows prosecutors to freeze assets pending a trial and provides for strict penalties if defendants are convicted, including forfeiture of assets and lengthy prison terms.

A new indictment had been expected for some time. A trial is scheduled for June 5. The new indictment also adds charges related to the filing of allegedly false tax returns.

The indicted Princeton/Newport officials are James S. Regan, Jack Z. Rabinowitz, Charles M. Zarzecki, Paul A. Berkman and Steven B. Smotrich. As in the original indictment, the one filed Thursday also names a former Drexel trader, Bruce L. Newberg, as a defendant.

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