Ex-Haas Official Indicted in Fraud Case : Allegedly Took Part in Scheme to Rig Price of ‘Penny Stocks’
The former chairman of the defunct Haas Securities Corp. was indicted on stock fraud and other charges Monday, as federal prosecutors pressed forward with a wide-ranging stock manipulation investigation begun after the market crash of October, 1987.
Eugene K. Laff, 51, was indicted on 15 counts of fraud, conspiracy and other charges stemming from an alleged scheme to manipulate the prices of over-the-counter stocks between January, 1986, and May, 1988. The counts also included a charge of obstructing an investigation of the Securities and Exchange Commission.
Former Haas President Stanley Aslanian Jr. has already pleaded guilty to conspiracy in the case, which came to light as Haas was liquidated in the aftermath of the crash. The market collapse yielded evidence of stock manipulation at a number of other securities firms that federal prosecutors are also investigating.
Acting U.S. Atty. Benito Romano said Laff and co-conspirators used a number of means to raise and maintain the prices of the shares of the small companies, commonly called “penny stocks.”
To create the appearance of demand for the shares, they sold stock into accounts in the name of Henry Lorin, a stock promoter associated with the firm, according to prosecutors. They allegedly kept share prices from declining by buying up most of what came onto the market.
These means enabled them to raise and maintain prices, even when orders to sell the stock exceeded those to buy it. The companies involved were Flores de New Mexico Inc., T. S. Industries Inc. and Big O Tires Inc.
Laff, of Greenwich, Conn., also published inaccurate information on Big O Tires in an effort to keep its stock prices up, the indictment said. On occasion, Haas also discouraged or refused to accept sell orders from customers for some of the stock.
Prices of the manipulated stocks collapsed when Haas went under.
Romano wouldn’t comment on whether Lorin is under investigation or is cooperating with investigators. Lorin could not be reached for comment.
The National Assn. of Securities Dealers, a self-regulatory organization that oversees activities of the over-the-counter stock market, has fined Laff $15,000, censured him and suspended him for two years from any supervisory position at another NASD member firm.
John Lang, an attorney for Laff, said his client is “completely innocent” and confident he will be exonerated. The indictment is based in part on the testimony of witnesses, including Aslanian, who were given special deals by prosecutors in exchange for their cooperation, Lang said.
Laff faces up to five years in jail and a maximum fine of $250,000 on each count, Romano said. Aslanian is awaiting sentencing.