Former Haas Securities Chief Indicted in TS Industries Stock Fraud Case
The former chairman of the defunct Haas Securities Corp. was indicted in New York Monday on stock fraud and other charges involving the securities of a former Orange County company and two other firms.
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 include a charge of obstructing an investigation of the Securities and Exchange Commission.
Among the companies whose securities were involved in the alleged manipulation was TS Industries Inc., an insulation manufacturer headquartered in Huntington Beach before relocating to Salt Lake City last fall.
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 stock market crash of October, 1987. 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 TS Industries, Flores de New Mexico 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.
TS Industries stock plunged from $34.50 per share before the 1987 market crash to $2 a share in the following quarter. The stock currently trades at about 53 cents per share.
TS Industries Chairman Harry Woodcock once owned 2 million shares of the company’s stock. He said the price collapse caused a significant personal loss and damaged the reputation of the businesses that he and his wife founded in 1977.
“We were battered. We lost customers when they learned what was going on in New York, and they didn’t want to be involved with us,” Haas said by telephone Monday from his home in Salt Lake City.
Woodcock said he hasn’t followed the investigation closely in recent months. He said he couldn’t comment on the indictment because he didn’t know the specific charges brought against Laff.
“We’ve tried to go on with things,” said Woodcock, who has stepped down from his position as TS Industry’s chief executive and is not involved in the company’s day-to-day operations. Stung by its decline in business, the firm has consolidated and is selling off its foam insulation operation to reduce debt.
Woodcock, 55, said he is chagrined by the stock-related events that began in 1986.
“A couple of years ago, things seemed wonderful,” he said. “Now I don’t have a job.”
As TS Industry’s stock price rose, the firm was making investments that turned sour. For example, the company spent more than $2 million to build an insulation plant in Grenada as part of a U.S. government program that faltered.
“I didn’t know Wall Street, and I never cared to know it,” Woodcock said. “In 1985, we were a private company that made $1 million. (Haas) approached us about going public, and initially we said no.”
Woodcock, who testified before the grand jury, said he doesn’t plan to file a lawsuit against Haas Securities. “We don’t know that they did anything to us that was illegal,” he said.
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 2 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 5 years in jail and a maximum fine of $250,000 on each count, Romano said. Aslanian is awaiting sentencing.