NASD, FBI in Probe of Brokers for Mob Ties
The National Assn. of Securities Dealers is investigating nine brokerages and 19 small-company stocks for possible organized-crime links and other securities violations, the self-regulatory agency confirmed Tuesday.
News of the probe, being conducted with the FBI, follows a lengthy BusinessWeek article in December that alleged manipulation of stocks of certain companies by investors with mob ties.
But some of the companies, including three in the Southland, say they have uncovered no evidence of manipulation.
Mary Schapiro, head of the regulatory arm of the NASD, confirmed Tuesday that her group is investigating mob activity in smaller stocks. “We believe the presence exists, and it’s disturbing--but we also believe it to be extremely limited,” she said in a speech in Orlando, Fla.
Meanwhile, in a letter to Rep. John Dingell (D-Mich.), Schapiro said the NASD--which owns the Nasdaq Stock Market--has had “significant ongoing investigations of our own” into certain companies and several allegedly mob-related brokerages. Dingell released a copy of the letter Tuesday.
“The influence of organized crime in our markets is an issue that must be aggressively addressed,” Schapiro wrote.
Last month, citing the BusinessWeek article, Dingell asked Schapiro, Atty. Gen. Janet Reno and the Securities and Exchange Commission for reports on what they had done and planned to do about organized crime’s alleged manipulation of penny-stock prices.
Though 15 brokerages were cited in the BusinessWeek article, NASD spokesman Michael Robinson said the NASD inquiry covers only those alleged to have organized-crime ties.
In the article, nine brokerages were linked to mobsters. Among them were Sovereign Equity Management of Boca Raton, Fla.; PCM Securities Ltd. of New York; Monitor Investment Group of New York; and Toluca Pacific Securities in Los Angeles.
Executives at Toluca Pacific and the other securities firms could not be reached for comment Tuesday.
Schapiro also said in her letter that her group is investigating trading activity in the stocks of 19 companies BusinessWeek mentioned. All are listed on Nasdaq or the OTC Bulletin Board, and all were either underwritten or sold by brokerages under investigation.
But several of the companies whose stocks were allegedly manipulated say they don’t believe it.
At First Colonial Ventures Ltd. in Century City, President Murray Goldenberg, said the BusinessWeek article was “pure sensationalism” and that he has no reason to believe that his shares have been manipulated by mobsters.
In Santa Monica, Osicom Technologies Chief Executive Par Chadha said, “Our inclusion was a total reckless, careless [act] on the part of BusinessWeek.” He said his firm has found no evidence that any of the brokerages named could have influenced the direction of Osicom’s stock in 1996.
The BusinessWeek article said manipulation occurred without the firms’ knowledge.
