FBI Agents Raid Beverly Hills Brokerage Firm
Dozens of FBI agents Tuesday raided JB Oxford & Co., the Beverly Hills discount brokerage firm associated with convicted stock swindler Irving Kott.
The raid signals a wide-ranging probe by federal agents into the operations of the brokerage and Kott, a consultant to Oxford who has had run-ins with securities regulators in the past, sources said. The Securities and Exchange Commission is working with the FBI in the investigation, which includes some ventures related to Kott, sources said.
The FBI served search warrants on the brokerage and seized documents, but no arrests were made, FBI spokesman John Hoos said. Employees were allowed to continue working in the Wilshire Boulevard office, he said. Authorities also raided an Oxford office in Basel, Switzerland.
The brokerage released a statement saying it is “cooperating fully with federal authorities” and that it “continues to conduct its normal business activities.” Oxford Chief Executive Stephen Rubenstein was not available for comment.
“It’s kind of a bad day here--I can’t talk,” said Michael J. Villanueva, a branch manager with Oxford in Beverly Hills.
Documents in the case have been sealed and authorities aren’t talking, but the investigation is said to center on Kott. Once a big-time stock promoter in Montreal, Kott was convicted of stock fraud in Ontario in 1976 and fined $500,000 in Canadian dollars.
Oxford touts itself as a kind of mini-Charles Schwab & Co., a passive order-taker for customers. But the firm’s brokers can steer clients to specific stocks, especially those in which the firm is a market-maker. (Market-makers stand by, willing to buy and sell shares to the public.)
The stock prices of some of those companies dropped Tuesday, as did shares of JB Oxford Holdings Inc., parent firm of the brokerage. Legacy Software Inc., a Los Angeles maker of education software whose initial public offering was arranged by Oxford, saw its shares drop 75 cents in Nasdaq trading to $2 a share. It traded at a new low of $1 a share earlier in the day. The company went public in May 1996 at $6 a share. Shares of JB Oxford Holdings fell 22 cents a share in Nasdaq trading to $1.34 a share.
Oxford has raised eyebrows in other areas. Its clearing unit at one time processed trades for Stratton Oakmont Inc., a Lake Success, N.Y., firm ousted from the securities industry by the National Assn. of Securities Dealers last year for alleged regulatory abuses. Oxford also recently agreed to take on the bulk of the 15,000 accounts held by Glendale brokerage W.S. Clearing Inc., which failed in March. The move caused some concern among clients of W.S. Clearing.
Oxford, formerly called RKS Financial Group, was the parent company of Reynolds Kendrick Stratton, a firm subject to several lawsuits from investors and an NASD probe that resulted in fines and settlements.
In early 1993, Kott helped arrange for a group of investors to acquire a controlling interest in the firm and Kott was hired on as a consultant. RKS eventually closed Reynolds and in 1994 created JB Oxford, which advertised aggressively and opened offices in New York, Boston, Dallas and Miami.
Authorities were characteristically tight-lipped about the Oxford investigation Tuesday.
Assistant U.S. Atty. David Z. Seide, who is overseeing the case, would not comment, nor would Elaine Cacheris, regional director of the SEC in Los Angeles.
