21 charged in Notorious Stock Boiler Room -AFBnews-9Feb2000
Stefan Lemieszewski
21 Charged in Notorious Stock 'Boiler Room'
Brokers Accused of Using Unscrupulous Tactics
Feb. 9, 2000
By Carol Huang
NEW YORK (APBnews.com) -- Federal authorities today indicted 21 brokers
and
dealers who worked for one of Wall Street's most notorious "boiler room"
operations
before an investigation forced it to close.
Among those indicted were former supervisors and managers at Sterling Foster
& Co.,
which shut its doors in 1997 shortly after the U.S. Securities and Exchange
Commission
(SEC) obtained a court order that February to suspend the firm's activities.
The investigation into Sterling Foster & Co. unveiled a particularly
egregious example of
a Wall Street "boiler room," a firm at which brokers push dubious stocks
using a variety of
unscrupulous tactics and make it virtually impossible for clients to sell
their holdings once
prices fall.
"At its peak, there were approximately 400 brokers at Sterling Foster,
and our
investigation is continuing," said Andrew Geist, senior associate regional
director for the
SEC in New York, whose office has filed civil charges of fraud against
18 of those
indicted.
Geist added that some say the firm's notoriety helped inspire Boiler Room,
a movie
opening this month that depicts the scramble among young brokers pressured
to sell
questionable stocks.
Company president pleaded guilty
The indictment filed by the U.S. attorney's office for the Southern District
of New York
accuses the indicted brokers of baiting clients with blue-chip stocks before
convincing
them to switch into stocks that were being manipulated by the firm. The
indictment also
alleges that the brokers made unauthorized purchases in their customers'
accounts and
failed to take and execute customers' requests to sell out of bad holdings.
The indictment said the brokers used these tactics in six public offerings,
five of which
were underwritten by Sterling Foster. These six public offerings were the
same named in
a November 1998 indictment against Randolph Pace and Alan Novich, whom
investigators say secretly controlled Sterling Foster.
Investigators in that case accused Pace and his associates of earning more
than $200
million in illegal profits.
Sterling's president, Adam Lieberman, pleaded guilty to securities fraud
in November
1998, Geist said.
The indictment said the brokers worked at Sterling Foster from 1994 to
1997. It accuses
the men of other common boiler-room tactics, including the use of scripted
pitches to sell
stocks and the coercion of clients, who were told they would have to buy
a stock after it
became available on the market before they were given access to an initial
public offering
of the stock.
Suspects face five-year sentences
The brokers named in the indictment are Frank Monroig, 39, and Andrew Tursi,
30, of
St. James; Timothy Matthews, 39, of Stonybrook; David Abish, 30, of New
York City;
Christopher Betts, 31, of Kings Park; Mark Charvat, 26, and James Corcoran,
27, of
Patchogue; Michael Cohn, 29, of Lawrence; Charles Distefano, 31, of Middle
Island;
Paul Feeny, 27, of Stamford, Conn.; Joseph Ferrante, 28, and David Weeks,
29, of
Huntington; Stephen Gourlay, 28, of Hicksville; Brian Kearney, 31, of Farmingdale;
Michael Maccaull, 28, of Hauppage; John Massaro, 33, of Commack; Robert
Pratt, 30, of
Coram; Dennis Rueb, 27, of Glendale; William Scuteri, 29, of Charlottesville,
Va.; Scott
Siegel, 28, of Dix Hills; and Donald Turney, 29, of Pompano Beach, Fla.
Five of the brokers indicted also worked at VTR Capital Inc., another firm
that has since
become defunct, prosecuting attorneys said.
The brokers face one count of securities, mail and wire fraud and five
counts of securities
fraud. Each faces up to five years in prison for the first charge and $250,000
or more in
fines. On the second charge, each count carries a maximum penalty of 10
years in
prison and $1 million or more in fines.