FBI arrests 45 in Wall Street bribes investigation

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The Independent Online
Federal agents arrested 45 people, including former brokers at major Wall Street firms and the chairmen of publicly traded companies, on charges that they bribed dealers to promote stocks to investors, the Securities and Exchange Commission said yesterday.

The nationwide sting operation by the SEC, the US attorney's office in New York and the Federal Bureau of Investigation, was continuing into about 60 companies whose stock was touted, SEC spokesman Henry Klehm said.

"I can't think of any other securities case that has had this many people arrested from one investigation," Mr Klehm said.

The arrests began early yesterday and continued throughout the day. Investigators used an undercover brokerage firm set up by the FBI in Manhattan to catch the defendants, Mr Klehm said. The inquiry has not discovered any investors harmed by the promotions, but investigators have found evidence that brokerage firms may have received bribes.

Most of the stock promoters were individuals who acted on their own to push small stocks that trade on the OTC-Bulletin Board run by the Nasdaq Stock Market. They hailed from 10 states, including New York, California and Florida, and Canada. Some allegedly worked together in small groups, Mr Klehm said.

Among the Wall Street firms for which some of the accused brokers worked were Merrill Lynch, Dean Witter Discover, and Gruntal, an SEC spokesman said.

The bribes often amounted to between 20 and 35 per cent of the value of the stock sold, paid either in cash or stock, an FBI court document said. Mr Klehm would not disclose the total amount of bribes paid or stock sold. While most of the stocks traded in the schemes listed on the OTC- Bulletin Board, some are listed on Nasdaq's SmallCap Market or Nasdaq's National Market.

The criminal charges allege securities fraud, conspiracy to commit securities fraud, commercial bribery and criminal contempt for actions between September 1993 and the present. Some of those arrested were brokers who had been barred from the securities industry, Mr Klehm said. The SEC is simultaneously filing civil suits against the defendants.

One broker arrested was George Panagiotou, who worked for New York-based Dean Witter Discover before joining New York-based Gruntal in January 1994, Mr Klehm said. Mr Panagiotou, along with two other brokers, was charged with civil fraud by the SEC last month for allegedly promoting the stock of San Diego Bancorp in exchange for bribes.

Gruntal said yesterday it fired Mr Panagiotou in July 1994, six months after he started, after discovering the alleged San Diego Bancorp scheme. Thefirm also sued him in a case still pending, said assistant Gruntal general counsel Donald Cohen. "Gruntal helped discover this matter," Mr Cohen said.

Another broker who Mr Klehm would not identify worked for Merrill Lynch and may have been employed there during the period in question, he said. Merrill Lynch had no immediate comment.

At least three chairmen of public companies were targeted in the investigation. George Badger, chairman of Golf Ventures, a golf course developer, was arrested for allegedly bribing an undercover FBI agent last March to promote the stock of his company. William G Lucas, chairman and chief executive of Command Credit Corp, a financial services company, was also charged.

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