NASD Charges Long Island Firm, its President, and Two Former Managers as a Result of Fraudulent "Boiler Room" Sales Practices
Washington, DC — NASD announced today that it has filed a complaint charging Yankee Financial Group, Inc. of Melville, N.Y., its President and a former branch manager with engaging in high-pressure, boiler-room type sales practices that defrauded investors of $8 million. NASD also permanently barred 11 other individuals, who worked for Yankee Financial and two other firms, for related fraudulent conduct.
NASD charged that, in the fall of 2001, Richard F. Kresge, Yankee Financial's President and majority owner, opened offices in Brooklyn and Staten Island. Brokers in these offices used high-pressure sales tactics, including misrepresentations, baseless price predictions, and omissions of material facts, to persuade investors to purchase shares of three highly speculative Over-the-Counter Bulletin Board (OTCBB) securities: Silver Star Foods, Inc.; Western Media Group Corp.; and Golden Chief Resources, Inc. In many instances, Yankee Financial brokers targeted sales of these stocks to the elderly and others for whom they were patently unsuitable.
NASD charged Yankee Financial and Kresge with fraudulent sales practices and unsuitable recommendations of these securities, as well as failing to supervise these branch offices and to establish any written supervisory procedures.
Gary Giordano, former Yankee Financial branch office manager, was charged with fraud for making unsuitable recommendations and for failing to supervise brokers in the Brooklyn and Staten Island offices. Charges against Joseph C. Korwasky, Yankee Financial's former compliance officer, included failing to report customer complaints to NASD as required and charges related to the firm's written supervisory procedures he agreed to produce.
NASD surveillance of the OTCBB and subsequent investigation of the market activity in the three securities identified a number of other individuals, some affiliated with Yankee Financial and others with Sierra Brokerage Services and Argus Securities, who improperly pressured customers to purchase shares or otherwise participated in this scheme. As a result of NASD's investigation, 11 individuals were permanently barred including:
- Kenneth Gliwa, Yankee Financial's former Vice President, who settled charges that he failed to supervise the firm's branch offices, allowed two unregistered persons to hire brokers and operate the Brooklyn and Staten Island branch offices, failed to conduct any meaningful review of the three securities to determine whether they were suitable investments for the firm's customers, and allowed the firm to operate without any written supervisory procedures;
- Jeffrey Richardson, Sierra's President and head trader, settled charges that he participated in an unlawful distribution of unregistered shares, which generated millions of dollars for offshore entities controlled by the two individuals who owned and operated Yankee Financial's Brooklyn and Staten Island branch offices;
- Lawrence Dugo, a Yankee Financial broker, and Samuel Barmapov, an Argus broker, settled charges that they used fraudulent sales practices in recommending shares to investors; and
- Joseph Ferragamo, one of the owners of theYankee Financial branch offices; Yankee Financial brokers David Anderson (a.k.a. Vasily Kouznetsov), Eric Cenname and Adam Klein; John Cook, Argus' former President; John Klukewycz, a former Argus branch manager; and Ilan Shteinberg, a former Argus broker were charged with failing to appear and testify in connection with NASD's investigation.
Under NASD rules, a firm or individual named in a complaint can file a response and request a hearing before an NASD disciplinary panel. Possible remedies include a fine, censure, suspension, or bar from the securities industry, disgorgement of gains associated with the violations, and payment of restitution.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD's Web site at www.nasd.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.