NASD Charges Dallas, San Diego Brokerage Firms With Fraudulent Promotion Of Pink Sheet Securities
Washington, D.C.—NASD announced today that it has filed complaints against Dallas-based RichMark Capital Corporation and San Diego-based Back Bay Capital, Inc. for using fraudulent tactics to sell highly speculative OTC (or "Pink Sheet") securities to customers. Three persons associated with RichMark and three persons associated with Back Bay were also charged.
RichMark, its owner Doyle Mark White and its former president Michael Ray Claiborne have been charged with fraudulently manipulating the price of the common stock of Paradise Tan, Inc, which operates tanning salons in Texas and Arizona. Paradise Tan's stock was first quoted on the Pink Sheets in July 2002. White is charged with engaging in unlawful "wash" sales of Paradise Tan shares to create the appearance of a genuine, independent market for the stock. Claiborne is charged with executing White's wash sales - even though he knew they were not bona fide market transactions, but simply trades between accounts controlled by White.
James G. Morgan, Jr., a former RichMark broker, is charged with fraud in connection with his solicitation of customers to purchase Paradise Tan promissory notes. One victim was a 91-year-old widow living in a retirement home on a limited, fixed income, whom Morgan persuaded to purchase a $25,000 promissory note that could be converted into Paradise Tan shares.
White and Claiborne are also charged with allowing an unregistered person at RichMark to trade in Paradise Tan stock as part of this fraudulent scheme.
In a second case, NASD filed fraud charges against Back Bay, its owner and president Albert Carazolez and registered representative Vladimir Feldman in connection with their promotion and sale of shares of InterContinental Services Corp., a now-defunct OTC company. InterContinental, which had little revenue and significant debt, purportedly was going to engage in the design and manufacture of "interactive toys."
NASD also charged Robert Meyer - who owned a minority interest in Back Bay, was the former CEO of InterContinental and was InterContinental's major stockholder - with failing to register as a principal in Back Bay. Meyer had been registered with NASD, from 1988 until 1994, when Montana state securities regulators obtained a default judgment against him for violating Montana anti-fraud regulations and employing unregistered agents to sell unregistered securities.
Feldman - who operated from a satellite office of Back Bay located in Brooklyn, NY - is charged with fraudulently inducing customers, some of them elderly and with limited incomes, to purchase approximately 400,000 shares of InterContinental in September and October 2002 for more than $200,000. The NASD complaint alleges that most of the stock sold by Feldman came from a personal account of Meyer's. As part of the scheme, Carazolez purchased almost 100,000 shares of InterContinental stock prior to Feldman's fraudulent solicitation efforts, and then dumped most of those shares at a profit after Feldman developed artificial interest in the market for InterContinental shares.
Under NASD rules, the individuals and the firms named in the complaint can file a response and request a hearing before an NASD disciplinary panel. Possible sanctions include a fine, suspension, bar, or expulsion from NASD.
Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by calling NASD's BrokerCheck. NASD makes available BrokerCheck at no charge to the public. In 2002, members of the public used this service to conduct more than 2.5 million searches for existing brokers or firms and requested almost 200,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to the program by going online to www.nasdbrokercheck.com. Investors can also access this service by calling 1-800-289-9999.
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 registered firms. For more information, please visit our Web Site at www.nasd.com.