Interesting Connections in a Boiler Room Case
In my book I discussed at length the dismaying manipulation surrounding a stock called Eagletech Communications. Eagletech was a straightforward "chop stock" scheme, with brokers paid in cash to push the stock, in which organized crime figures played a decisive role.
I say "surrounding" because the "manipulatees" included the media. NBC News's Dateline program ran a disgraceful segment portraying this dogpile stock -- its registration was revoked for not filing required SEC reports -- as, you guessed it, a "victim of naked short selling." That despite the total absence of any mention of naked shorting in the voluminous legal proceedings surrounding the company.
So it's easy to dismiss out of hand a recent lawsuit filed by the company, being circulated by loony "stock counterfeiting" conspiracy sites, as just more grandstanding by Eagletech's CEO Rodney Young. Which is precisely what it is. The suit claims that a mammoth conspiracy of Wall Street firms destroyed his company, thereby shifting the blame from Young and the company.
Though this suit stinks to high heaven, there's some testimony cited in it that is intriguing, and which bring to mind the late 1990s case of A.R. Baron, a boiler room whose customer ripoffs were known to its clearing broker, Bear Stearns & Co.
In this case, what's at issue is Salomon Smith Barney, one of whose employees, an executive vice president named John Dorocki, was involved in a round of financing fir the company through a firm called Trinity Technology Management. TTM, the suit claims, was "composed of SSB managing directors." There's no evidence presented in the suit that SSB management knew about any of this -- in contrast to Bear Stearns-AR Baron -- but it is still raises eyebrows.
In a deposition quoted in the suit, a stock promoter who masterminded the scheme, John Serubo, testified as follows:
Q. In your conversations with Mr. Dorocki, was Mr. Dorocki made aware of the mob affiliation in connections to [the boiler room that pushed the stockk,] Bryn Mawr?In the next few questions, Serubo claims Dorocki dropped some mob names in a conversation they had. Then comes this exchange:
Q. Was Mr. Dorocki aware of mob connections or mob affiliations in the Wall Street and money business?
Q. Did Mr. Dorocki state that he did business with them through SSB [Salomon Smith Barney]?The suit also makes some interesting allegations against Schroder & Co., which was the clearing firm for the Bryn Mawr.
A. He didn't say that.
Q. At least as much as you know of?
A. As much as I know of, yeah. I mean it's common practice that we were, you know, a pump and dump shop,
Q. And surely Dorocki knew that?
A. Yes, he did.
Q. Well, thell me if you knew how he knew that.
A. Well, Harry Leopold told me that he gold Dorocki about our felony - my felony conviction. I always make it aware. Also, Harry Leopold told me that Robert Dobbs had told Dorocki he wanted to do the deal with Salomon Smith Barney to get away from the Bryn Mawr firm because Bryn Mawr was a tainted firm.
And Dorocki and I had conversation about, you know, my New York guys pumping the stock. You know, he thought it was absolutely wonderful how, you know, we could get a stock to trade for almost a 12-month period, you know, at a market cap of 180 million dollars when the company had a million dollars net worth.
Q. So Dorocki as an executive vice president of Salomon Brothers had no problem whatsoever dealing with mob people in his business?
A. No. He had no problem dealing with - I can only tellyou from my perspective he had no problem dealing with our firm or our deal.
A lot of junk lawsuits have been filed by small companies seeking to shift blame for their own failings and negligence. This suit is clearly one such suit. But despite the suit's absurd overreaching and conspiracy-mongering, its allegations of involvement by people from large firms should not be tossed casually aside.
They deserve further investigation and media attention -- but not the kind that Young and the conspiracy theorists are craving.
Reading through the suit (available from a wackadoo website here) makes me wonder about Rodney Young. He seems to have escaped this whole mess without so much as a rap on the knuckles, and it does not seem right. That anomaly deserves at least as much attention as anything else.
© 2007 Gary Weiss. All rights reserved.
Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.