These days if you’re one of the thousands of defrauded investors
trying to contact the offices of A.S. Goldmen & Co., Inc. just leave
a message at Body By Boris in Red Bank, New Jersey. According to the
NASD, that’s where this broker-dealer is now receiving its mail. But
don’t expect to find any of the former Goldmen brokers at that address.
The firm, which once maintained offices in New York City; Iselin, New
Jersey; Los Angeles, California and Naples, Florida, is now inactive.
Understandably so. On July 8, 1999, the New York County District
Attorney, Robert Morganthau, issued indictments against A.S. Goldmen and
33 individuals, charging that the brokerage firm had engaged in massive
securities fraud. According to prosecutors, A.S. Goldmen, its brokers
and other affiliated persons have bilked thousands of investors out of
almost $100 million. Morganthau also initiated civil proceedings seeking
to recover these funds.
Indicted along with the firm were its President, Anthony Marchiano, his twin brother, Salvatore (the firm’s Head Trader), A.S. Goldmen’s Vice-President, Stuart Winkler, and more than 20 former A.S. Goldmen employees.
The charges run the full gamut of securities offenses, including high pressure cold calling, the sale of stocks at inflated prices, price manipulation, and refusal to obey customer sell orders. The indictment also alleges that "nominee" accounts were created by A.S. Goldmen employees in the names of their friends and relatives in order to evade rules which prohibited employees of the brokerage from investing in initial public offerings. The accounts were apparently funded by the Goldmen employees, who later shared in the profits.
According to the indictment, A.S. Goldmen’s efforts to evade regulators were devised by Winkler, the firm’s Chief Financial Officer, who worked as an examiner for the NASD between 1979 and 1986. Winkler, who reportedly joined A.S. Goldmen in 1989, allegedly used his experience at the NASD to divert attention from the regulators.
In a related case the SEC instituted administrative proceedings against Goldmen and sought a cease and desist order charging the firm and eight employees with securities law violations.
The New York indictment would seem to be the final nail in the coffin for a brokerage firm which has run afoul of regulators throughout the 1990’s. If A.S. Goldmen is truly gone, it leaves behind quite a legacy. And if you’re one of the fortunate individuals who never opened an account with this outfit, chances are you will never hear of A.S. Goldmen again. But there is an equal likelihood that former Goldmen brokers (at least the ones who have escaped indictment) will resurface at other brokerage firms, once again utilizing their well-honed sales skills on unsuspecting customers. The history of A.S. Goldmen is, therefore, an instructive cautionary tale.
A.S. Goldmen began operating in 1988. Even before the New York arrests, its final demise was signaled in May of this year when NASD Regulation’s National Adjudicatory Council found that the brokerage firm engaged in fraud and market manipulation in connection with its domination of the market for warrants of Innovative Tech Systems Inc. The NASD ordered A.S. Goldmen and its President, Anthony Marchiano to pay a $150,000 fine and make restitution of $500,000 to the firm’s customers (this decision cut in half the amount of restitution originally ordered by NASD District 10’s Business Conduct Committee). Marchiano was also required to requalify as a securities principal and censured for his failure to supervise. Goldmen’s Vice-President, Stuart Winkler, was suspended from the securities business for two years and fined as well. Stacy Meyers, the firm’s head trader at that time was also sanctioned.
The NASD sanctions resulted from A.S. Goldmen’s conduct in connection with a July 1994 Initial Public Offering for Innovative Tech Systems. Prior to that IPO Innovative had issued warrants as part of a bridge financing (Companies about to go public often arrange for bridge financings through their underwriters so that they will have sufficient funds to operate until the offering is completed. The people who offer the bridge financing generally receive securities from the company in return for providing these funds). In this case, the NASD found that, within two hours after the IPO began trading, Goldman had purchased most of the 1.3 million warrants from the bridge lenders at substantial discounts from the market price. Goldmen then artificially inflated the price of warrants to $2.00, a 700% increase over the initial offering price.
NASD Regulation considers markups of over 5% to be excessive and markups of over 10% to be fraudulent. 700%? That’s in a class all by itself.
The NASD order was merely one more blemish on A.S. Goldmen’s complexion. Other highlights –
Customer complaints? The NASD reports 79 arbitrations filed against the brokerage firm through the end of 1998.
That’s not all. The recent New York indictments apparently had their genesis in April 1998, when Morganthau’s office, with the assistance of Florida law enforcement officials, raided A.S. Goldmen’s offices in Iselin, New Jersey and Naples, Florida (as well as Marchiano’s Naples estate).
The Naples office of Goldmen is now closed, but the presence of the firm in that prosperous community will not soon be forgotten. It seems that Goldmen became involved with local officials and businesspeople as the investment banker for a project known as Stadium Naples – a proposed golf course stadium project. When rumors of Goldmen’s sales practices began to surface, the community started to question the involvement of the brokerage firm in the community project. Once the New York District Attorney’s Office raided the firm’s offices, Goldmen’s involvement in the project ceased. But the investigations continue. In a letter to the Florida Department of Law Enforcement on May 14, 1999, Governor Jeb Bush directed a review of "any possible violations of Florida’s criminal laws involving the brokerage firm of A.S. Goldmen & Co…that are not already being addressed by a current New York grand jury investigation."
And what if you invested in one of the companies taken public by A.S. Goldmen in the 1990’s? We looked at prices as of July 8, 1999:
One thing’s for certain, former A.S. Goldmen salespersons will soon reappear in the brokerage community. It’s happened already. In June of this year federal prosecutors in New York’s Eastern District arrested 85 people, including some who were allegedly connected to organized crime, and charged them with swindling investors out of $100,000,000. Reportedly, 12 former Goldmen brokers were among those named in the indictments.
And just how do you make sure that your broker is not among the A.S. Goldmen alumni? Check him or her out with the NASD at http://www.nasdr.com. You just can’t be too careful.
About Hartley Bernstein: Hartley Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.
Indicted along with the firm were its President, Anthony Marchiano, his twin brother, Salvatore (the firm’s Head Trader), A.S. Goldmen’s Vice-President, Stuart Winkler, and more than 20 former A.S. Goldmen employees.
The charges run the full gamut of securities offenses, including high pressure cold calling, the sale of stocks at inflated prices, price manipulation, and refusal to obey customer sell orders. The indictment also alleges that "nominee" accounts were created by A.S. Goldmen employees in the names of their friends and relatives in order to evade rules which prohibited employees of the brokerage from investing in initial public offerings. The accounts were apparently funded by the Goldmen employees, who later shared in the profits.
According to the indictment, A.S. Goldmen’s efforts to evade regulators were devised by Winkler, the firm’s Chief Financial Officer, who worked as an examiner for the NASD between 1979 and 1986. Winkler, who reportedly joined A.S. Goldmen in 1989, allegedly used his experience at the NASD to divert attention from the regulators.
In a related case the SEC instituted administrative proceedings against Goldmen and sought a cease and desist order charging the firm and eight employees with securities law violations.
The New York indictment would seem to be the final nail in the coffin for a brokerage firm which has run afoul of regulators throughout the 1990’s. If A.S. Goldmen is truly gone, it leaves behind quite a legacy. And if you’re one of the fortunate individuals who never opened an account with this outfit, chances are you will never hear of A.S. Goldmen again. But there is an equal likelihood that former Goldmen brokers (at least the ones who have escaped indictment) will resurface at other brokerage firms, once again utilizing their well-honed sales skills on unsuspecting customers. The history of A.S. Goldmen is, therefore, an instructive cautionary tale.
A.S. Goldmen began operating in 1988. Even before the New York arrests, its final demise was signaled in May of this year when NASD Regulation’s National Adjudicatory Council found that the brokerage firm engaged in fraud and market manipulation in connection with its domination of the market for warrants of Innovative Tech Systems Inc. The NASD ordered A.S. Goldmen and its President, Anthony Marchiano to pay a $150,000 fine and make restitution of $500,000 to the firm’s customers (this decision cut in half the amount of restitution originally ordered by NASD District 10’s Business Conduct Committee). Marchiano was also required to requalify as a securities principal and censured for his failure to supervise. Goldmen’s Vice-President, Stuart Winkler, was suspended from the securities business for two years and fined as well. Stacy Meyers, the firm’s head trader at that time was also sanctioned.
The NASD sanctions resulted from A.S. Goldmen’s conduct in connection with a July 1994 Initial Public Offering for Innovative Tech Systems. Prior to that IPO Innovative had issued warrants as part of a bridge financing (Companies about to go public often arrange for bridge financings through their underwriters so that they will have sufficient funds to operate until the offering is completed. The people who offer the bridge financing generally receive securities from the company in return for providing these funds). In this case, the NASD found that, within two hours after the IPO began trading, Goldman had purchased most of the 1.3 million warrants from the bridge lenders at substantial discounts from the market price. Goldmen then artificially inflated the price of warrants to $2.00, a 700% increase over the initial offering price.
NASD Regulation considers markups of over 5% to be excessive and markups of over 10% to be fraudulent. 700%? That’s in a class all by itself.
The NASD order was merely one more blemish on A.S. Goldmen’s complexion. Other highlights –
- Since 1991 the State of Missouri has issued four separate orders
directing the brokerage firm to cease and desist from its practice of
selling unregistered securities to residents of that state.
- In December 1997 the State of Massachusetts suspended Goldmen’s
registration in that state for five years, charging the firm with
selling over $890,000 in unregistered securities.
- In May 1995 the State of Maine issued a Notice of Intent to
Revoke the Broker-Dealer License of Goldmen for refusal to execute
customer orders and unauthorized transactions.
- In February 1999 the State of Delaware suspended Goldmen for a
period of five years from selling any security that was not listed on
the New York Stock Exchange.
- In April 1998 the NASD sanctioned Goldmen for its failure to comply with required reporting and bookkeeping practices.
Customer complaints? The NASD reports 79 arbitrations filed against the brokerage firm through the end of 1998.
That’s not all. The recent New York indictments apparently had their genesis in April 1998, when Morganthau’s office, with the assistance of Florida law enforcement officials, raided A.S. Goldmen’s offices in Iselin, New Jersey and Naples, Florida (as well as Marchiano’s Naples estate).
The Naples office of Goldmen is now closed, but the presence of the firm in that prosperous community will not soon be forgotten. It seems that Goldmen became involved with local officials and businesspeople as the investment banker for a project known as Stadium Naples – a proposed golf course stadium project. When rumors of Goldmen’s sales practices began to surface, the community started to question the involvement of the brokerage firm in the community project. Once the New York District Attorney’s Office raided the firm’s offices, Goldmen’s involvement in the project ceased. But the investigations continue. In a letter to the Florida Department of Law Enforcement on May 14, 1999, Governor Jeb Bush directed a review of "any possible violations of Florida’s criminal laws involving the brokerage firm of A.S. Goldmen & Co…that are not already being addressed by a current New York grand jury investigation."
And what if you invested in one of the companies taken public by A.S. Goldmen in the 1990’s? We looked at prices as of July 8, 1999:
- Apparel Technologies, Inc. (APTX) – 3/256;
- Cinema Ride Inc. (MOVE) – 33/256
- Cinemaster Luxury Theaters Inc. (LUXY) – $3 9/16
- Perma-fix Environmental Services, Inc. (PESI) – $1 _;
- Datatrend Services, Inc.(DATA) –$5 9/16;
- Millenium Sports Management Inc. (MSPT) – 23/32;
- Country Star Restaurants Inc. (KAFE) – no quote available;
- Innovative Tech Systems Inc. (ITSY) – no quote available;
- Adrenalin Interactive Inc. (ADRN) – $4.00;
- Imatec Ltd.(IMEC) – 1 13/32;
- Independence Brewing Company - (IBCO)- no quote available;
- Innodata, Inc. (INOD) – 9 1/8
And the apparent winner …
- Winfield Capital Corp. (WCAP) – 25 13/16;
One thing’s for certain, former A.S. Goldmen salespersons will soon reappear in the brokerage community. It’s happened already. In June of this year federal prosecutors in New York’s Eastern District arrested 85 people, including some who were allegedly connected to organized crime, and charged them with swindling investors out of $100,000,000. Reportedly, 12 former Goldmen brokers were among those named in the indictments.
And just how do you make sure that your broker is not among the A.S. Goldmen alumni? Check him or her out with the NASD at http://www.nasdr.com. You just can’t be too careful.
About Hartley Bernstein: Hartley Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.
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