In California, four stockbrokers who were convicted for securities fraud and conspiracy because of their roles in a “pump-and-dump” scheme that cost investors over $5 million will be sentenced this year.
According to the U.S. Attorney’s Office, the four men worked for Hampton Porter Investment Bankers LLC, a San Diego-based company that failed to disclose the company’s financial interests in certain stocks when it sold these particular stocks to clients.
Hampton Porter allegedly held sales meetings where co-owner John Laurienti and former Hampton Porter retail manager James Green pressured brokers to sell “house stocks.” Brokers who sold these stocks were paid “special incentive” compensation that customers didn’t know about. Hampton Porter also had a “no net-sales” policy that prevented customers from selling their house stocks’ shares because brokers delayed or failed to make sell orders. Brokers from Hampton Porter also engaged in cross-trading, which consists of selling one client’s shares to another client.
The four people found guilty by the jury in the U.S. District Court for the Central District of California are:
– Bryan Laurienti, 50, of Peoria, Arizona – Donald Samaria, 37, of San Diego – Curtiss Parker, 45, of La Jolla – David Montesano, 39, of Winchester, California
These four men could be sentenced to up to 20 years in prison. The Justice Department says that the men used high-pressure sales tactics and made false statements to customers so that they would buy the “house stocks.” Laurienti, Samaria, Parker, and Montesano are also accused of unauthorized trading. “As the price of the house stocks rose, Hampton Porter owners sold their holdings and realized significant profits.”
Michael Losse, a fifth defendant, was acquitted. A sixth defendant, Adam Gilman, had pleaded guilty to securities fraud in 2003 and was sentenced to an 18-month prison term.
The U.S. Securities and Exchange Commission offers the following information about Pump-And-Dump Schemes:
“Pump-and-dump” schemes, also known as “hype and dump manipulation,” involve the touting of a company’s stock (typically microcap companies) through false and misleading statements to the marketplace. After pumping the stock, fraudsters make huge profits by selling their cheap stock into the market.
Pump-and-dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is “pumped” up by the buying frenzy they create. Once these fraudsters “dump” their shares and stop hyping the stock, the price typically falls, and investors lose their money.
At Shepherd Smith Edwards & Kantas LTD LLP, we make it our primary responsibility to help people who have been the victims of securities fraud and broker misconduct recover their money. Collectively, our clients have recovered millions of dollars through our assistance in negotiations, mediation, arbitration and litigation. Your first consultation with us is free, so contact Shepherd Smith Edwards & Kantas LTD LLP today.
Jury Convicts Four Stockbrokers Involved in Pump-And-Dump Scheme Operated in San Diego, USdoj.gov, December 7, 2006
Pump and Dump Schemes, SEC.gov
Related Web Resource:
Eight Former Employees of Defunct Brokerage Firm Hampton Porter Investment Bankers are Indicted by Federal Grand Jury, Shepherd Smith Edwards & Kantas LTD LLP
Beware of ‘pump-and-dump’ stocks, MSN.com
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Website contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this Website. Read More.