Federal agents arrested 45 people, including former brokers at major Wall Street firms and the chairmen of publicly traded companies, on charges that they bribed dealers to promote stocks to investors, the Securities and Exchange Commission said yesterday.
The nationwide sting operation by the SEC, the US attorney's office in New York and the Federal Bureau of Investigation, was continuing into about 60 companies whose stock was touted, SEC spokesman Henry Klehm said.
"I can't think of any other securities case that has had this many people arrested from one investigation," Mr Klehm said. The arrests began early yesterday and continued throughout the day. Investigators used an undercover brokerage firm set up by the FBI in Manhattan to catch the defendants, Mr Klehm said. The inquiry has not discovered any investors harmed by the promotions, but investigators have found evidence that brokerage firms may have received bribes. Most of the stock promoters were individuals who acted on their own to push small stocks that trade on the OTC-Bulletin Board run by the Nasdaq Stock Market. They hailed from 10 states, including New York, California and Florida, and Canada. Some allegedly worked together in small groups, Mr Klehm said. Among the Wall Street firms for which some of the accused brokers worked were Merrill Lynch, Dean Witter Discover, and Gruntal, an SEC spokesman said. The bribes often amounted to between 20 and 35 per cent of the value of the stock sold, paid either in cash or stock, an FBI court document said. Mr Klehm would not disclose the total amount of bribes paid or stock sold. While most of the stocks traded in the schemes listed on the OTC- Bulletin Board, some are listed on Nasdaq's SmallCap Market or Nasdaq's National Market. …