SEC Bares Another Securities Fraud
LaGesse, David, American Banker
NEW YORK -- The Parr Securities Corp., a small government securities dealer based in New York City, and its chief executive were charged with fraud Monday by the Securities and Exchange Commission.
Parr Securities, the latest in a string of troubled dealers, has debts to banks and thrifts of some $16 million, the SEC said in a civil complaint filed in U.S. District Court for the Southern District of New York. The SEC said it found assets of $750,000 in Parr's accounts.
The SEC accused Parr's primary owner, Gregory Herbert, of covering Parr's trading losses in government securities by fraudulently borrowing from banks and illegally selling securities owned by Parr customers.
Mr. Herbert on Monday agreed to a permanent injunction against his or Parr's engagement in any further violations of securities law. Late Monday afternoon a federal court judge said he would later rule on issuing a permanent injunction and appointing a receiver, which would effectively close the firm.
Parr Securities fraudulently claimed that it held securities for its customers as collateral for repurchase agreements, sold interests in nonexistent bankers acceptances, and fraudulently obtained loans from clearing agents, the SEC charged.
Aside from its government securities business, Parr Securities runs a discount brokerage operation incorporated in 1981. The firm, a broker-dealer registered with the SEC, is a member of the New York Stock Exchange and the National Association of Securities Dealers.
Its brokerage customers are insured for losses of up to $500,000 per account by the Securities Investor Protection Corp.
The SEC papers listed a $4.9 million debt owed to the Security Pacific Clearing and Services Corp., a clearing agent and the largest Parr creditor listed in the civil complaint. Security Pacific is currently involved in a legal fight to recover a $33 million loan to the Bevill, Bresler & Schulman Asset Management Corp., another failed government securities dealer.
Parr is at least the fifth government securities firm to get into trouble since early March. The closing of E.S.M. Government Securities Inc., Ft. Lauderdale, Fla., on March 4 led to huge losses at a Ohio thrift and the temporary closing of some 71 privately insured thrifts in that state.
Bevill, based in Livingston, N.J., failed in early April, and led to the closing of two smaller government securities dealers in Arkansas and Chicago.
Another Parr customer filed suit Monday in the New York federal court in an attempt to recover securities that it said were fraudulently sold by Parr. Land of Lincoln Savings and Loan, Berwyn, Ill., in a press release said its losses could amount to $6.6 million -- though the SEC's filing indicated a $2.6 milion debt owed to Lincoln by Parr.
The thrift's officials say that Lincoln purchased the $6. …