SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16707 / September 18, 2000
SECURITIES AND EXCHANGE COMMISSION v. ROBERT J. GUYER and LIBERTY NATIONAL SECURITIES, INC., U.S. District Court, D. Conn., No. 00 CIV ____
The Securities and Exchange Commission today charged that broker-dealer Liberty National Securities, Inc. and its President, Robert J. Guyer, aided and abetted a fraudulent scheme by Martin Frankel, by helping to conceal Frankel's secret ownership and control of Liberty after the Commission had barred Frankel from the securities industry. In its Complaint filed in U.S. District Court for the District of Connecticut, the Commission alleges that the conduct of Liberty and Guyer substantially assisted Frankel's scheme to loot the assets of several insurance companies in Tennessee, Alabama, Oklahoma, Mississippi, Missouri and Arkansas. The United States Attorney for the District of Connecticut announced today that Guyer pled guilty to criminal charges stemming from this and other conduct.
The Commission's Complaint alleges as follows:
From at least November 1991 through May 1999, Frankel orchestrated a massive fraud to loot the assets of several insurance companies, most of which were subsidiaries of a public holding company. Frankel secretly owned and exercised control over Liberty, a broker-dealer where the insurance companies believed Frankel was investing their money. To conceal his interest in Liberty, Frankel retained Guyer to serve as Liberty's President in approximately 1993. At the time he became Liberty's President, Guyer knew that the Commission had barred Frankel from the securities industry.
Guyer took numerous steps to hide Frankel's ownership and control of Liberty, and thereby assist Frankel in violating his bar. Guyer filed false broker-dealer registration forms ("Forms BD") with the Commission, which falsely stated that Guyer owned Liberty and failed to disclose Frankel's ownership and control. Guyer set up an incoming telephone line at Liberty, in Dundee, Michigan, that was forwarded directly to Frankel's residence in Greenwich, Connecticut. Frankel used this line to receive telephone calls from employees of the insurance companies that were purportedly investing their funds with Liberty. At Frankel's direction, Guyer registered Liberty to conduct business in several states where Frankel was doing business. Frankel paid some of Liberty's operating expenses, and he paid Guyer $2,000 per month to operate Liberty, using money that Frankel had stolen from the insurance companies.
Frankel purported to open accounts at Liberty for the insurance companies, but did not do so. Funds and securities that the insurance companies believed were being transferred to Liberty, never reached Liberty and went instead to accounts elsewhere that were under Frankel's control. Acting at Frankel's direction, his employees in Greenwich generated fake Liberty trade confirmations and monthly statements, which they sent to the insurance companies. The transactions described in these bogus confirmations and statements never actually took place. Frankel never executed any trades for the insurance companies through Liberty, nor did he effect any other securities transactions through Liberty. Frankel diverted the insurance companies' funds for his own purposes, including funding his own investments and business expenses and supporting his lavish lifestyle.
The Commission alleges that Guyer and Liberty aided and abetted Frankel's violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5. The Complaint further alleges that Liberty, aided and abetted by Guyer, violated Sections 15(b) and 17(a) of the Exchange Act and Rules 15b3-1 and 17a-3(a)(12). The Commission seeks permanent injunctions against future violations of these provisions against Guyer and Liberty, and disgorgement of ill-gotten gains and the imposition of civil money penalties against Guyer.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Connecticut in bringing this case.