UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 41183/March 18, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9654 __________________________________ In the Matter of : : ORDER MAKING FINDINGS AND EUGENE K. LAFF, : IMPOSING REMEDIAL SANCTIONS STANLEY ASLANIAN, JR., : BY DEFAULT AGAINST RESPONDENT and LAWRENCE CAITO : STANLEY ASLANIAN, JR. __________________________________ BACKGROUND The Securities and Exchange Commission (Commission) issued its Order Instituting Proceedings (OIP) in this matter on July 23, 1998. Respondent Stanley Aslanian, Jr. (Aslanian) was personally served with the OIP on August 8, 1998. Aslanian’s answer was due twenty days after service pursuant to both the OIP and Rule 220(b) of the Commission’s Rules of Practice, 17 C.F.R. § 201.220(b). Aslanian did not answer the OIP, and did not participate in the September 16, 1998 prehearing conference. He has otherwise failed to defend himself in these proceedings. On January 11, 1999, the Division filed a motion for an order of default against Aslanian (motion). Accompanying the motion was a statement of need for remedial sanctions against Aslanian (statement). In its motion, the Division requests that the Administrative Law Judge determine the proceeding against Aslanian upon consideration of the record, including the OIP, the allegations of which may be deemed to be true. See Rule 155(a)(1) and (2), 17 C.F.R. § 201.155(a)(1) and (2). In support of its motion, the Division states that Aslanian is in default for failing to file an answer to the OIP and for failing to appear in person or through a representative at the hearing. On January 14, 1999, I ordered Aslanian to show cause why he should not be held in default within ten days of the date of the order. FINDINGS OF FACT AND CONCLUSIONS OF LAW Respondent Aslanian is in default because he failed to answer the OIP. He also failed to appear at the scheduled prehearing conference. He did not respond to the Division’s motion for default, nor did he show cause why that motion should not be granted pursuant to my order of January 14. Accordingly, I find that the allegations in the OIP are true. Aslanian became a registered representative at Haas Securities Corporation, Inc. (Haas) in July 1986 and served as president of the firm from June 1987 until the firm ceased operations. Over a two year period, from October 1985 through October 1987, Aslanian, together with other brokers and dealers, engaged in a scheme to defraud the investing public by manipulating the over-the-counter market for the securities of seven companies, including Big O Tires, Inc. (and its predecessor company, Tires, Inc.), Cliff Engle Ltd., Digital Metcom, Inc., Flores de New Mexico, Inc., Fountain Powerboat Industries, Inc., TS Industries, Inc., and Tunex International, Inc. Aslanian and other brokers and dealers artificially increased the prices of those stocks and then maintained and prevented the decline in the price of those stocks, despite the publication of news articles containing highly negative information about the companies, despite substantial short selling, and despite the Market Break of 1987. The manipulation scheme collapsed after Haas ceased doing business at the end of October 1987 as a result of net capital violations and cessation of its clearing relationship with L.F. Rothschilds. Following the collapse of the manipulation scheme, the market value of the stocks dropped by approximately $644.2 million -- from approximately $715.3 million on September 30, 1987 to approximately $71.1 million on November 30, 1987. On January 6, 1989, the United States District Court for the Southern District of New York found Aslanian guilty of one felony count of conspiracy to commit securities fraud in violation of 18 U.S.C. 371. See U.S. v. Aslanian, 89 Cr. 0003 (S.D.N.Y. Jan. 6, 1989). SANCTIONS In its motion, the Division requests that Aslanian be barred on a permanent basis from associating with any broker, dealer, investment adviser, investment company, municipal securities dealer, and any member of a national securities exchange or registered securities association. The Commission has the authority to impose a permanent collateral bar when the public interest and the protection of investors demand such a sweeping prohibition. Ted Harold Westerfield, Exchange Act Rel. No. 41126, 1999 WL 100954, at *5 (Mar. 1, 1999) (citing Meyer Blinder, 65 SEC Docket 1970, 1974-75 (Oct. 1, 1997)). A collateral bar may be imposed where the respondent’s "misconduct is of the type that, by its nature, ‘flows across’ various securities professions" and is so egregious as to warrant "a comprehensive response in order to protect the public." Blinder, 65 SEC Docket at 1981. The "flows across" element is met when the "misconduct could be committed in various capacities within the securities professions." Westerfield, 1999 WL 100954, at *5 n.30. In assessing the egregiousness of the respondent’s actions, the Commission considers, inter alia, the duration of the period in which the violative conduct occurred; the number and frequency of illegal transactions; the harm caused to investors; the extent to which the violator was enriched; and whether the conduct formed the basis for a criminal conviction or a civil injunction. See Westerfield, 1999 WL 100954, at *5; Alan E. Rosenthal, 67 SEC Docket 2694, 2698 (Sept. 1, 1998); Blinder, 65 SEC Docket at 1981. Aslanian’s misconduct clearly flows across various sectors of the securities industry. He misused his own broker-dealer firm to manipulate the markets for seven securities. He also employed an investment adviser in furtherance of the manipulative scheme. Thus, barring Aslanian from association with a broker, dealer, or investment adviser is in order. Furthermore, by demonstrating his willingness and ability to use these entities to deceive investors, Aslanian has also shown that he must not be allowed access to other segments of the industry, namely, investment companies and municipal securities dealers. The fraudulent conduct at issue was particularly egregious. The manipulative scheme was executed over the course of two years, involved several stocks, and resulted in the collapse of both Haas and its clearing firm. Aslanian pled guilty to one felony count of conspiracy to commit securities fraud and was sentenced to one year in prison and two years of supervisory release following imprisonment. Thus, it is necessary to exclude Aslanian "from every facet of the securities industry." See Blinder, 65 SEC Docket at 1982. In view of the foregoing, I find it in the public interest to sanction Aslanian pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act. Accordingly, it is hereby ORDERED that Stanley Aslanian, Jr. is permanently barred from association with any broker, dealer, investment adviser, investment company, municipal securities dealer, and with any national securities exchange or registered securities association. _____________________________ Lillian A. McEwen Administrative Law Judge 1