UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 42104 / November 4, 1999
File Nos. 3-9010 and 3-9168
In the Matter of :
ANDREW BRESSMAN, :
ROMAN OKIN, :ORDER MAKING FINDINGS
RICHARD ACOSTA, :AND IMPOSING REMEDIAL
RICHARD SIMONE, :SANCTIONS AND CEASE
BURTON BLANK, :AND DESIST ORDER AS TO
MARK GOLDMAN and :ROMAN OKIN
JACK WOLYNEZ :
On December 6, 1996 the Securities and Exchange Commission ("Commission") issued an order postponing these proceedings at the request of the District Attorney of the County of New York to permit the grand jury impaneled by the District Attorney to complete its investigation into the conduct of the respondents in this action and to file any resulting indictments.1 Since that time, respondents Andrew Bressman, Roman Okin, Richard Acosta, Richard Simone, Mark Goldman and Jack Wolynez have been indicted by the grand jury and criminally convicted in connection with their activities while employed at A.R. Baron & Co., Inc.2
In anticipation of the reopening of this proceeding by the Commission, Respondent Roman Okin ("Okin" or "Respondent") has submitted an offer of settlement which the Commission has determined to accept ("Offer"). Accordingly, the Commission deems it appropriate to reopen the proceeding as to Respondent Okin for the purpose of accepting his Offer. Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to jurisdiction of the Commission over the Respondent and the subject matter of this proceeding, and as to the entry of the conviction set forth in paragraph II.B.1. and II.H. below, which are admitted, Okin, by his Offer, consents to the findings and the imposition of the sanctions and other relief contained in this Order Making Findings and Imposing Remedial Sanctions and Cease and Desist Order as to Roman Okin ("Order").
Accordingly, it is ordered that said proceeding be, and hereby is reopened with regard to Okin.
On the basis of this Order and the Offer submitted by Okin, the Commission finds the following:3
In 1992, Okin, then a registered representative at D.H. Blair & Co., Inc. ("Blair"), participated in a scheme to manipulate the market for the common stock of Health Professionals, Inc. ("HPI"). After moving to A.R. Baron & Co., Inc. ("Baron") in 1993, Okin and others at Baron continued the scheme to manipulate the market price for HPI common stock. Finally, in 1995, Okin and others at Baron manipulated the market for the common stock of Cypros Pharmaceutical Corp. In addition, over an extended period of time during his tenure at both Blair and Baron, Okin engaged in repeated and egregious sales practice abuses, including the unauthorized trading in customer accounts.
B. Respondent and Other Relevant Entities
Roman Okin, age 30, resides in Fort Lee, New Jersey. Okin was a registered representative with Blair from October 1990 through May 1992 and with Baron from May 1992 through August 1993, when he left Baron to become associated with another firm. In December 1993, Okin returned to Baron, became a registered principal of the firm in September 1994, and remained with the firm until it went out of business in June 1996. On June 5, 1997, Okin pleaded guilty to one count of enterprise corruption arising from his activities at Baron. Okin presently is awaiting sentencing.
2. Other Relevant Entities
a. A.R. Baron & Co., Inc., a Delaware corporation with its principal place of business in New York, New York, was registered with the Commission in September 1991 as a broker-dealer pursuant to Section 15(b) of the Exchange Act. In July 1996, Baron ceased operations and was placed into liquidation pursuant to the Securities Investors Protection Act. On October 17, 1996, the Commission issued an order (i) finding that Baron had violated Section 17(a) of the Securities Act, Sections 7(c), 9(a)(2), 9(a)(4), 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder and Regulation T promulgated by the Federal Reserve Board and (ii) revoking Baron's registration as a broker-dealer.
b. D.H. Blair, a New York corporation with its principal place of business in New York, New York, was, during the relevant period, registered with the Commission as a broker-dealer pursuant to Section 15(b) of the Exchange Act. Blair ceased operations in August 1998 and has applied to terminate its registration with the Commission.
c. Health Professionals, Inc. ("HPI"), is a Delaware corporation with its principal place of business in Fort Lauderdale, Florida. Prior to November 1991, HPI was a wholly-owned, shell corporation subsidiary of Professional Care, Inc. ("PCI"), a company whose common stock was traded on the American Stock Exchange ("Amex") and over-the-counter. On November 21, 1991, HPI merged with PCI and HPI became the successor company. HPI has common stock registered with the Commission under Section 12(b) and warrants registered under Section 12(g) of the Exchange Act. At all relevant times, HPI common stock was listed and traded on both the Amex and Nasdaq.
d. Cypros Pharmaceutical Corp. ("Cypros") is a California corporation with its principal place of business in Carlsbad, California. Cypros has common stock and warrants registered with the Commission pursuant to Section 12(g) of the Exchange Act. Cypros common stock and warrants are listed for trading on Nasdaq.
C. 1992 Market Manipulation of HPI Stock
Between January 27, 1992, and February 12, 1992, Okin, with other persons at Blair, manipulated the stock price of HPI, preventing its price from dropping in the wake of heavy selling due to adverse publicity, and causing its price to increase from around $17 per share to around $21.25 per share. Okin engaged in the manipulative conduct for the purpose of inducing others to buy the security, by among other things, placing unauthorized trades in customer accounts; adhering to a no-net-sale policy; refusing to execute customer sell orders; making false or misleading claims about the business prospects of HPI; making unfounded predictions about the future price of HPI common stock; failing to tell customers about the risks of investing in HPI common stock; and failing to tell customers that the market in HPI common stock was manipulated.
D. 1993 Market Manipulation of HPI Stock
Okin left Blair in May 1992 for employment with Baron. Between May 24, 1993 and June 25, 1993, Okin, with others at Baron, again manipulated the market price of HPI common stock, reversing a downward price movement and preventing its price from dropping in the wake of heavy selling due to adverse publicity, for the purpose of inducing others to buy the security. In this instance, Okin engaged in the same conduct as during the 1992 manipulative periods discussed above. In addition, Okin placed Regulation T extensions on unauthorized stock purchases to prevent liquidation and to delay payment; opened new accounts for customers whose accounts had been restricted pursuant to Regulation T; and purchased HPI common stock for those new accounts on delayed payment terms.
E. 1995 Market Manipulation of Cypros Stock
Between January 1, 1995 and October 10, 1995, Okin, with others at Baron, by engaging in the same conduct as described above in the 1992 and 1993 HPI manipulations, and for the same purpose of inducing others to buy the security, manipulated the market price of Cypros common stock, causing its price to rise from around $13-3/8 per share to around $23-3/4 per share.
F. Sales Practice Abuses
From approximately January 1992 through June 1996, Okin engaged in repeated abusive and fraudulent sales practices in connection with the offer, purchase or sale of HPI, Cypros and other securities. Specifically, Okin made misleading or untrue statements of material facts; placed unauthorized purchases in customer accounts; refused to execute customer sell orders; placed unauthorized margin trades in customer accounts; refused or delayed the delivery of proceeds of securities sales to customers; churned customer accounts; concentrated customer accounts in a few speculative issues without regard to the customers' investment objectives or the risks in such concentration; and placed Regulation T extension requests on unauthorized securities purchases. In addition, Okin participated in Baron's "no net sales" policy by refusing or failing to execute customer sell orders unless those orders could be crossed with purchases from other Baron customers. Okin failed to disclose to his customers that he was participating in the no net sales scheme.
G. Okin's Criminal Conviction
On June 5, 1997, Okin pleaded guilty to and was convicted of a New York State felony charge of enterprise corruption arising from his activities as a broker and executive of Baron. In his plea, Okin admitted to defrauding his customers by engaging in a pattern of unauthorized trading and parking of stocks. On July 7, 1999, Okin was sentenced to prison for a term of three to nine years.
H. Okin's Illegal Profits
During the three manipulative periods described above, Okin received $622,584 in commissions from trades in HPI and Cypros stocks entered in furtherance of the manipulation.
III. Legal Discussion
A. Violations of the Antifraud Provisions Through Market Manipulation
Section 9(a)(2) of the Exchange Act, which prohibits the manipulation of the prices of securities listed for trading on a national exchange, makes it unlawful for a person to engage in a series of transactions that creates actual or apparent activity or raises or depresses the stock's price when done for the purpose of inducing others to buy or sell the security. Section 9(a)(4) of the Exchange Act prohibits a person purchasing or offering to purchase or selling or offering to sell securities registered on a national securities exchange from making false or misleading statements for the purpose of inducing the purchase or sale.
The manipulative practices described in Sections 9(a)(2) and 9(a)(4) also violate the antifraud provisions in Section 10(b) and Rule 10b-5 of the Exchange Act for both exchange-listed and over-the-counter securities. S.E.C. v. Sayegh, 906 F.Supp 939, 946 (S.D.N.Y. 1995); S.E.C. v. Lorin et al., 877 F.Supp. 192, 196-197 (S.D.N.Y. 1995); In re Michael Batterman, 46 S.E.C. 304, 305 (1976). Section 17(a) of the Securities Act is violated by these same acts to the extent that they were committed in connection with the sale of or offer to sell the manipulated stocks. Finally, conduct of a broker or dealer of the type prohibited by Section 9(a) also violates Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder with respect to securities traded over-the-counter. In re F.N. Wolf & Co., Inc., 60 S.E.C. Docket 3348, 3376 (1996); In re Barrett & Co., 9 S.E.C. 319, 328-29 (1941).
With regard to PCI and HPI, both of which were exchange- listed stocks at the time of the manipulations, Okin violated Section 17(a) of the Securities Act and Sections 9(a)(2), 9(a)(4) and 10(b) of the Exchange Act and Rule 10b-5 thereunder by participating in the manipulative schemes.
With regard to Cypros, which was traded on Nasdaq during the relevant period, and as well as certain HPI and PCI trades that Okin executed over-the-counter, Okin violated Section 17(a) of the Securities Act and Sections 10(b) and Rule 10b-5 thereunder, and aided and abetted and caused Baron's violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder.
B. Abusive Sales Practices as Violations of the Antifraud Provisions
In carrying out the manipulative schemes in PCI, HPI and Cypros, as well as at other times between January 1992 and July 1996 in connection with the purchase or sale of other securities, Okin engaged in repeated, egregious sales practice abuses that violated the antifraud provisions of the Securities Act and the Exchange Act.
1. Material Misrepresentations
Okin's abusive sales practices included, among other things, making unfounded predictions about the future value PCI, HPI and Cypros; making false and misleading claims about the issuers' business prospects; and misleading customers about the risks associated with these speculative securities. In doing so, Okin violated Section 17(a)(1) and (2) of the Securities Act and Sections 9(a)(4) and 10(b) of the Exchange Act and Rule 10b-5 thereunder. See James E. Cavallo, 49 S.E.C. 1099, 1102 (1989); Lester Kuznetz, 48 S.E.C. 551, 553-54 (1986).
Okin also solicited purchases by, and sold securities to his customers without telling them that their purchases were subject to a no-net-sale policy and would not be sold unless Okin could find another Baron customer to buy the securities. In furtherance of the no-net-sale policy, Okin discouraged his customers from selling by making highly-optimistic and unfounded predictions about the future price of the security and by simply refusing to carry out sell orders. Okin's failure to disclose the no-net-sale policy constituted a material misrepresentation in connection with the sale of securities, in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
2. Unauthorized Purchases
The unauthorized trading of customer accounts accompanied with deception, misrepresentation or nondisclosure violates Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. S.E.C. v. Hasho et al., 784 F.Supp. 1059, 1110 (S.D.N.Y. 1992); Cruise v. Equitable Securities of New York, Inc., 678 F.Supp 1023, 1028-29 (S.D.N.Y. 1987); Pross v. Baird Patrick & Co., 585 F. Supp. 1456, 1459 (S.D.N.Y. 1984). By placing unauthorized securities purchases in customer accounts, coupled with deception, misrepresentation or nondisclosure, Okin violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Okin deceived his customers by seeking the customers' ratification of unauthorized transactions through misrepresentations. He also concealed the unauthorized transactions by misusing the sale proceeds from authorized transactions to pay for unauthorized trades so that no cash would be required from the customer.
C. Credit Violations
Section 7(c) of the Exchange Act prohibits a broker-dealer from extending or maintaining credit or arranging for the extension or maintenance of credit to or for any customer in contravention of the regulations promulgated by the Federal Reserve Board. Federal Reserve Board Regulation T, 12 C.F.R. §§ 220.1 et seq., imposes payment rules on securities transactions and requires a broker to obtain full cash payment for customer purchases in a cash account within one payment period which, at the time of the 1993 HPI manipulation, was seven business days. 12 C.F.R. §§ 220.2(w) and 220.8(b)(1). If a customer has not paid for a stock purchase within the required time, the broker must promptly cancel or otherwise liquidate the transaction or part of the transaction for which the customer has not made full cash payment. 12 C.F.R. § 220.8(b)(4).
Under certain circumstances, a broker may apply to its examining authority for an extension of time for payment if the customer makes a good faith request for more time based on an inability to timely deliver payment to the broker, such as when a check is delayed in the mail. 12 C.F.R. § 220.8(d)(1).
Okin aided and abetted and caused Baron's violations of the credit provisions, Section 7(c) of the Exchange Act and Regulation T promulgated by the Federal Reserve Board, by making extension requests in bad faith. Okin placed extension requests on his own unauthorized transactions in his customers' accounts. The customers had not timely paid because they had not authorized the purchases.
Based on the above, the Commission finds that Respondent Okin willfully violated Section 17(a) of the Securities Act and Sections 9(a)(2), 9(a)(4) and 10(b) of the Exchange Act and Rule 10b-5 thereunder and willfully aided and abetted and caused violations of Section 7(c) and 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder and Regulation T promulgated by the Federal Reserve Board.
Respondent Okin has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay a civil penalty. The Commission has reviewed the sworn financial statements and other evidence provided by Respondent and has determined that he does not have the financial ability to pay a civil penalty.
V. Offer of Settlement
The Respondent has submitted an offer of settlement in which, without admitting or denying the findings herein, he consents to the Commission's issuance of this Order, including findings as set forth above and the relief ordered below.
On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions and other relief specified in Okin's Offer.
Accordingly, it is hereby ordered that Okin:
(1) be barred from association with any broker or dealer;
(2) cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Sections 7(c), 9(a)(2), 9(a)(4), 10(b) and 15(c)(1) of the Exchange Act and Rules 10b-5 and 15c1-2 thereunder and Regulation T promulgated by the Federal Reserve Board; and
(3) disgorge $622,584. Okin shall satisfy his disgorgement obligation by making quarterly payments of 20% of his after-tax income to James Giddens, Trustee for the Estate of A.R. Baron & Co., Inc., Hughes, Hubbard & Reed, One Battery Park Plaza, New York, NY 10004, beginning after completion of his term of incarceration; provided that, in any quarter where Okin's after-tax income exceeds $25,000, he shall pay to the Trustee 20% of the first $25,000, and 30% of the excess over $25,000. Okin's disgorgement obligation shall be satisfied upon the earlier of: the making of twenty payments, or payment of $622,584. Until his disgorgement obligation is satisfied, Okin shall provide the Trustee with (a) notice of his and his employer's addresses and telephone numbers within ten business days of any new address or employer; (b) a statement of all income for each calendar quarter; and (c) copies of all federal and state tax returns (including quarterly estimates) filed by him or on his behalf during each year. Okin shall further request in writing of his employer, with a courtesy copy to the Trustee, that such payments be made directly by his employer to the Trustee contemporaneously with payments by such employer to Okin. If the employer shall refuse to honor such request, or if income is received by Okin other than as an employee, Okin shall make such payments directly to the Trustee within thirty days of the end of each calendar quarter.
It is further ordered that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: reopen this matter to (1) consider whether Respondent provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Respondent's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of civil penalty to be imposed and whether any additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
1 Previously, the Commission instituted administrative proceedings on May 23, 1996 (3-9010) against A.R. Baron & Co. Inc., Andrew Bressman, and Roman Okin, and on October 17, 1996 (3-9168) against A.R. Baron & Co., Inc., Andrew Bressman, Roman Okin, Richard Acosta, Richard Simone, Burton Blank, Mark Goldman and Jack Wolynez pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b)(6), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"). On October 17, 1996, the Commission accepted an Offer of Settlement from A.R. Baron & Co., Inc. and dismissed the firm from these proceedings. See Exchange Act Release No. 37830. On December 6, 1996, the Commission postponed these proceedings until the completion of the grand jury proceedings. See Exchange Act Rel. No. 38025.
2 Respondent Burton Blank was not indicted by the grand jury.
3 The findings herein are made pursuant to the Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.