FBI agents set up an elaborate, yearlong, undercover sting operation aimed at penny stock manipulators - and the results were a 36-count indictment.

U.S. Attorney Brent D. Ward released the indictment Wednesday, minutes after it was handed up by a federal grand jury in Salt Lake City. It maintains that Robert C. Gleave, Candace M. La-Casto and O. Robert Meredith conspired to commit securities fraud.Gleave, a securities broker with Xcel Securities Inc. of Englewood, Colo., is charged in all 36 counts. They include conspiracy, sale of an unregistered security, security fraud and wire fraud.

The 44-page indictment covers the period from Sept. 1, 1987, to Sept. 30, 1988.

In the operation, agents worked out of an office in the Sandy-Midvale area. Supposed investors David Alders, James Gianetti and David Bakers were actually FBI agents. The project cost the government about $150,000.

LaCasto and Meredith are both from the Salt Lake area, Ward said. They are charged only with the single conspiracy count.

The indictment says LaCasto was an employee of Olympic Stock Transfer, Salt Lake City, and Meredith was an attorney practicing mostly in the field of securities law in Salt Lake City.

The grand jury named as unindicted co-conspirators Rick N. Hansen and Dean S. Lemmon, both called stock promoters; Paul W. Nielsen, listed as a middleman for accountants and attorneys; Marvin D. Haney, a certified public accountant; Jerry D. Timothy, "a salesman of public shell corporations;" and Loraine C. Timothy, who was married to Jerry D. Timothy. Ward said all are from the Salt Lake area.

He said Lemmon pleaded guilty to one count of conspiracy to commit security fraud. The charge was in a felony information separate from the grand jury indictment.

Ward said there was a scheme to effect an unlawful public distribution of securities purportedly of Protecto Industries Inc., and to manipulate their price upward.

After the stock reached a level of $2 per share, it was supposed to be pledged as collateral on a loan to be sought in Guam, he said.

"For years Utah has been criticized as a hotbed of criminal fraud," he said. "We in law enforcement have applied tremendous effort to eradicate one form of that fraud - investment fraud.

"Today, we launch a frontal attack on the most fundamental source of Utah's bad reputation in the securities industry, fraud and manipulation in the over-the-counter market for low-priced securities, or the penny stock market."

In the operation, FBI agents let it be known they wanted to buy a shell corporation, he said.

A shell is a company with no operating history, few or no employees, few or no assets and often no legitimate business prospect, Ward said. Shells sometimes are revived by manipulators and used as the vehicle for fraud.

The indictment contends the conspiracy aimed at setting up a "box job" in which the manipulators of a securities fraud own nearly all of the shares of the company involved.

"The co-conspirators and the undercover agents created the private Nevada corporation known as Protecto; Business Finance (a dormant Delaware company) was then merged with Pro-tecto," says the indictment.

The indictment says Protecto was listed in the pink sheets - price quotations - for over-the-counter stock sales. It says one controlled sale of 5,000 shares took place on March 31, 1988, and five days later the SEC suspended trading in Protecto.

As part of the claimed manipulations, the indictment says, Nielsen introduced agents to Haney, the CPA, on March 7, 1988.

The same day, it charges, "unindicted co-conspirator Marvin D. Haney provided the undercover agents false audited financial statements and was paid for his services by check in the amount of $10,000."

It says the financial statement listed Protecto's assets at $937,036.78. "Protecto had virtually no assets at any time during its existence," the indictment charges.

It contends that Timothy sold the revived shell corporation, Business Finance Service, to Lem-mon for $20,000. The shell was incorporated in 1927, and thus it was supposedly exempt from registration requirements covering stocks offered for sale after 1933.