Harry Son made some mistakes, but perhaps the worst were calling the head of licensing for the Utah Securities Division and trying to sell stock when Son was an unlicensed securities broker using a fake name and his company already had been warned it might be shut down for allegedly fraudulent practices.
On Thursday Son's situation came to a head when the Great Neck, N.Y., man pleaded guilty in a securities fraud case. He agreed to help Utah with its continuing investigation into Meyers Pollock Robbins, a New York bro-ker-age firm.Additionally, a warrant was issued for Michael Ploshnick, the president of Meyers Pollock, for not showing up at the court hearing in Murray. The warrant sets bail at $75,000.
Calls to Meyers Pollock's New York headquarters were unanswered Thursday.
This court action is yet another outcome of a longstanding nationwide crackdown by state securities regulators on telemarketers who sell stock in "micro-cap" companies under false pretenses.
Microcap is the term generally used to describe the tiniest publicly traded companies that frequently try to raise a few million dollars in capital through initial public offerings.
"To our knowledge, this is the first time that securities regulators have filed criminal charges against someone for cold calling. The reason we did was two-fold: the early administrative actions had not been enough to induce compliance, but secondly, when Harry Son made calls to Matt Jenkins (the Utah securities licensing head), Son was using somebody else's name," said Wayne Klein, Utah assistant attorney general.
"The second reason we're doing this is that it is our experience that it is fairly widespread for microcap brokerage firms to hire unlicensed cold callers, and this is the first downpayment on an effort to go after that practice and call it what it is - fraudulent practice," Klein said.
Klein said that in May of 1997, the Securities Division of the Utah Department of Commerce issued ad-ministrative orders against Meyers Pollock and three of its agents who had made solicitations in Utah.
"Incredibly, two months later two more brokers for the firm made cold calls into the state to, of all people, the head of licensing for securities, Matt Jenkins, soliciting investment," Klein said.
Jenkins taped the calls, which is legal in Utah. "We went to Meyers Pollock's attorneys and said, `We have outstanding orders trying to revoke your license for fraud, and you're still doing it,' " Klein said.
"Then, a month later, Harry Son called Matt Jenkins. After having so many warnings and since the administrative action was not enough to stop them, we had to impress upon them the importance of obeying the law," Klein said.
Son pleaded guilty to two class A misdemeanors of attempted securities fraud and attempted offer or sale of securities by an unlicensed agent.
During the court proceedings, 3rd District Judge Michael K. Burton bound the company over for trial on two felony counts of securities fraud and employing an unlicensed agent.
Burton sentenced Son to 360 days in jail and imposed a $2,500 fine for each of the two violations. However, the judge suspended the jail time and fine and put Son on 18 months probation with the condition that Son help the state with its prosecution of Meyers Pollock.
The criminal charges said Son made calls into Utah soliciting securities transactions when he was not licensed and took part in fraudulent activities to cover up the fact that he didn't have a license.
Court records show that Son acted as a "cold caller" for the company and solicited securities business using the name of his "trainer" at the company. He also submitted false information to the state, according to court records.
Klein said the licensing process offers protection to the public in two ways: It ensures that brokers are trained, have been informed about the laws and have had a criminal background check, and it also gives states a measure of oversight power.
"If you've got a bad broker, and there are not many of them, you want to get him after he bilks two or three people, not 200," Klein said.