SEC says Rockville man duped Wall Street firms

March 20, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Armed with little more than a fax machine and a telephone, a Rockville man cheated some of Wall Street's largest firms out of at least $700,000 by posing as a bond buyer and trading $1 billion in bonds on credit, according to a complaint filed by government regulators.

Daniel O. Teyibo, 35, has been accused by the Securities and Exchange Commission of running the alleged scam between 1991 and last month. The charges say his trades resulted in profits of at least $165,000 and losses of another $550,000, though a full accounting has yet to be made.

If true, the allegation could awaken old fears about the buying and selling of government securities. If someone on the outside could trick an inner circle of billion-dollar traders into believing that he was one of them, the question is raised whether the government securities market is outdated and inherently open to fraud.

"This guy was clever, very clever, and quick," SEC Assistant Chief Counsel Tom Sjoblom said from Washington yesterday.

Mr. Teyibo, who could not be reached for comment yesterday, has challenged the SEC's complaint and filed his own complaint with the SEC against 19 brokerage firms for not executing his trades. He is claiming $28 million in damages.

If Mr. Teyibo is found guilty of the SEC's charges, he could have to repay the companies for their losses, return the profit he made and pay a $195 million fine. An SEC complaint is not the same as a criminal charge, and Mr. Teyibo, a Nigerian immigrant who assumed dual U.S.-Nigerian citizenship in 1991, is not under arrest.

The original complaint was filed in December, but according to the SEC, Mr. Teyibo continued to try illegal buying and selling of government securities into this year. On March 12, the SEC won a court-ordered injunction against Mr. Teyibo and froze his assets, the SEC announced in a statement Thursday. If he violates the injunction, Mr. Teyibo could be held in contempt of court and imprisoned or fined.

Although sporadic fraud exists in the financial industry, just as in any other line of business, Mr. Teyibo's alleged deal-making was not a one-shot thing but repeated 325 times, the government charged.

He allegedly duped 25 of the biggest names on Wall Street, such as Citicorp Inc., Harris Government Securities Inc., Nikko Securities International Inc. and Prudential Securities Inc., as well as Baltimore's Alex. Brown Inc.

None of the firms identified by the SEC as having done trades for Mr. Teyibo would comment publicly about the case.

Speaking anonymously, however, an official at one brokerage described one of Mr. Teyibo's deals: He called up and said he represented a Nigerian bank with $84 billion in assets that wanted to buy $1 million in U.S. Treasury bonds, the official said. When asked for financial data and his company's documents, Mr. Teyibo then faxed information on a company called JFM Government Securities Inc., he said. In fact, the SEC believes that JFM does not exist as a company and that the information was falsified.

The unsuspecting dealer then executed the trade -- without first having the documents checked at the company's credit office, the brokerage official said. The bond price went up, Mr. Teyibo immediately sold and made a profit, and the dealer took his commission out of the profit and wired Mr. Teyibo the difference, he said. Only later, after Mr. Teyibo's documents had been checked, did the brokerage halt dealings with him.

Although this brokerage did not lose in the trade, many others did, according to the government.

According to the SEC complaint, Mr. Teyibo succeeded through sheer persistance -- using 19 aliases, he called dozens of firms and was rejected many times by suspicious dealers. But he could count on the sheer improbability of his actions to overwhelm many people's suspicions.

Mr. Sjoblom at the SEC said Mr. Teyibo kept false balance sheets and even fake audits on a computer and would then print them out when needed. He changed the name of his company and its balance sheets time and again to convince dealers that he was not the same person, Mr. Sjoblom said.

Another alleged ruse involving Dean Witter Reynolds Inc. required detailed knowledge of how securities firms were organized, Mr. Sjoblom said. Mr. Teyibo is alleged to have called up the company's New York office liaison desk, which deals with branch offices. He said he was from the Chevy Chase branch office of Dean Witter and asked for government bonds to be purchased for a client, according to Mr. Sjoblom. This meant that the employees at the liaison desk, and not Mr. Teyibo, asked the dealers to execute the trade, making the traders think it was an approved deal, he said.

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