A Florida-based stockbrokerage that was the chief promoter of shares of Novatek International Inc., the bankrupt Columbia-based company that regulators allege was at the center of a stock-rigging scheme, has been fined $100,000 and expelled from the securities industry.
The National Association of Securities Dealers, which polices U.S. brokers and runs the Nasdaq stock market, found that Joseph Roberts & Co. broke inventory requirement rules, failed to maintain enough capital during the first six months of 1996, did not keep accurate books and records, and filed false financial reports with the NASD, according to the NASD's July disciplinary report.
Joseph Roberts never responded to the NASD complaint and was not represented at a February disciplinary hearing in Atlanta, the NASD said. Neither of Roberts' principals, Joseph DeSanto, 27, and Robert DiMarco, 31, could be reached for comment.
The NASD also fined former Roberts controller Christopher B. Pascente $10,000 for overstating the company's capital.
In deciding to fine and expel Roberts, the NASD said it took into account its disciplinary history and the seriousness of the misconduct.
In December 1995, the Pompano Beach-based brokerage and its chief operating officer were fined $50,000 by the NASD for selling unregistered securities and failing to supervise brokers.
The expulsion of Roberts follows several arbitration claims filed since late 1996 by investors who alleged they suffered financial losses as a result of violations of NASD regulations by Roberts.
The allegations ranged from unauthorized trading in accounts to misrepresention of investments, NASD records show. The company has been ordered to pay more than $50,000 to customers the NASD found were wronged, NASD records show.
Roberts' NASD registration was suspended in 1997 for its failure to pay an arbitration award, NASD records show, and its membership was stripped last year for its failure to pay fees.
The company was closed by the NASD in October 1996 after it collapsed when Novatek's share price plunged after questions were raised about its claims of multimillion-dollar contracts in South America, how it was valuing assets and the background of one of its principals, William B. Trainor.
In its most recent order, the NASD said it found that Roberts' inventory of stocks exceeded net capital by $1.5 million to $10.8 million. That was a violation of an agreement the company had signed with the NASD in which it was stipulated that Roberts would not carry an inventory that exceeded 50 percent of its previous month's excess net capital.
The NASD said it found that DiMarco and DeSanto were aware that their company was in violation of the agreement and that the violation was partly responsible for the company's financial collapse when Novatek's stock plummeted.
Roberts received 1 million shares of Novatek in early 1996 for helping to arrange a merger between Novatek and Medical Diagnostics Products Inc., a shell company founded by Vincent Celentano and Trainor, both of Hillsboro Beach, Fla.
After that merger, Celentano and Trainor transformed Novatek from a failing manufacturer of steel framing for homes into a distributor of medical diagnostic kits. The Securities and Exchange Commission has filed a civil complaint against Celentano and Trainor, alleging that they used Novatek to mastermind an extensive fraud against investors.
Novatek shareholders interviewed in 1996 by The Sun said they found it difficult, if not impossible, to take any profits on their investments even when Novatek was trading at an all-time high. They said brokers at Roberts always offered an array of reasons that shares couldn't or shouldn't be sold.
Pub Date: 7/21/98