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 WASHINGTON, Jan. 29 /PRNewswire/ -- The National Association of Securities Dealers, Inc. (NASD), the self-regulatory organization for The Nasdaq Stock market and the over-the-counter securities markets, has taken disciplinary action against Monarch Funding Corp. (Monarch); Leo M. Eisenberg, the firm's owner and president; and Michael B. Eisenberg, a vice president and treasurer of another NASD member, Concorde Brokerage Corp.
 Pursuant to an offer of settlement, made without admitting or denying the allegations, Monarch was censured and expelled from membership in the NASD, while Leo Eisenberg and Michael Eisenberg were each censured and permanently barred from associating in any capacity with any member firm. In addition, Monarch, Leo Eisenberg, and Michael Eisenberg were jointly and severally fined $1,700,000.
 The complaint involved activity during the initial public offering and aftermarket trading of Tele-Dynamics, Inc., then a non-Nasdaq over-the-counter blind-pool security in which Monarch had acted as the sole underwriter. The allegations of misconduct were based on findings that the firm, acting through Leo Eisenberg, and others, manipulated the market of Tele-Dynamics securities. Respondents committed the manipulation by dominating and controlling the market for the Tele-Dynamics securities and trading at artificially high prices despite the lack of legitimate market demand, according to the findings. As a consequence of the manipulative scheme, Monarch, Leo Eisenberg, and others realized excessive profits of at least $535,000. The NASD stated that this market manipulation occurred during the initial public offering and immediate aftermarket trading by Monarch, Leo Eisenberg and Michael Eisenberg, among others, by fraudulently using a prospectus of Tele-Dynamics that was known by the respondents to contain material omissions and false and misleading statements and by making other misrepresentations, including price predictions, to customers purchasing the securities.
 In addition, the complaint charged Monarch, Leo Eisenberg, and Michael Eisenberg with failure to disclose that Michael Eisenberg was a promoter of Tele-Dynamics, Inc., during the initial public offering, and that he controlled the management of Tele-Dynamics during the relevant aftermarket trading. This allowed Michael Eisenberg to take from Tele-Dynamics $200,000 that the company had received on the exercise of 2 million Tele-Dynamics warrants, the findings stated.
 During the initial public offering, Monarch, through Leo Eisenberg and others, sold securities to accounts that were restricted from purchasing securities of a "hot issue." Monarch and Leo Eisenberg were also found to have failed to establish, maintain, and enforce written procedures with respect to the matters described above.
 As a result of this violative activity, Monarch, Leo Eisenberg, and Michael Eisenberg were found to have violated the anti-fraud provisions of the federal securities laws and Article III, Section 18 of the Association's Rules of Fair Practice. These provisions prohibit the use of any manipulative, deceptive, or other fraudulent device in the purchase or sale of any security.
 The NASD investigation was carried out by its Anti-Fraud Department in Washington and is part of a continuing effort by the NASD to eliminate trading and sales-practice abuses in penny stocks. The disciplinary action was taken by the NASD's Market Surveillance Committee, a national committee responsible for maintaining the integrity of the Nasdaq and the non-Nasdaq markets and for disciplining members that fail to comply with relevant NASD rules and securities laws.
 In addition to taking this disciplinary action, as is set forth in the attached press release issued by Michael Chertoff, U.S. Attorney for the District of New Jersey, the NASD provided assistance in a related criminal action taken by the U.S. Attorney. In that criminal action, Leo Eisenberg pleaded guilty to securities fraud, racketeering, and other felonies in connection with manipulative schemes involving other over-the-counter securities.
 The following was issued by U.S. Department of Justice, U.S. States Attorney for the District of New Jersey on Jan. 23:
 The owner and president of a defunct New York City penny stock brokerage firm pleaded guilty to racketeering today, admitting that he committed wire, mail and securities fraud in schemes that manipulated the prices of three stocks, U.S. Attorney Michael Chertoff announced.
 Leo M. Eisenberg, 70, formerly of Woodmere, N.Y., who now lives in upstate New York and in Boca Raton, Fla., faces a maximum of 20 years in federal prison and fines ranging from $250,000 to twice the profit or loss due to the schemes, which have been estimated to cost consumers around the world millions of dollars, Chertoff said.
 Eisenberg was the owner and president of Monarch Funding Corp. from 1965-1990, a defunct brokerage firm formerly located on John Street in Manhattan. He pleaded guilty to the first count of an October 1989 Superseding Indictment that charged him and two other men with racketeering in connection with fraudulent trading in the penny stocks of at least six companies.
 Richard O. Bertoli, 59, of Rye, N.Y., former president of Executive Securities Corp., and Richard S. Cannistraro, 39, formerly of Venice, Calif., a former securities research analyst at a New York Stock Exchange member firm were charged, along with Eisenberg, in the superseding indictment brought under the Racketeer Influenced and Corrupt Organizations (RICO) Act.
 Last week a Newark Federal Grand Jury charged Bertoli and Cannistraro -- in a Second Superseding RICO Indictment -- with racketeering, racketeering conspiracy, criminal conspiracy,and obstruction of justice in the same penny stock fraud schemes that netted more than $7 million in profits for Bertoli, Cannistraro and Eisenberg, according to Assistant U.S. Attorney John M. Fietkiewicz.
 The second superseding indictment alleges that Bertoli, Cannistraro and others used Monarch as a racketeering enterprise from 1982 to the present in connection with fraudulent trading in at least six penny stocks, the use of off-shore brokerage accounts in the Cayman Islands, and the attempted cover-up of their fraudulent activities, Chertoff said.
 Eisenberg is named as a co-conspirator of Bertoli and Cannistraro, but is not charged in the Second Superseding Indictment.
 Eisenberg told U.S. District Judge Alfred J. Lechner Jr. today that he, Bertoli, Cannistraro and others agreed to manipulate and control the prices of Liquidation Control, Inc. (LCI), Toxic Waste Containment, Inc. (Toxic Waste) and High Technology Capital Corp. (High Tech) securities. That scheme, Eisenberg said, was planned prior to the completion of the Initial Public offerings (IPOs) for those securities. The plan was to buy the securities at low prices, manipulate their prices and then sell them at higher prices, Eisenberg said.
 Bertoli masterminded the scheme, Eisenberg said, including how the IPOs were to be structured, who could buy securities in each of the IPOs and how many securities each could purchase.
 As a result, almost all the securities in the IPOs of LCI, Toxic Waste and High Tech were sold to accounts controlled by persons with whom Eisenberg, Bertoli or Cannistraro had understandings concerning the manner in which the securities would be traded, Eisenberg admitted today.
 Bertoli, Cannistraro and Eisenberg used nominee accounts at Monarch to purchase the three companies' securities, and were also the beneficial owners of five Cayman Islands-based accounts that bought and sold securities of the three companies, Eisenberg admitted. Bertoli directed and controlled the trading in the five Cayman Islands accounts, and the three men were to share equally the profits derived from the accounts, Eisenberg said.
 Brokers at Monarch, and brokers and traders outside the company, were given inducements to trade the three companies' securities as the co-conspirators directed, some of whom were permitted to buy securities in the IPOs and were promised that they could participate in future deals, Eisenberg admitted.
 Some of those brokers and traders who cooperated in the scheme were guaranteed that they would not lose money if they followed directions, and they bought and sold the securities at times and prices determined by the three co-conspirators, Eisenberg told Judge Lechner. Cannistraro, who at that time was a research analyst at Wood Gundy Corp. in Manhattan, wrote research reports touting LCI and Toxic Waste to generate demand for the stocks, and the agreement to write the favorable reports was reached even before the IPOs were closed. The report recommending LCI was published under someone else's name, and research reports recommending Toxic Waste were disseminated by Wood Gundy to the investing public, Eisenberg told Judge Lechner.
 Eisenberg also admitted that, beginning in 1983, he, Bertoli, Cannistraro and others engaged in actions designed to cover up the stock manipulation schemes.
 Money from the manipulation schemes was sent to the Cayman Islands, Eisenberg said. The money was first placed in accounts at Euro Bank and later placed under the management of an individual at Paget-Brown & Co. Ltd., a financial management firm in the Cayman Islands.
 After Cannistraro's 1987 indictment (see below), Eisenberg and Bertoli went to Euro Bank's offices in June 1987 and obtained and shredded documents concerning accounts owned by Eisenberg, Bertoli and Cannistraro, Eisenberg admitted today.
 Then, in a March 1990 meeting in a Manhattan restaurant, Bertoli, Eisenberg and others discussed moving the money from the Cayman Islands to Andorra, to prevent the United States from finding the money, Eisenberg told Judge Lechner.
 Documents requested in 1988 by a Newark Federal Grand Jury were not produced, because they had been moved from Monarch to a garage at Eisenberg's house, and then to a bakery in Brooklyn.
 Bertoli, who maintains an office in Newark, N.J., is the former president of Executive Securities Corp., which was also located at 25 Broadway, Manhattan, a brokerage firm that was established in 1973 and placed in liquidation by federal regulatory authorities in 1975.
 Bertoli faces a maximum sentence of 70 years in jail, several million dollars in fines, and, under RICO, forfeiture of all assets obtained through his racketeering activity, if convicted on the counts of the Second Superseding Indictment with which he is charged, Chertoff said.
 Cannistraro is now in federal prison for, among other things, securities fraud and obstruction of justice, having pleaded guilty to a 1987 indictment concerning LCI and Toxic Waste securities transactions.
 Cannistraro faces a maximum of 45 additional years in jail and several million dollars in fines if convicted on the Second Superseding Indictment counts with which he is charged and, again under RICO, forfeiture of all assets obtained through his racketeering activity, Chertoff said.
 The Second Superseding Indictment charges that the defendants used fraudulent trading activities to significantly raise the prices of the securities of the following public companies, all of which were traded in the over-the-counter markets:
 1) Astrosystems, Inc., Lake Success, N.Y., which was engaged in the design and manufacture of electronic products.
 2) Nature's Bounty, Inc., Bohemia, N.Y., which was engaged in the production and distribution of natural vitamins and health food supplements.
 3) LCI, formerly located in Washington, which was purportedly engaged in the business of consulting and advising financially distressed companies (in November 1983, LCI merged with Network Data Systems, Inc., a Canadian company, to form Romlock, Inc., and became engaged in the computer security business).
 4) Toxic Waste, formerly located in Washington, which was purportedly engaged in the business of marketing hazardous waste containment products.
 5) High Tech, formerly located in Paterson, N.J., which was purportedly engaged in the venture capital business (High Tech is now in bankruptcy proceedings, Chertoff said).
 6) Solar Age Industries, Inc., formerly located in Albuquerque, N.M., which was engaged in the solar energy business (Solar Age is also now in bankruptcy proceedings, Chertoff said).
 No employees of the six firms have been charged, Chertoff said, with the exception Cannistraro, the secretary-treasurer, principal shareholder, and a director of LCI from its October 1982 inception until June 1983.
 Bertoli and Cannistraro are scheduled to be arraigned before Judge Lechner on Jan. 27 at 9:30 a.m., Fietkiewicz said.
 Most of the additional charges against the defendants in the Second Superseding Indictment relate to obstruction of justice by the defendants in connection with SEC and Grand Jury investigations, and SEC civil action against the defendants and others, the 1987 criminal indictment against Cannistraro, and the 1989 RICO case, Fietkiewicz said.
 An indictment is a formal charge made by a grand jury, a body of 16 to 23 citizens, Chertoff noted. Grand jury proceedings are secret, and neither persons under investigation nor their attorneys have the right to be present.
 A grand jury may vote an indictment if 12 or more jurors find probable cause to believe that the defendant has committed the crime or crimes charged. Despite indictment, every defendant is presumed innocent, unless and until found guilty beyond a reasonable doubt following a trial at which the defendant has all of the trial rights guaranteed by the U.S. Constitution and the federal law.
 Chertoff credited Special Agents of the FBI, under the direction of Gary L. Penrith, special agent in charge of the FBI's Newark Division; the Anti-Fraud Department of National Association of Securities Dealers (NASD), under the direction of John E. Pinto Jr., in Washington; the NASD New York District Office, under the direction of William Clendenin; the SEC, under the direction of William R. McLucas, director of the Enforcement Division, in Washington; and Postal Inspectors of the U.S. Postal Inspection Service, under the direction of T.F. Johnson, Newark postal inspector in charge, with developing the case.
 Representing the United States are Robert P. Warren, chief of the U.S. Attorney's Fraud and Public Protection Division in Newark; Assistant U.S. Attorney Fietkiewicz, deputy chief of the Fraud and Public Protection Division; and Special Assistant U.S. Attorney David M. Rosenfield.
 NOTE: Eisenberg's Attorney is Barry M. Fallick, Esq., Manhattan.
 -0- 1/29/92
 /CONTACT: Robert Ferri, 202-728-8955, or Daniel M. Sibears, 202-728-6911, both of NASD/ CO: National Association of Securities Dealers ST: New York, District of Columbia IN: FIN SU:

MK -- DC016 -- 4790 01/29/92 13:55 EST
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Date:Jan 29, 1992

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