A federal sting operation led to charges of kickbacks and stock manipulation yesterday against seven investors, including the chief executive officer of National Lampoon Inc. in Los Angeles.
The local offices of the U.S. Attorney and the Securities and Exchange Commission charged that in separate schemes, three sets of investors paid off corrupt stock promoters to inflate stock prices.
At the center of each scheme was a 49-year-old stock promoter from Livingston, N.J., Eduardo Rodriguez.
According to prosecutors, Rodriguez, for a fee, would arrange for brokers and other individuals to buy stock and "park" their holdings to artificially inflate a stock's price.
The stock purchases gave the impression of interest and activity in thinly traded securities.
An unnamed witness who cooperated with the FBI worked with Rodriguez to secretly bribe brokers to purchase stock in their clients' accounts, prosecutors said.
In addition to the stock of National Lampoon, the other companies involved in the stock manipulation schemes were Advatech Corp., a biotechnology business in West Palm Beach, Fla., and Swedish Vegas, a developer of theme restaurants based in Arcadia, Calif.
Although none of the defendants was located here, the kickback scheme involved money transfers to and from an account with an unnamed bank in Blue Bell, according to the indictments.
Acting U.S. Attorney Laurie Magid of the Eastern District of Pennsylvania said the integrity and credibility of the stock market was undermined by the scheme.
She said the indictments "tell the story of deception."
The scheme gave the impression of strong demand for the stocks. "But that demand was fake," Magid said.
"These schemes were designed to corrupt the market and reap large profits for these defendants at the expense of the average investor," she said.
Among the investors affected by the alleged manipulation of National Lampoon stock was the New Jersey Division of Investments, which holds 270,000 shares.
In addition to Laikin of National Lampoon, the others who are accused of paying kickbacks to Rodriguez are:
Dennis Barsky, 60, a consultant for National Lampoon in Las Vegas.
Richard J. Margulies, 58, chief financial officer of Advatech in Edison, N.J.
Alex Kanakaris, 52, of Newport Beach, Calif., and Richard Epstein, 60, of Parkland, Fla., two investors in Swedish Vegas.
The five were arrested yesterday on charges of securities fraud. Magid said Rodriguez and another stock promoter, Tim Dougherty, 29, of Webster, N.Y., were expected to turn themselves in today.
The SEC yesterday halted trading in National Lampoon and Advatech shares until Dec. 29. The commission suspended trading in Swedish Vegas on July 22.
Marcy Goot, a spokesperson for National Lampoon in Los Angeles, had no comment.
National Lampoon, which is listed on the NYSE Alternext, is a media company that holds the title to iconic film comedies such as Animal House and the Vacation series.
According to prosecutors, Laikin, 46, who owns 40 percent of the stock of Lampoon, agreed to pay Rodriguez $60,000 to create artificial volume in the company's stock. Barsky, a consultant for Lampoon, facilitated the payments, the indictment said.
It alleges that one of the stock promoters contacted by Rodriguez was Tim Dougherty of Rochester, N.Y. The indictment said Dougherty was paid a kickback equal to 10 percent of the value of his purchases.
The SEC said Rodriguez, Dougherty and a cooperating witness purchased at least 87,500 shares as part of the scheme.