The case against Kresge and Yankee was the product of NASD’s investigation into a high-pressure, boiler-room type operation of a Yankee branch office in Brooklyn, NY in the fall of 2001 and spring of 2002. The investigation resulted in permanent bars for related fraudulent conduct against 12 registered individuals employed by Yankee and two other firms involved the fraudulent scheme.
Brokers in Yankee’s Brooklyn branch office used high-pressure sales tactics, fraudulent misrepresentations, baseless price predictions and omissions of material facts to persuade investors to purchase shares of three highly speculative Over-the-Counter Bulletin Board (OTCBB) securities: Silver Star Foods, Inc., Western Media Group Corp. and Golden Chief Resources, Inc. Yankee brokers in many instances targeted sales of these stocks to elderly persons for whom they were patently unsuitable.
The Hearing Panel held that, “Yankee and Kresge are liable for … [the] violations by the brokers in the Brooklyn office” because they were the brokers’ employers and ultimate supervisors, with the duty to establish guidelines for brokers’ conduct and to monitor brokers’ adherence to those guidelines. The Hearing Panel concluded that Kresge’s performance of due diligence in reviewing the backgrounds of brokers hired to staff the Brooklyn branch office was “grossly insufficient.” The panel noted that his “indifference to every aspect of its operation except its financial success was reckless and failed to prevent injury to the investing public.”
NASD’s surveillance of the OTCBB and investigation of market activity in the three securities identified a number of individuals who participated in the fraud who were affiliated with Yankee and two other firms, Sierra Brokerage Services of Columbus, OH and Argus Securities of Hallandale, FL. As a consequence, 12 individuals have been barred, including:
- Kenneth Gliwa (CRD. No. 1087236), Yankee’s former Vice President, who settled charges that he failed to supervise the Brooklyn branch office, allowed two unregistered persons to hire brokers and operate the branch office, failed to conduct any meaningful review of the three securities to evaluate their suitability for the firm’s customers and allowed the firm to operate without any written supervisory procedures;
- Gary Giordano (CRD No. 2722480), former Yankee branch office manger, who settled charges of employing fraudulent sales practices, making unsuitable recommendations and failing to supervise brokers in the Brooklyn branch office;
- Jeffrey Richardson (CRD No. 736249), Sierra’s President and head trader, who settled charges that he participated in an unlawful distribution of unregistered shares, generating millions of dollars for offshore entities controlled by the two individuals who owned and operated the Yankee Brooklyn branch office;
- Lawrence Dugo (CRD No. 2555823), a Yankee broker, and Samuel Barmapov (CRD No. 4245309), an Argus broker, who settled charges they used fraudulent sales practices in recommending shares to investors;
- Joseph Ferragamo (CRD No. 2868601), one of the owners of the Yankee Brooklyn branch office; Yankee brokers Vasily Kouznetsov (a.k.a. David Anderson) (CRD No. 4163388), Eric Cenname (CRD No. 2207772) and Adam Klein (CRD No. 2686322); John Cook (CRD No. 1900910), Argus’ former President; John Klukewycz (CRD No. 2477332), a former Argus branch manager; and Ilian Shteinberg (CRD No. 3208021), a former Argus broker, were all barred for failing to appear and testify in connection with NASD’s investigation.
Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD's Web site at www.nasd.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.
