Stock Games (Sara/Mana edition)
Did an insider at Sarasota's Uniroyal Technology Corp. manipulate the stock price before the company filed for bankruptcy protection?
By David R. Corder
A federal regulatory group claims a former member of the Uniroyal Technology Corp. board of directors manipulated the company's publicly traded stock while also serving as its independent financial adviser.
The National Association of Securities Dealers (NASD) accuses Howard F. Curd, 39, former president and chief executive officer of New York-based Jesup & Lamont Securities Corp., of failing to properly supervise the content in eight investor research reports that touted the Sarasota-based company as a good stock investment.
NASD officials claim those research reports contained exaggerated and unwarranted claims about Uniroyal Technology's financial condition. What might be more troublesome is what was absent: The reports contained no mention of the financial adviser's role on the company's board of directors, the brokerage's relationship as financial adviser to the company or his relationship as the son of Uniroyal Technology's founding CEO Howard R. Curd.
In August 2002, about eight months after the younger Curd left the board of directors, Uniroyal Technology filed a petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The company, now based in Tampa, experienced substantial losses in the late 1990s and early 2000s as it ventured into the highly competitive compound semiconductor and optoelectronics markets and discontinued its coated-fabrics and specialty-adhesives manufacturing operations. The U.S. Bankruptcy Court in Delaware recently approved the company's petition to convert to a liquidation action.
The NASD complaint, issued Nov. 5, also listed as co-respondents Jesup & Lamont securities dealers Vincent J. Glinski, 60, the research reports' purported author, and Joseph P. Shanahan, 56, who edited the reports while acting as the brokerage's chief operating officer.
The complaint came just weeks after the U.S. Bankruptcy Court in Delaware authorized the sale of Uniroyal Technology's coated-fabrics business to an investment group that included both Curds. Last month, New York-based Five Points Partners LLC, which lists Howard F. Curd as president, assumed about $10 million in liabilities and contributed about $7.1 million in cash and financed proceeds for Uniroyal Engineered Products Inc. and its Naugahyde-production factory in Stoughton, Wis.
Uniroyal Technology's bankruptcy attorney, D. Farrington Yates of New York's Sonnenschein Rath & Rosenthal, says he was unaware of the NASD complaint, but he says the court knew about related pending class action claims that named Howard F. Curd as a defendant. Yates declined to say whether the recent NASD complaint raises any new issues about the Five Points Partners acquisition.
It is unclear whether the NASD complaint matters to any of the federal agencies charged with the oversight of the Uniroyal Technology bankruptcy petition. A spokeswoman for the U.S. attorney's office in Wilmington, Del., says officials there knew nothing about the NASD complaint and could not speak about whether the complaint raises any further legal issues. A spokeswoman for the U.S. trustee's office in Washington referred all questions to Montague S. Claybrook, the private trustee now overseeing Uniroyal Technology's liquidation. He did not respond to a request from the Review for information.
Despite numerous inquires made over the past few weeks, the younger Curd has yet to respond to the Review's requests for information about the acquisition or the NASD complaint. This is not the first time Curd was accused of violating member-broker regulations. In June 1995, a New York Stock Exchange panel ruled Curd failed to maintain Jesup & Lamont's net capital requirements, failed to compute the firm's net capital requirements and filed inaccurate financial and operations reports. He was fined $10,000.
In July this year, Curd, Jesup & Lamont and other affiliates successfully defended against a $400,000 claim filed against them with the NASD's dispute resolution division. An arbitration panel cleared the respondents on allegations they committed a variety of securities infractions, including common law fraud, negligence, stock churning and unauthorized transactions.
By alleging he manipulated the company's public stock, the NASD enforcement division claims Howard F. Curd made a dozen wash trades of Uniroyal Technology shares between December 2000 and August 2001 through personal and corporate securities accounts he beneficially owned. Wash trades are purchases and sales of publicly traded stock either simultaneously or within a short time frame. The NASD claims such wash trades created a false appearance of market interest in Uniroyal Technology stock in the eyes of the investing public.
Seven of the wash trades occurred between Dec. 13 and 26, 2000 - prior to Curd's appointment in May 2001 to the company's board of directors. Shares of Uniroyal Technology stock closed at about $7.13 that Dec. 13 and at about $6 each that Dec. 26. The stock had entered a steady decline from Feb. 23, when shares closed at an all-time high of about $35.56 each. Three other purported wash trades took place between May 14 and 16, another on July 3 and one more on Aug. 6. The decline in the value of Uniroyal Technology stock continued, with shares now trading at less than a penny a share.
Those wash trades netted hardly any profit, according to the financial accounts the NASD identified in the complaint. For the most part, those accounts either posted losses of pennies per share or broke even.
At no time, the NASD alleges, did Curd ever disclose his equity interest in Uniroyal Technology stock by filing investor disclosure forms as required by the U.S. Securities Exchange Commission.
1991 - Jesup & Lamont Securities Corp. is founded by Howard F. Curd.
1992 - Uniroyal Technology is founded by the elder Howard R. Curd.
1994-2001 - Jesup & Lamont serves as Uniroyal's financial adviser.
2000 - Howard F. Curd acquires Uniroyal Technology stock and immediately sells it.
2001 - In May, Howard F. Curd joins Uniroyal's board. He resigns in Jan. 2002.
2002 - In August, Uniroyal files a Chapter 11 bankruptcy petition.
2003 - In October, bankruptcy court approves the sale of Uniroyal's coated-fabrics division to Five Points Partners, which lists the younger Curd as its president.
2003 - In November, the National Association of Securities Dealers accuses Howard F. Curd of manipulating Uniroyal Technolo-gy's publicly traded stock.