Pop Goes the Weasel

On New York's busy over-the-counter market, the stock of the obscure Oreclone Concentrating Corp., holder of a process of treating low-grade iron ores to make them commercially usable, created a sensation. Issued last fall at $3 a share, the stock bounded to $30. But three weeks ago the price plunged from $28 to $2 in eight hours. Last week, after investigating this giddy performance, New York Attorney General Louis J. Lefkowitz charged that "professional racketeers, promoters and boiler-room operators" had bilked investors of $4,000,000. Only this time, said Lefkowitz, the public had company in its misery. Many brokerage houses were sucked into the stock-rigging, sustained such heavy losses that some may go bankrupt.

Boiler Rooms. Oreclone had originally contracted to pay $20,000 in expense money and hand over 60,000 "free" shares and 20,000 warrants to its underwriters in order to raise $480,000 of new money --a suspiciously large underwriting commission. To create the appearance of great public interest, promoters sold stock through boiler-room operations, also arranged with cooperating brokers to buy shares, offering to purchase them at cost plus a 1/16-to 1/4-point profit for the broker. Seeing the stock rise, other brokers jumped in, began trading. All told, the SEC discovered, some 190 firms bought and sold Oreclone shares, either as principals or brokers.

As the shares reached a peak, a new group of sharpers moved in, said Lefkowitz. Knowing the stock was astronomically overpriced, they began selling short. Among those known to have sold short, said Lefkowitz, were two ex-convicts, Sidney Barcley and Morris ("The Weasel") Miller, who got one-year prison terms in 1958 for SEC violations involving Canadian oil and uranium stocks. After the price plummeted, Barcley made the rounds of sweating brokerage houses offering "mob money" to bail the brokers out and take over their businesses.

Notorious Manipulators. What made the whole story incredible was the fact that many of the participants had previous SEC records in stock deals, which should have alerted SEC officials not to accept the stock registration in the first place. Oreclone's prospectus disclosed that two old SEC pen pals were closely related to the company: Sydney Newman, who was to get royalties on all ore concentrate sold by Oreclone, and Robert Rodman, father of the president and of the secretary-treasurer of the company. Both jointly submitted to SEC injunctions in another stock violation case, and both were described by Lefkowitz as having a "notorious background in the stock manipulation field." The real underwriter of the Oreclone issue did not appear on the stock registration: Norman Pinsker of New York, who told the SEC that the underwriting was originally his "deal." But because he is facing charges of violating the SEC law by selling unregistered stock in a phony cancer cure, he arranged to have the underwriter of record appear as a Washington firm in which his brother-in-law had originally had a one-third interest. This firm has the fancy title of Investment Bankers of America, Inc., a name confusingly close to the august Investment Bankers Association of America, also with headquarters in Washington.

Last week, belatedly closing the stable door, the SEC got a temporary injunction barring Norman Pinsker from further stock trading on the ground that he failed by $224,767 to meet the minimum capital requirements. Attorney General Lefkowitz planned to haul "The Weasel" and 48 other witnesses into court.

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