Hot Money Boils Over In IPOScam
WALL STREET - (06/05/06) Four more investors werecharged in a civil suit Friday by the Securities and ExchangeCommission with a scheme that reaped almost $3 million in illegalprofits in the 2004 conversion of a mutual savings bank by payingnominee depositors of the bank to buy shares in the initial publicoffering for them. The practice is rumored to be widespread, butusually undetected, in the conversion of mutuals, in whichdepositors always get first crack at buying prized stock in IPOs.The case also highlights the practice of professional speculatorswho maintain deposits at numerous mutually owned institutions,including credit unions, in the expectation they will soon gopublic. The SEC charged the investors paid depositors of New HavenSavings Bank who were given first-tier rights in the IPO to buyshares in the mutual-convert and to assign those shares to theinvestors. The investors, identified as Jay Slesinger, a75-year-old Florida retiree who maintains deposits in numerousmutual savings banks in the expectation they will go public;Maurice Servetnick, a 72-year-old retired broker; Moshe Ariel, thenominee depositor; and Jay Rice, a Connecticut broker, consented torepay more than $800,000 in profits and interest without admittingor denying the charges. The four are the second set of investorscharged in the IPO, with five others agreeing last year to repayalmost $2 million of ill-gotten gains in the 2004conversion.