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2 From O.C. Indicted in Big Stock Scheme : Crime: Ex-president of pager firm, three others accused of conspiracy, fraud in manipulating price of Southland Communications stock.

October 15, 1994|DEBORA VRANA | TIMES STAFF WRITER

SANTA ANA — In what authorities say is the largest stock manipulation case ever uncovered in Los Angeles or Orange counties, the former president of a Santa Ana paging company and three others were indicted Friday on charges of securities fraud, money-laundering and conspiracy.

Named in the 39-count federal indictment were two Orange County men, Ahmad Naim Bayaa, 41, of Lake Forest, former president of Southland Communications Inc., and Abdul Deeb, 43, of Anaheim, a former oil consultant.

They controlled the market for nearly all the company's stock in an attempt to drive up its price, according to indictments filed by Assistant U.S. Atty. John Libby.

From 1988 to 1990, the men, along with Shaw Tehrani, 40, an Atlanta stockbroker, and Eduardo Anton, 32, a broker in Miami, manipulated Southland Communications' stock prices, setting up a "secret network" of accounts at stock brokerages across the country, Libby said.

None of the four defendants could be reached for comment.

Because of the scheme, six brokerage firms holding Southland Communications stock allegedly lost nearly $12 million and one firm, Suplee Reed & Co. of Media, Pa., was forced out of business, according to the indictment.

"This was a complex, thought-out scheme," Libby said. "Basically, they wanted to sock away a good portion of the stock in these secret accounts. They opened up accounts in the names of people who lived overseas, many with ties to Bayaa's family."

According to the indictment, the men used the names of Bayaa's relatives and friends to fraudulently buy nearly every available share in the pager company, eventually controlling more than 80% of the company's stock, or about 1.3 million shares, without telling federal regulators. Under Securities and Exchange Commission rules, a stake of more than 5% in a company must be reported.

By secretly controlling the shares and keeping out other investors, the men were allegedly able to artificially boost Southland Communications' stock price dramatically by withholding shares from the market, thereby forcing the price upward.

On March 14, 1992, the company's stock jumped from $8.75 a share to $13.25 a share, and the company issued a press release saying it knew of no reason for the unusual activity. By April 4 of that year, the stock had risen to almost $17 per share, and the SEC halted trading.

Most of the stock purchased by Bayaa and the others for the secret accounts was purchased on margin, Libby said--meaning they paid half and the brokerage firms paid half.

When trading was suspended by the SEC, the stock's price eventually went to zero and the brokerage firms asked Bayaa and others to repay the loans for the share purchases. But the men did not, forcing the brokerages to take losses estimated at nearly $12 million, the indictment states.

The result of an extensive investigation by the FBI, Friday's indictment is the largest criminal stock manipulation ever charged in the Central District of California, according to U.S. attorneys. Although Barry Minkow's ZZZZ Best carpet cleaning company was a much larger investment fraud case, it was not related to stock manipulation.

If convicted, Bayaa could face 295 years in prison and a $10.2-million fine. Tehrani could face 320 years in prison, Deeb 215 years, and Anton could face 50 years. Each also is subject to an undetermined amount of fines.

Bayaa appeared Friday before U.S. District Judge Andrew J. Wistrich on the charges and was released on $100,000 bail. Neither he nor his attorney, Stanley Greenberg of Los Angeles, was available for comment. Bayaa is expected to enter a plea Monday and the other three men are slated to appear in court later.

Bayaa, a Palestinian refugee who moved to the United States in the 1970s, founded Southland Communications in 1981 to make radio paging devices in Santa Ana. The company, which eventually employed 70 people, went public in 1987 and filed for bankruptcy six years later.

In 1992, the Securities and Exchange Commission filed a lawsuit in federal court in New York accusing Bayaa and others of manipulating the price of Southland Communication stock. In January of that year, Bayaa agreed to resign as president and pay back $736,935 in stock trading profits to settle civil charges that he manipulated the company's stock prices. At the time, he also agreed to give up 921,000 shares of company stock.

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