NCJ Number
193108
Date Published
2001
Length
24 pages
Annotation
This essay provides a criminological analysis of fraud in the penny-stock industry, which involves those securities not listed on a recognized exchange.
Abstract
Penny stocks are traded over-the-counter, and information about them is only available on the pink sheets. The contemporary penny-stock boiler room depends on a large work force of telephone solicitors who are deliberately chosen for their lack of experience in, and knowledge of, the securities industry. It is the relentless pressure by the managers on the callers-solicitors and theirs, in turn, on the unsophisticated credulous public that is at the heart of the penny-stock swindle. The initial battle lines between regulators and fraudulent penny-stock dealers are drawn over the quality and quantity of information, not whether the game is fixed. When it had been determined that the information was spotty, typically after laborious procedures, the penalties were excessively mild. Those who get rich from victimizing investors in the penny-stock world are correct in their belief that there are millions of fools obsessed with making a fortune, and all that separates them from the loot are some petty rules and regulations that have little "teeth." If things get too hot, they have "house" lawyers whose specialty is stretching cases out for years. This essay includes a case study of how one of the more notorious and successful operators of penny-stock fraud, Robert E. Brennan, has managed to stay in business. 134 notes