Firm Seeks Secrecy On D'amato Dealings -- New York Senator Got Big One-Day Profit On Securities Trade

WASHINGTON - A New York penny stock firm that paid $2.5 million to settle Securities and Exchange Commission fraud allegations is trying to keep secret a report to the SEC that spells out details of its stock transactions with Sen. Alfonse D'Amato, R-N.Y.

D'Amato reported on his financial disclosure form that he made $37,125 in just one day on a 1993 securities trade arranged for him by Stratton Oakmont Inc., a Long Island-based penny stock firm that paid the multimillion-dollar penalty in February after the SEC accused the firm of defrauding investors and manipulating stock prices.

D'Amato traded stocks through Stratton Oakmont for three months during the summer of 1993, buying and selling several of what the SEC called Stratton's "house stocks," which were allegedly manipulated by the firm to defraud investors. D'Amato made money on some of his trades, lost on others and ended up ahead by $10,837.63 before closing his account.

D'Amato's profit was unusual for Stratton Oakmont customers, according to the March 1992 SEC complaint, which said investors in 13 states were defrauded by the firm.

"I am absolutely confident I received no special treatment," D'Amato said when the trades were disclosed earlier this year.

Stratton ran a "high-pressure boiler room" staffed by teams of brokers who sold stocks by reading from scripts that misrepresented the firm and the stocks it was touting, the SEC alleged. The firm hired inexperienced stock brokers and exhorted them "to take customers to the mat (and) to rip their heads off," the complaint said.

TWO BANNED FOR LIFE

As part of the settlement in the SEC case, Stratton Oakmont's two top executives were banned from the securities business for life and the firm was ordered to hire a special consultant to study its business practices.

Last month, the consultant, attorney Carl Loewenson Jr. of the New York offices of the law firm of Morrison and Foerster, sent the SEC and the firm a report on Stratton Oakmont's operations that discloses new details of the practices that produced the SEC charges and describes Stratton's deals with D'Amato, SEC sources said.

Several news organizations, including The Washington Post, have filed requests under the Freedom of Information Act asking the SEC to make the report public, but the agency has yet to respond.

Loewenson said he could not discuss the contents of the report but "my reading of the order is that it does not bar public disclosure."

SEC sources said the report has not been released to the media because of objections from Stratton Oakmont and the SEC's fear of offending D'Amato.

D'Amato is the top-ranking Republican on the Senate Banking Committee, which oversees the SEC. He is in line to become chairman of the committee if the GOP were to capture control of the Senate in Nov. 8 elections.

Stratton Oakmont's attorney Ira Sorkin confirmed that "on behalf of Stratton we have raised certain legal issues" about release of the report. Sorkin would not discuss either the contents of the study or the legal arguments he has made for keeping it secret.

Harvey Valentine, an aide to D'Amato, denied that the senator has sought to keep the study secret. "We don't know what's in the report," he said.

D'Amato has said his investments at Stratton Oakmont were handled by one of the firm's brokers, David Beall, who is the son-in-law of Larry Elovich, one of D'Amato's closest friends.

Other Stratton Oakmont investors who bought the same stocks as D'Amato did not fare as well. Records of the performance of four stocks D'Amato invested in show they have all gone down sharply since D'Amato sold his holdings.

BIG PROFIT IN ONE DAY

D'Amato's big profit came when he invested in a company called Computer Marketplace Inc. on the day it was first offered to the public by Stratton Oakmont. Computer Marketplace was sold as units, which included one share of stock and two other securities called warrants that gave investors the right to buy additional shares later.

D'Amato bought the units at their opening price of $4 each on June 29, 1993, and sold them later that same day for $12.25 each. As of yesterday, Computer Marketplace stock was selling for $1.50 a share.

Since its auspicious launch, Computer Marketplace has had difficultly starting its planned business of selling new and used computers.

D'Amato also bought stock in Licon International Inc., another company taken public by Stratton Oakmont. Licon's business was mobile hazardous-waste-disposal plants. D'Amato sold his Licon stock at a small loss on June 7, 1993, for $1.50 a share.

D'Amato lost about 16 cents a share on his investment in another Stratton Oakmont stock, SMT Health Services Inc., which operates mobile medical diagnostic equipment. The senator reported selling his stock on Aug. 8, 1993, for $4.50 a share. Last week it was selling for $1.50 to $1.62 a share.