Posted on 09/06/2003 8:37:11 AM PDT by Liz
Two New Jersey men were arrested yesterday and charged with conspiring to manipulate the stock price of Marx Toys & Entertainment Corp., a toy company made famous in the 1920s for introducing the yo-yo.
Steven Wise, the chief executive officer of Marx Toys, and Larry Vindman, a stock promoter, were charged with fraudulently inflating the company's stock price by $6 million.
The two were charged in U.S. District Court in Brooklyn and released on bail. If convicted, Wise, 43, of Manalapan, and Vindman, 32, of Marlboro, could be sentenced to 25 years in prison and fined $250,000 or twice the amount of the fraud.
As a result of the scheme to manipulate Marx Toys, the stock price rose from about 10 cents a share at the beginning of July to 36 cents a share Aug. 15, a 52-week high. Yesterday, it dropped 48 percent to 11 1/2 cents a share.
The government alleges that to further their scheme, Wise and Vindman recruited two purported brokers to "pump up" the stock price by selling it to their retail customers. In return, the brokers were offered Marx Toys stock as a kickback and were given 100,000 shares up-front for future assistance.
The prosecutors said the brokers were cooperating witnesses.
"Like snake-oil salesmen, these defendants sought to line their pockets at the expense of numerous individual investors," said Pasquale D'Amuro, assistant director in charge of the FBI in New York.
"The investors bought the grossly and artificially inflated stock based on the recommendations of brokers bribed by the defendants, when, in truth, the company was barely staying afloat," D'Amuro said.
In its most recent quarterly report filed with the U.S Securities and Exchange Commission, Marx Toys reported sales of $22,844. It also said it needed working capital of $1.5 million and expressed doubt about the company's ability to continue.
Neither Wise nor Vindman could be reached for comment.
Wise headed Freehold-based Stereoscape.com, which sold audio and video equipment over the Internet. The company in December 2000 bought Sebring, Ohio-based Marx Toys for 15 million shares of stock, or about $450,000, and it planned to find distribution outlets for its toys.
At one time, Marx Toys sold 20 percent of the toys in the United States. It filed for bankruptcy in 1980, but made a comeback when collectors began searching for its products.
© 2003 Bloomberg News Service
Marx made some pretty neat toy pistols back in the day: I had an M1911AI that had a retractable slide, which one of the neighborhood vets thought was real from a distance. I think his heart rate was increased by the thought of this little kid running through the backyards with a 1911. That and a Mattel roll cap-firing Thompson are fondly remembered despite 40 years of time.
IIRC, Marx toys often suffered from weak plastic formulas or poor reinforcement, because they cracked easily. Apparently, so did their new CEO.
Now that I think about it, those older, plated die-cast "cowboy" cap pistols I had when really little might have been better deals than the plastic "military" toy guns that replaced them. Aside from breaking if they got hit too hard and growing weird oxides from too many caps, those sixguns held up pretty well.
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