Penny-Stock Lawyer Nears Day of Reckoning

There have been so many big-time white-collar-crime trials going on at the federal courthouse in Manhattan this summer that nobody has paid much attention to the case of Washington lawyer Thomas T. Prousalis Jr.

Credit Suisse First Boston investment banker Frank P. Quattrone was convicted of obstructing justice. WorldCom's former chief executive Bernard J. Ebbers came for preliminary maneuvers preceding a trial scheduled for September. Adelphia Communications founder John J. Rigas and his son Timothy were convicted of looting their company. Washington businessman C. Gregory Earls was found guilty of defrauding people he met on the Washington charity and social circuits. And Martha Stewart won the most-watched award for a case in which she was sentenced Friday to five months in prison and five months of home detention.

Lost in the crowd of celebrity corporate criminals was Tom Prousalis, just some guy on trial for penny-stock fraud.

The Prousalis case is a postscript to the penny-stock scandals of the 1990s, the final chapter in the stories of four now-defunct local companies in which investors lost millions of dollars.

A month ago, in the middle of his trial, Prousalis switched his plea to guilty on all counts -- two securities-fraud charges and one charge of conspiracy to commit wire, mail and securities fraud in connection with the sale of stock of another now-defunct company called Busybox.com Inc.

Prousalis, 55, is scheduled to be sentenced Sept. 9. Under federal sentencing guidelines, he could get 46 to 57 months in prison. He is negotiating to settle a parallel civil case brought by the Securities and Exchange Commission.

Prousalis was also the securities lawyer for MVSI Inc. of Vienna, e-Net Inc. of Germantown, Octagon Corp. of Arlington and Czech Industries Inc. of Washington. All four are also out of business, their stocks worthless.

They were all taken public by Stratton Oakmont Inc., a Long Island penny-stock firm that was shut down by the SEC and the National Association of Securities Dealers in 1997.

Stratton was forced out of business for running a series of "pump and dump" schemes in which the stocks of little companies were pumped up so that favored investors could dump their shares, eventually causing the share prices to plummet. For a time Stratton ran a "boiler room" sales operation from a building near Montgomery Mall where brokers called would-be investors and used high-pressure sales tactics to persuade them to buy stocks the company was promoting.

After Stratton Oakmont was shut down, regulators focused on a Florida firm called Barron Chase Securities Inc, which also promoted penny stocks until it closed in 2000 .