Some 180 salesmen from First Jersey Securities Inc. traveled last weekend from sales offices around the country to the Playboy Club at Great Gorge, N.J., for their company's annual Christmas party.
Picking up the tab for the two-day affair was First Jersey, whose president, Robert Brennan Jr., a 35-year-old motivational genius, used the festive occasion to urge his sales force to greater and greater productivity.
But while Brennan's hard-sell methods have caused First Jersey to grow from nothing in 1974 to sales of $12.5 million last year, his techniques have gotten him into hot water with regulatory authorities.
As he has each business day since Nov. 20, an administrative law judge here listened last week as government attorneys sought to present allegations against First Jersey, founder Brennan and eight of the firm's executives.
The administrative action naming the defendants was filed on May 17 in the Securities & Exchange Commission. The SEC charged the defendants with numerous instances of defrauding customers and manipulating the market for some of the stock sold by First Jersey.
Brennan, an accountant by education, is defending himself against SEC allegations. But he is in constant huddles with First Jersey's attorney as the hearing moves at a painfully slow pace.
The SEC has spent nearly five years investigating Brennan, who before he founded First Jersey headed another controversial firm, Mayflower Securities. That firm's accounts already had been transferred to First Jersey by the time the SEC took action against it in November 1974.
Along with the SEC, the National Association of Securities Dealers, an industry self-regulatory organization that oversees the over-the-counter market, has conducted its own investigation of Brennan's operations. That probe rivals the SEC's for its turtle-like pace and is in limbo pending the results of the SEC's hearing before the administrative law judge.
Brennan has made himself a millionaire -- and created on of Wall Street's fastest-growing firms. The SEC charges that he has made his fortune by buying up stocks for pennies a share in little-known companies, then artifically pumping up the market price of that stock. The stock is then sold by some 300 commission salesmen operating telephones in First Jersey's "boiler rooms" in 16 cities.
Just last spring, First Jersey opened one of its sales offices in Falls Church to find customers in the wealthy Washington area.
Recently, during a break in the SEC proceedings in Federal Plaza in lower Manhattan, Brennan commented that he welcomes the opportunity "to have SEC allegations aired in an open public forum."
Brennan also criticized Washington Post stories describing his operations. He characterized the newspaper accounts as "dishonest and irresponsible."
"I don't claim to walk on water, but we do have procedures for treating our clients fairly," he said."If you're a crook, it doesn't take long for you to be put out of business in this kind of market."
Brennan claims to have loyal customers who will stand up and be counted on his behalf. "We plan to bring in busloads of customers to testify," he said.
Brennan predicted the hearings could stretch out for a year by the time he finishes telling his side of the story.
He boasted that business never has been better at First Jersey, even though the firm's president and prime mover spends each business day at the SEC hearings.
Indeed, as the hearings move painfully ahead with each document presented in evidence scrutinized and debated extensively, First Jersey's staff of salesmen continue business as usual.
For example, First Jersey recently came up with a gimmick to sell units of securities -- each unit consisting of 4 shares of common stock and 8 warrants -- in URT Industries Inc. The units are priced at $3 each, even though URT, which markets records and tapes, has earned a total of 6 cents a share during the past 5 years.
First Jersey also made a unit-type offering in another of the stocks it regularly sells, Pubco Corp. Brennan said both "Pubco and URT were successful offerings, and we have three or four other deals in the works."
But a reasonable investor who reviews the registration statements of URT and Pubco might pause before he or she plunges.
The registration statements note that priot URT and Pubco offerings, which were sold by First Jersey, are at issue in the ongoing SEC proceedings.
But both statements stoutly assert: "The underwriter and its associated persons intend to vigorously contest allegations that they have committed any violations of the federal securities laws."