The E. F. Hutton stock brokerage firm has been sued for more than $35 million in federal court in Alexandria by investors who claim the firm enticed them through deliberately false and misleading statements into buying stock in a Canadian mining company.
In rebuttal, the top lawyer in New York for Hutton said yesterday that the giant brokerage firm itself had been "victimized" for hundreds of thousands of dollars by a promoter of the Canadian company, known as Jupiter Development Limited.
The Securities and Exchange Commission had obtained a preliminary injunction July 16 against the stock's promoter, Brian Patrick Smith, after claiming in federal court papers that Smith ordered $383,251.60 worth of stock in the company without paying for it, or using checks which later bounced.
Smith, of Flushing, N.Y., ordered $145,667 worth of stock through E. F. Hutton's Manhattan office and $237,584.60 worth of stock from Black & Co. and Balford Hammerbeck, two brokerage houses based in Portland, Ore., according to the preliminary injunction, signed by U.S. District Court Judge Richard Owen in New York.
Smith could not be reached for comment yesterday.
The SEC complaint, and the subsequent preliminary injunction, identify Jupiter Development Limited as a registered Canadian corporation dealing in mineral development projects such as mines and oil wells.
There is no statement in the preliminary injunction as to whether Jupiter officials knew of the activities of Smith, according to SEC staff attorney Venrice Palmer. Jupiter is traded on the Alberta, Canada, stock exchange, he said.
According to the suit filed late Monday in Alexandria, Hutton salesman Robert W. Grenley "falsely represented" to the six plaintiffs that the value of Jupiter stock would rise significantly.
Last March, when the stock was selling at about $8 a share, Grenley advised stockholders against selling their shares because of the anticipated increase in value, according to the court papers.
At the same time Grenley told the customers that one individual had just given him an order for 300,000 shares, that the order was "on the desk," and that they should purchase more shares before he processed the order which would make the price rise, "dramatically," court papers state.
The suit, filed by attorney William B. Cummings, seeks $5 million in exemplary damages for each of the seven plaintiffs allegedly damaged by Hutton's actions.