The Securities and Exchange Commission has accused a New York brokerage house and four businessmen of fraudulently manipulating the sale of stock in two local firms that shared offices on Capitol Hill.

The prices of stock in Liquidation Control Inc. and Toxic Waste Containment Inc. were illegally driven up through a secret scheme that used fictitious brokerage accounts and Cayman Islands financial institutions, the SEC charged.

Toxic Waste's stock jumped from 25 cents a share to $5 a share shortly after the company when public, and Liquidation Control Shares climbed from 25 cents to $2.25. Both stocks now are quoted at 12 1/2 cents a share in the over-the-counter market.

The SEC charged that the stock price was manipulated by four individuals associated with Monarch Funding Corp. of New York, the broker that underwrote the two issues. The scheme benefited the founder and promoter of the firms, Richard O. Bertoli, as well as the president of Monarch Funding, Leo M. Eisenberg, the SEC said.

Eisenberg, speaking for the defendants, denied the allegations and said Monarch Funding -- a major underwriter of penny stocks -- and the other defendants would contest the SEC charges. The SEC complaint "is an absolute horror story -- the poorest investigation I've ever seen by the SEC," Eisenberg said.

Eisenberg noted that the defendants sold most of their Toxic Waste Containment shares at $2.25 a share. "The stock more than doubled after we sold it. So if we were manipulators, we were not doing a very good job," he said.

The SEC complaint alleges that a series of fictitious customer accounts were set up at Monarch to enable Bertoli to control the supply of stock and drive up its price. Bertoli failed to disclose his role to the public, the SEC said.

The SEC contended that Bertoli and Eisenberg tried to hide the profits by setting up accounts in Cayman Island financial institutions. According to the SEC, the men also created a check-cashing scheme in which persons who claimed to be Monarch representatives cashed checks for the allegedly fictitious accounts at a store-front check-cashing company.

The SEC also charged Bertoli with arranging for an unnamed associate to write a "materially false and misleading investment recommendation" for Liquidation Control.

Similarly, another defendant in the case, Richard Cannistraro, wrote a report recomending investment in Toxic Waste Containment while working as a financial analyst at the Wall Street firm of Wood Gundy Inc. At that time, he also was secretary-treasurer, director and principal shareholder of Liquidation Control. Toxic Waste and Liquidation Control shared offices at 53 D St. SE on the Hill, and several officers and directors worked for both companies, according to reports filed with the SEC.

The two recommendations, "without any reasonable basis in fact," predicted rapid growth in sales and earnings for both companies, the SEC charged. Along with Eisenberg, Cannistraro and Bertoli, the complaint named Steven R. Cloyes, another Monarch employe.

The SEC asked the U.S. District Court in New York to order Bertoli and Eisenberg to return their allegedly illegally obtained profits, which the SEC said total more than $4 million.

Eisenberg said the charge of fictitious accounts is completely erroneous. "They the holders of the accounts were not us. Handwriting examples" will show that those people who signed the checks written to those accounts were "were not the four defendants."

The SEC charged that in return for writing the favorable Toxic Waste Containment report, Cannistraro was allocated 975,000 pre-offering shares of Liquidation Control. Eisenberg disputed that charge, arguing that when Liquidation Control went public, Toxic Waste Containment "was not even conceived."

The SEC began investigating Toxic Waste Containment and Liquidation Control in June 1983, after two penny stocks became very active and Toxic Waste Containment reached its high of $5 a share.

Liquidation Control had been set up in late 1982 to provide business consultant and advisory services to financially distressed companies, including appraisals, advertising, liquidation of property and collection of accounts receivable. It since has merged with a Canadian firm and changed its name to Romlock Inc. Now involved in the computer software business, it does about $2 million in sales a year from its Toronto headquarters, Eisenberg said.

Toxic Waste was set up to compete for hazardous waste-disposal jobs for industry and the Pentagon, anticipating much revenue from the cleanup efforts launched by the Environmental Protection Agency's Superfund.

Eisenberg said the company still has no sales, no customers and no full-time employes. It has closed the office it shared with Liquidation Control, he said.

This is not the first time Monarch Funding, Eisenberg or Bertoli have had trouble with the SEC. In September 1975, Monarch Funding and Eisenberg were suspended for 10 days after an SEC investigation into alleged market manipulation of 26 stocks.

In 1978, Bertoli pleaded no contest to a federal indictment that charged him with participating in a $3 million stock swindle. He was given a suspended sentence and placed on five years' probation. And in 1981, he was barred by the SEC from association with any broker or dealer for six months for illegal stock trading at a investment fund he managed.