The National Association of Securities Dealers this week censured and fined Prudential Bache Securities Inc., alleging that the company manipulated trading and propped up the price of Crown Books Inc. stock.
The NASD fined Prudential Bache $100,000 and suspended it for 20 business days from making a market in Crown Books Corp. stock, which is traded in the over-the-counter markets. Crown Books, which is based in Landover, is a retail bookstore chain.
One former and two current Prudential Bache employes were fined and suspended by the association, which regulates over-the-counter stock trading. The NASD said the employes reported 48 fictitious trades to the association's stock trading system and failed to report 51 others between Feb. 4 and May 11, 1984.
"There were two effects: to support the stock price and give an inflated appearance to the price," said John Pinto, senior vice president of compliance at the NASD.
Prudential Bache and the three individuals accepted the sanctions without admitting or denying the allegations. None of the former or current employes was available for comment yesterday. A spokeswoman for Prudential Bache said the company had "cooperated fully" with the NASD. "The activities in question were totally contrary to the firm's policies," she said.
The NASD also suspended former Prudential Bache employe James B. Raphalian from association with any NASD member for 30 business days and fined him $100,000, suspended current employe Charles M. Casper from association with any NASD member for 40 business days and fined him $10,000 and suspended current employe Richard H. Morse from association with any NASD member for five business days and fined him $3,000.
The NASD specifically alleged that Raphalian, former head of the firm's over-the-counter stock trading department and now a vice president and head of the over-the-counter stock trading department at First Boston Corp., with "aiding and abetting" the activity by "failing to supervise" the other two employes. Morse was accused of entering fictitious trade reports into the Nasdaq computer system, which handles over-the-counter trading, and Casper was accused of submitting fictitious reports and failing to report actual trades.
An industry source said Prudential Bache underwrote Crown Books when the company went public in 1983 and may have retained a "significant" portion of the stock at that time. Prudential Bache would not comment about any aspect of its business relationship with Crown Books or its president, Robert M. Haft. Haft was unavailable for comment yesterday.
In 1983, Dart Drug Corp., then the parent of Crown Books -- which was founded by Robert M. Haft's father, Herbert Haft -- said it would sell Crown stock to the public. Dart retained a 34 percent interest in the company. Crown stock initially came out in August 1983 at 23 5/8, but steadily began to plummet to a low of 12 in April 1984. The stock closed yesterday at 14, down 1/4.