DISTRICT ATTORNEY - NEW YORK COUNTY

News Release
March 8, 2002

Contact: Barbara Thompson
212.335.9400

Manhattan District Attorney Robert M. Morgenthau announced today the securities fraud convictions of D.H. BLAIR & CO. and its four top managers. D.H. Blair, a Wall Street brokerage firm established in 1904, was a member of the New York Stock Exchange. The firm and its four managers have pled guilty to multiple counts of securities fraud and collusion to fix securities prices on the NASDAQ market. Three of the four face prison terms of up to four years and, together with the company, will pay $21 million to reimburse losses by defrauded Blair customers.

The four senior managers of the now-inactive brokerage are Chairman KENTON WOOD, Vice-Chairmen KALMAN RENOV and ALAN STAHLER, and head trader VITO CAPOTORTO. These defendants, along with the company and eleven of its stockbrokers, were indicted in July, 2000 for a massive scheme of securities fraud and price manipulation spanning the years 1989 through 1998. During that period, Blair and its investment bank affiliate brought public nearly 100 small companies, predominantly in the technology and health-care industries. Unknown to its tens of thousands of retail customers, Blair consistently arranged to buy IPO shares from its preferred clients - often celebrities and wealthy individuals - at a predetermined premium and resell them to its rank-and-file clients at artificially inflated prices. Many of the less favored customers were unsophisticated investors of limited means, in some cases elderly or infirm, and completely unsuitable for Blair's highly speculative securities.

Blair was able to execute this manipulative scheme by organizing its brokers into groups whose purpose was to support the price of its "house stocks." Prior to a house stock going public, members of the group would commit themselves to selling a certain number of shares to clients. Based on those commitments, the group leader and Blair management would decide how many shares they should buy from preferred clients and how high they could lift the share price. The brokers would then pitch the stocks using high pressure sales tactics and misrepresentations. Clients were given only very limited information about the risks of the companies whose shares they were buying, most of which had little earnings and no profits. After the companies went public, the group brokers continued to manipulate prices higher so that clients' portfolios would appear profitable, attracting more money to the firm. When customers wanted to sell their shares, however, they were aggressively discouraged from doing so, often with promises about a company's future prospects based on supposed confidential inside information. Brokers were given special compensation in order to induce them to engage in these practices. Ten of the eleven indicted brokers have already pled guilty.

To further this scheme, the managers colluded with another brokerage - A.R. Baron - to park securities and manipulate prices of both Blair and Baron house stocks. Baron and its senior managers were convicted of securities fraud by the District Attorney's Office in a previous prosecution.

Today's pleas mark another in a series of convictions in the Office's ongoing investigation of corrupt practices in the securities industry. In addition to Blair and Baron, in the past two years the Office has successfully prosecuted A.S. Goldmen, Duke & Co., Meyers Pollock Robbins and others.

Frauds Bureau Deputy Bureau Chief Steve Krantz, and Frauds Assistant District Attorneys Sean Brewer, Christopher Conroy, John Nathanson and Ray Rowland handled the prosecution of this case under the supervision Bureau Chief Owen Heimer.

For their assistance with this case, Mr. Morgenthau thanked William Baker, Lawrence West, and Louis Randazzo of the United States Securities and Exchange Commission; Neal Alexander and Kenneth Andrichik of the National Association of Securities Dealers; and Indiana Securities Commissioner Bradley Skolnik whose work was also on behalf of the North American Securities Administrators Association.