Monday, May 18, 2009
FINRA's National Adjudicatory Council (NAC) has expelled Kirlin Securities of Syosset, NY, (a wholly owned subsidiary of Kirlin Holding Corporation, nka Zen Holdings Corp.) and barred two Kirlin officials — Anthony Kirincic, the firms' co-CEO and largest shareholder, and Andrew Israel, Kirlin's head trader — from the securities industry for engaging in a manipulative trading scheme in 2002 to artificially inflate the price of Kirlin Holding stock, which was then trading on the Nasdaq National Market. The NAC found that the purpose of the scheme was to increase the price of KILN to $1.00 a share or higher for 10 consecutive trading days, in order to avoid a delisting from the Nasdaq National Market. The NAC also found that Kirincic forged his parents' signatures on stock certificates and other documents, in part, to generate funds to carry out the manipulation scheme. Additionally, the NAC found that Kirlin Securities, Israel and David Lindner, then the co-CEO of Kirlin Holding and Kirlin Securities, failed to obtain best execution on a customer order of KILN during the same period.
Their scheme succeeded in raising the price of Kirlin Holding's common stock from 64 cents per share on March 18, 2002, to more than $1.00 per share on April 2, 2002, despite an absence of any news or other apparent reason for the company's stock price to increase. After April 2, 2002, Kirlin, Kirincic and Israel successfully maintained KILN's price at or over $1.00 per share for at least 10 trading days, using the same manipulative methods. On April 18, 2002, Nasdaq informed Kirlin Holding that it had satisfied the market's listing requirements by having its stock price exceed $1.00 for 10 consecutive trading days and therefore the stock would not be delisted.
The NAC also found that on April 22, 2002, while KILN was still trading at more than $1.00 per share, Kirlin Securities, through Lindner and Israel, executed a sale of a customer's shares in KILN at $.80 per share in a transaction with Kirlin Holding. At the time of this trade, the inside bid for the stock was $1.04 per share and two of Kirincic's own relatives had sold their Kirlin Holding's stock for $1.05 per share. The NAC ruled that this violated the obligation for the firm, Lindner and Israel to achieve best execution for their customer's order.
In January 2005, Kirlin Holding ceased having its stock listed on Nasdaq Stock Market and ceased filing periodic reports under the federal securities laws. In August 2008, Kirlin Holding changed its name to Zen Holdings Corp. and changed its stock symbol to ZNHL. Its stock is currently quoted in the Pink Sheets.
The NAC ruling upholds a November 2007 ruling by a FINRA Hearing Panel expelling the firm and barring Kirincic and Israel. The NAC's decision reduced the sanction for Lindner from a permanent bar to a one-year suspension, payment of restitution and requalification as a broker. FINRA's Enforcement Department first brought the charges in this matter in November 2005.
Kirlin, Kirincic, Israel and Lindner have appealed the decision to the SEC. The sanctions against the firm and individuals remain in effect pending an SEC ruling.
The U.S. Supreme Court has agreed to accept certiorari in the criminal conviction of Conrad Black, U.S. v. Black, 530 F.3d 596 (7th Cir. 2008).
Question(s) Presented: (1) Does 18 U.S.C. § 1346 apply to conduct of private individual whose alleged "scheme to defraud" did not contemplate economic or other property harm to private party to whom honest services were owed? (2) May court of appeals avoid review of prejudicial instructional error by retroactively imposing onerous preservation requirement not found in federal rules?