THE `KING OF PENNY STOCKS' WANTS TO RULE FROM ASIA
Not too long ago, the Shanghai stock exchange sent an invitation to a prominent U. S. investor in the Far East. It was addressed as follows: "Mr. Meyer Blinder, King of One Doller Share." It is a sobriquet that pleases the 69-year-old Blinder, founder and CEO of Blinder Robinson & Co., the defunct penny-stock brokerage. He shows it proudly, misspelling and all, to a visitor at his white-carpeted, multilevel office in a Denver suburb. "I think the Chinese people," he muses, "have more faith in me than the American people."
Meyer Blinder is back--and Asia's got `im. On these shores, he may be a pariah--the subject of a decade-long crusade by the Securities & Exchange Commission aimed at putting Blinder out of business. He is facing trial in Las Vegas on six counts of racketeering and securities fraud. If convicted, he faces 60 years imprisonment. But in the Far East, Blinder is a mogul who controls some 15 companies--including a Hong Kong holding company, Hantex Development Inc., that heralds Blinder's return to the U. S. securities markets.
LONGTIME FOES. With Hantex, Blinder is dropping his traditional role of stock promoter and is seeking registration as the company's major shareholder. But, like the penny-stock underwriters of yore, he is still trying to put fresh stock before the public. Once Hantex clears the SEC, its stock and warrants would be distributed to him and the 11,000 other shareholders of his Intercontinental Enterprises Inc. holding company--and can then be traded over the counter. Regulators suspect that former Blinder brokers and other penny-stock peddlers will hawk the securities, driving up the price and letting insiders such as Blinder cash out big. "We've seen situations such as these where the securities are given as dividends to shareholders to create a market. We've then seen those securities bid up far past their value and investors harmed," says James M. Smith, chief of the Securities Bureau in New Jersey. Blinder denies that he intends to manipulate Hantex stock.
So far, three states--New Jersey, Iowa, and Idaho--have prohibited sale of Hantex shares. But regulators say that as many as 20 states may also impose a ban. "You have to look at the entire history of Mr. Meyer Blinder's involvement in various offerings. Just look at the track record," asserts Anton Veldman, an Iowa Securities Bureau lawyer.
Blinder's longtime adversaries at the SEC share those concerns but are all but powerless to prevent the stock from being sold in this country--no matter how dubious its ownership or financial condition. Observes R. Wayne Klein, Idaho's securities bureau chief: "Under federal law, if you disclose what you're doing, regardless of whether it may work a fraud on investors, you're allowed to register with the SEC." Thus the stock is likely to become eligible for sale to investors in states such as New York, Illinois, and Florida, which have no more than limited ability to bar offerings that have been registered at the SEC.
Blinder's overseas empire is but the latest chapter in the saga of the self-styled "king of penny stocks." Regulators had thought Blinder had been put out of business, and for good, as a result of years of litigation--ranging from investor class actions to SEC lawsuits and culminating in the federal racketeering indictment a year ago. Blinder, who has long and vociferously denied wrongdoing, sent Blinder Robinson into a Chapter 11 bankruptcy reorganization last July, and the Securities Investor Protection Corp. then sought liquidation of the firm. It seemed that Blinder was done for. He even put on the market his gleaming 10-story tower facing the Rockies--and took his name off the building to enhance its salability.
SILVER MEDALS. But Blinder has had an ace in the hole. As pressures on him mounted over the past four years, he had set up shop in the less-regulated Far East. Now, through Intercontinental Enterprises, he controls or has a substantial interest in a crazy quilt that includes a toymaker, coin dealer, and medical-equipment company, most based in Hong Kong (table). Blinder has kept his headquarters in Colorado, while traveling frequently to the Orient. Overseas, his brokers have used time-tested, cold-calling, penny-stock-peddling techniques while staying outside the reach of U. S. courts and regulators.
To date, his ventures have hardly taken the Asian markets by storm. With reform-minded Hong Kong regulators watching closely, Tele-Art Securities, a Blinder-controlled brokerage firm, has kept a low profile. The company--whose plush offices fill an entire floor of the I. M. Pei-designed Bank of China Building--is puny compared with the old Blinder Robinson, which at its peak employed 3,000 people. Tele-Art has only about 40 brokers. General manager Carolyn A. Gary, who formerly ran Blinder's U. S. training operations, says Tele-Art handles U. S. stocks, bonds, "and some penny stocks--whatever the client wants." Although Tele-Art's modest operations are confined to Hong Kong at present, the company's plans are ambitious: "We are discussing expanding throughout Asia," says Gary.
Already, some offshore Blinder operations have drawn official displeasure. The American Rare Coin Exchange Ltd. subsidiary has irked U. S. Treasury officials with Desert Storm medallions, $55 silver medals that show an American Eagle on one side and a shield on the other. A company official was quoted in the South China Morning Post as saying U. S. authorities minted the medals--and that prompted the U. S. Treasury Dept. to issue a letter branding the alleged statements as "misleading." The official claims she was misquoted, which the Post denies.
SHRAPNEL WOUNDS. Some Blinder ventures seem only distant promises. So far, the Satcom China Corp. affiliate hasn't made good on plans to set up a fax and satellite-telecommunications network in mainland China. And the Anle Hotel project in Beijing appears to be a paper tiger: While a Blinder company brochure says the planned 583-room hotel is under construction, it's doubtful whether the project will ever be completed.
U. S. officials fret that Blinder's Asian interests are draining cash that could be claimed by aggrieved U. S. investors. One Hong Kong associate, Andy Lai, says Blinder has pumped more than $10 million into Asian investments ranging from a private bus company to a toymaker. In 1989, a U. S. District Court judge in Philadelphia, citing "a serious question about the transfer and secreting of funds and assets," ordered that the cash outflow to Hong Kong be stopped. But the order was voided on appeal. And now, Glen E. Keller Jr., the trustee liquidating Blinder Robinson, is mulling lawsuits to recover assets for the estate. Claims against the company exceed $100 million.
Hantex' assets appear to be beyond easy reach of U. S. creditors. It is an insolvent, Hong Kong-based company chartered in the British Virgin Islands, whose main subsidiary produces medical gloves in Malaysia. Among the company's selling points are its ties to Malaysian royalty, including a princess listed as a managing director. But if relations between the company and shareholders do not go smoothly, the prospectus notes that investors might have a hard time suing Hantex abroad or enforcing any U. S. civil judgments that might be entered against the company. When Idaho barred trading on Mar. 1, it said Hantex' offshore charter "may enable it to work a fraud upon investors."
Blinder, who still sports a ring with a knuckle-size diamond and proudly shows off the shrapnel wounds he suffered in World War II, is unintimidated by such allegations. He insists that his growing network of corporations is perfectly legitimate. "Those people are sick," he says of the regulators. "I never manipulated any stock. The only thing that's being manipulated is their brains." Flanked by lawyers in the plush penthouse of his Englewood (Colo.) tower, he says he'll keep battling regulators who he says have hounded him for 23 years. And he claims powerful backing: "God tells me: `Keep on fighting, Meyer. Don't give up.' " Blinder disavows plans to participate directly in the U. S. stock markets again. "I'm never going back to the brokerage business because I'm not going to be regulated by a bunch of nincompoops," he says defiantly.
Even if Blinder's foes eventually catch up to him, his operations may outlast him. If Hantex is a curtain-raiser, regulators will be hard-pressed to keep an ingenious market player under wraps for good. They are hardly nincompoops. But when it comes to dealing with the penny-stock kingpin, Charles Dickens' Mr. Bumble may have put it best: "The law is a ass."Joseph Weber in Philadelphia, Pete Engardio in Hong Kong, Sandra D. Atchison in Denver, and Gary Weiss in New York