From Togas to Orange Jumpsuits

From the New York Times:
December 16, 2008
National Lampoon Chief Faces Charges
By RITA K. FARRELL

The chief executive of National Lampoon, Daniel S. Laikin, was charged on Monday with conspiracy and securities fraud in what prosecutors said was an attempt to raise the value of the company’s stock artificially.

The National Lampoon, a media company in Los Angeles with projects in feature films, television programming and interactive entertainment, owns interest in the movies “Animal House” and the “Vacation” series.

Mr. Laikin, who was arrested on Monday in Los Angeles, and five other defendants were indicted by a grand jury in Philadelphia.

Laurie Magid, acting United States attorney for the Eastern District of Pennsylvania, said in a statement, “These schemes were designed to corrupt the market and reap large profits for these defendants at the expense of the average investor.”

Mr. Laikin was accused of promising kickbacks to a stock promoter to raise the value of National Lampoon’s stock.

The investigation was conducted by the Philadelphia offices of the F.B.I., the Securities and Exchange Commission and the United States attorney.

Prosecutors said a seventh defendant, the stock promoter Eduardo Rodriguez, 49, of Livingston, N.J., enlisted other promoters to use insider information provided by the companies and drive up the share price of National Lampoon and two other companies, the Advatech Corporation of Florida, and Swedish Vegas of California. Richard J. Margulies, the chief financial officer of Advatech, is a defendant.

The stock buys were made from March to June and timed to the release of public announcements to avoid suspicion. But a witness in Pennsylvania, not part of the government but using F.B.I. funds, exposed the plan after pretending to cooperate in raising National Lampoon’s stock to $2.50 to $5 a share, from $1.87 in mid-March.

Mr. Laikin, 46, controls about 40 percent of the company’s 8.9 million outstanding shares. Had the plan succeeded, the value of his stake could have increased by up to $15 million, Ms. Magid said.

An assistant United States attorney, Derek A. Cohen, who with Louis D. Lappen will prosecute the case in Philadelphia, said Mr. Laikin was working out the terms of his release.

Mr. Laikin’s assistant, Cora Victoriano, said the company had no immediate comment.

The S.E.C. also filed civil charges against the seven defendants. Daniel Hawke, director of the S.E.C.’s regional office in Philadelphia, said paying illicit kickbacks to arrange manipulative trades “is brazen misconduct and threatens to destroy any sense of fairness that investors expect in the financial markets.”

Mr. Hawke said that trading of National Lampoon shares was halted at 9:30 a.m. on Monday. Shares closed Friday at 73 cents on the American Stock Exchange.