SEC Calls ‘Laser Arms’ Self-Cooling Can Company a Fraud
NEW YORK (AP) _ A purported high-technology weapons manufacturer claimed in national advertisements that it had developed a self-cooling beverage can, but the claim - and the company - were created to defraud investors, federal authorities charged Wednesday.
In a complaint filed in U.S. District Court, the Securities and Exchange Commission alleged that Laser Arms Corp. and a principal of the firm, Marshall Zolp, drew unwary investors with a phalanx of false claims.
Zolp sold at least 940,000 shares of Laser Arms common stock for at least $1.5 million from January until the SEC halted trading last week, the SEC said, but its officials had no estimate of the total shares sold.
″I know he sold them through brokerage accounts throughout the U.S.,″ said Gladwin Goins, a branch chief of enforcement for the SEC. ″It’s massive. No one knows the number of shares.″ The SEC described the stock as worthless.
The complaint identified Zolp as a ″habitual securities law violator″ and a fugitive from state charges in Las Vegas of possessing a stolen vehicle and other property. A receptionist at the Laser Arms office in Manhattan said by telephone that neither Zolp nor anyone else was available to comment.
U.S. District Judge William C. Conner issued a temporary order that Laser Arms halt business pending a hearing May 9, and instructed it to provide details on its finances, Goins said in a telephone interview.
The SEC charged that Laser Arms issued a forged auditor’s report and other false documents, including a report to stockholders showing assets of $6.9 million and predicting an annual income in ″the nine figure range.″
That report is ″entirely fictitious,″ the SEC complaint said, and the income prediction ″lacks any reasonable basis, in that, among other things, Laser Arms does not have any ongoing business.″
As part of the alleged fraud, the SEC charged, Zolp issued a news release claiming that Laser Arms had been in the high-technology weapons business since 1954, had 2,700 shareholders, and was announcing a new product, a self- cooling beverage can.
Zolp repeated the claims in half-page advertisements in the Wall Street Journal on April 7 and April 14, adding an assertion that Laser Arms had 17 patents on the self-cooling can, the SEC charged.
But it said Laser Arms has no such patents and was incorporated only in March - three months after it began selling its stock. The firm ″has no known arms business or rights to a self-cooling beverage can and has never had such business or such rights,″ the SEC said.
The complaint said the false claims created substantial interest in Laser Arms stock. It cited broker’s reports that the volume of the stock traded went up fivefold after the ads appeared, and that 150,000 to 200,000 shares were being traded daily the week of April 14, at prices of $1.50 to $3.50 per share.
Goins said the company filed false documents in order to begin selling its stock. In the SEC’s examination of Laser Arms records, he said, ″We have not found at this stage anything that’s real. Everything appears to have been made up out of whole cloth.″
The complaint described Zolp as an undisclosed principal in Laser Arms. He had been enjoined from violating stock laws in two other cases in 1982 and one in 1983, said Chiles Larson, an SEC spokesman in Washington.