Also commonly known as micro-cap stock fraud, this variant of “white-collar” crime has received little academic attention. This is problematic – and remarkable, when you consider how often such frauds are in the news. Penny-stock fraud (though not referred to as such) made its way onto the big screen in the 2000 film Boiler Room. The film fairly accurately depicts the sociology of such frauds – from the recruitment, hiring and “training” of stock scammers to the actual hustles that are all-too-often successful. For anyone seeking a sober, academic examination of boiler rooms more generally (though including financial scams), Robert J. Stevenson’s classic The Boiler Room and Other Telephone Scams is invaluable.
Perhaps the most audacious of the firms known for massive penny-stock scams was Robert E. Brennan’s First Jersey Securities, the subject of my current research. Unfortunately, what little I have written on the subject in academic journals is not available without subscription and thus can’t be posted here. I could link to numerous internet pieces re: Brennan or FJS, but choosing which of the thousands of sites discussing the inter-related topics is a challenge. A quick primer can be found here in Forbes magazine, which dogged Brennan throughout his fabulous rise (and contributed to his precipitous fall).
As for Brennan, he resides in the Federal Correctional Facility (FCI) in Fort Dix, New Jersey, where he is serving time for bankruptcy fraud. According to the Federal Bureau of Prisons web site, he is slated for release in December 2011.Immediately below is a poor quality version of Brennan in the now-infamous Super Bowl commercial for First Jersey which ran in 1985.
One last note: Some useful resources for anyone researching or investigating stock frauds will soon be found on a page I am creating. These will be a blend of government and private agency sites, along with several academic and quasi-academic sites. Hopefully, when completed the page will become a tool for students and academics, and also for the general public. In advance of that comprehensive page, these may be of assistance: