YOUNGSTOWN 4 investment salesmen say they were duped

Regulators should focus on stopping promoters of risky investments, one broker said.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Four local businessmen accused of violating state securities laws say they were duped into selling risky investment products by false and misleading advertising.
The Ohio Department of Commerce Division of Securities issued cease and desist orders to:
UPhillip C. Dyer of Dyer Marketing Corp., Warren, accused of selling automated teller machines without a securities license.
UJoseph Sirilla Jr., Princess Street, Campbell, accused of selling pay telephones without authorization from the dealer through which he was licensed to sell securities.
URudy Cyphert, Spillway Road, Lisbon, accused of selling promissory notes without a securities license.
UMichael Minot, Carriage Hill N.E., Warren, accused of selling membership interest in a limited liability corporation, viatical insurance settlements and high-yield promissory notes without a securities license.
Dennis Ginty, a spokesman for the Department of Commerce, said the dealers have the right to appeal the cease and desist orders. Unless overturned on appeal, he said, the orders will become part of their record with the state and with the National Association of Securities Dealers. They can be used as evidence by investors filing civil lawsuits.
Blames the state
State records say Minot was a licensed insurance agent but had no securities license when he sold more than $535,000 in promissory notes and membership interest in a Nevada corporation in 1999.
He also sold more than $270,000 in viatical settlements that year, records state, which also require a securities license in Ohio. With viaticals, the investor buys the life insurance policy of a terminally ill person at discounted rate, the policy holder and family receive a percentage of the face value of the policy for living expenses, and the investor becomes the beneficiary when the policyholder dies.
Minot blames state regulators for going after "small fish" like himself instead of pursuing the marketing companies, which he said promote viaticals and other products to unlicensed dealers, often through trade publications.
"This was nothing new. These things had been sold for years and years when I got into it, and the marketers told me I didn't need a security license to sell them," he said.
Minot has appealed his case in Franklin County Common Pleas Court.
'I was duped'
Sirilla told a similar story. "I was duped like everyone else," he said.
State investigators say he was a licensed securities dealer but was not authorized to sell pay telephones under his license. Records indicate he earned a 12 percent commission on pay telephone sales of about $174,000 from February 1998 through May, 2000.
Sirilla said the company promoting the pay phones as a business opportunity assured him that no securities license was required to sell them. "I lost a lot of good, trusting customers," he said. "I was led down the garden path like everyone else."
Sold ATM machines
Dyer, who now operates Financial Opportunities Management in Cortland, said he invested some of his own funds in the ATMs he sold to clients.
He said he was sure, based upon the ATM marketer's advertisements and his own research, that no securities license was required to sell ATMs. State regulators say he was wrong.
Now Dyer said he sells only annuities which are insured and guaranteed by insurance companies. "The state should be targeting the companies that are promoting these risky investments," he said. "Those companies betrayed my customers and they betrayed me."
Cyphert said the company issuing the promissory notes he sold assured him they were not considered securities. He's still not sure they are, even though the state has ordered him to stop selling.
"I'm sick of all the rules and regulations and the government involved in everything. You can't do anything here," he said. "I'm getting out of the investment business completely, and I'm leaving the country."
vinarsky@vindy.com