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For many years Hariston was a Kott plaything. Hariston's stock had been sold by First Commerce Securities. The company was once called Western Allenbee Oil & Gas and later renamed Convoy Capital. Whatever the label, Hariston bore an odd resemblance to First Commerce's main piece of merchandise, DeVoe-Holbein International. It too boasted technology that could squeeze minerals from water, and one of the same scientists was involved: Irving W. DeVoe, a Canadian professor who had co-founded DeVoe-Holbein. In the early 1990s, a Hariston unit announced a project to extract minerals from mining waters in Butte, Montana, and many local people who believed in the project bought stock. The scheme came to naught, as did much of the money invested. (In its current incarnation, Hariston is a computer software company.)
Reynolds Kendrick Stratton's practices touched off a spate of litigation by investors as well as a probe by the nasd, forcing the company to pay out settlements, arbitration awards and fines. A March 1994 expose in BusinessWeek highlighted Kott's "consulting" role and revealed that Kott and some of the investors he had helped bring into the brokerage company were major shareholders of Hariston.
Shortly after that story appeared, RKS announced that it was pulling out of the full-service brokerage business. RKS shut down Reynolds Kendrick Stratton, and a new brokerage firm took its place: JB Oxford & Co.
Unlike its predecessor, JB Oxford & Co. would be a discount stockbroker--essentially a passive order taker for customers who wanted to save money on commissions.
In the two years since then, JB Oxford has expanded aggressively, hiring dozens of stockbrokers and opening branch offices in New York City, Boston, Miami, Dallas and Basel, Switzerland. Customers have been solicited through television commercials on cnbc in the U.S. and nbc Super Channel, an English-language cable channel in Europe. An Asian marketing group runs ads in Japanese, Chinese and Korean newspapers in California, and there are plans to open offices in Hong Kong and Taipei. Oxford has also plunged into cyberspace with its own Internet site, enabling investors to trade online.
Oxford CEO Rubenstein insists that Oxford is "vastly different" from its predecessor, Reynolds Kendrick Stratton, "with new management, new personnel and an entirely different business focus. There is simply no comparison between the two firms." One thing hasn't changed, however: the Kott connection. Several major JB Oxford shareholders have been closely associated with Kott or with stocks pushed through Kott-connected boiler rooms. Felix Oeri, a Swiss financier who is Oxford's biggest stockholder, bought a large block of Hariston stock a few years ago after it was recommended to him by Kott. (Oeri says he's lost money on the stock.) Arabella, a Luxembourg company that is Oxford's second-ranking stockholder, is currently the controlling shareholder of Hariston.
"Kott was the key: he made the decisions," recalls a former employee. When asked whether Kott gave orders to Rubenstein, this source replied, "Definitely." Said another ex-employee: "Kott called the shots. Everyone made suggestions to him, but [I think] his word was the final one. Nothing went on without his knowledge." A former broker said flatly, "It's his place. He runs it, he makes the decisions, he does the hiring and firing."