Rowland made $26,000 in stock investment in six daysHARTFORD, Conn. -- Former Gov. John G. Rowland, who struggled so much with managing his finances that an aide occasionally loaned him money to balance his checkbook, made $26,000 in less than a week by investing in an obscure speculative stock, records show.
Rowland made the profit in six days during 2000 by buying and selling shares in a penny stock called "I would find it peculiar for a governor of a major state to go into the market and buy a penny stock," said Nancy Van Sant, who investigated insider trading cases while at the Securities and Exchange Commission. "Most politicians either have blind trusts or are doing very conservative things while they are governor." The investment is one of several very profitable deals the governor made that are now under investigation, including the secretive 1997 sale of his Washington D.C. condominium for well above the market rate. Rowland's attorney, William Dow III, declined to comment on the stock investment. Rowland's discount brokerage, Quick & Reilly, did not return telephone calls Tuesday. Rowland, who resigned July 1 amid the federal probe and the impeachment inquiry, purchased 50,000 shares of Los Angeles-based EduLink at 25 cents a share on March 3, 2000, and sold it six days later for 80 cents a share -- a profit of $26,136. Rowland's salary at the time was about $78,000. He sold the stock at its exact peak. After closing March 9 at 84 cents, the stock never recovered, ending the year at about 2 cents. Federal investigators have subpoenaed information about the investment. "I think that would be worth scrutiny because of the magnitude of the increase in price," said Garrick Tsui, another former SEC investigator who is now managing director of a private investigative firm. "In terms of percentage increase, it's huge." EduLink had no state contracts, according to the Department of Administrative Services, the state's contracting agency. Rowland was portrayed at his impeachment hearings as a cash-strapped official who leaned on wealthy friends and aides who had business before the state. His personal secretary, Kathy Mengacci, loaned the governor money to balance his checkbook over a five month period in 2002. The EduLink documents were included among more than 86,000 pages released this week by the impeachment committee. The documents show that Rowland sometimes had next to no cash on hand. Other times, his accounts were filled with tens of thousands of dollars. Company officials acknowledged the governor invested at a tumultuous time for the company. "We had no revenue. We were just getting started. It was kind of silly, but that's what happened," said Michael Rosenfeld, the company's chairman. Asked why Rowland may have bought stock, Rosenfeld said, "Obviously it got promoted by somebody. I don't know who. Somebody obviously told him. Who knows who? Somebody obviously touted this company." Penny stocks are vulnerable to abuse because of a lack of scrutiny by regulators and analysts, Tsui said. Speaking generally, he said penny stocks can be easily manipulated by making fraudulent announcements about anticipated deals or through other means.
"To find out about them, you usually have to know somebody involved," Tsui said. © Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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