Man Pleads Guilty in Stock Conspiracy

A former Woodland Hills resident pleaded guilty this week to conspiring with six others to manipulate stock trading and prices of a defunct medical testing service company, the U.S. Attorney’s office said Friday.

As part of a plea bargain, David Paletz, 54, who now lives in Phoenix, admitted to conspiring to increase the value of stock of E.N. Phillips, Inc., a company that provided testing services at shopping malls.

He is expected to be sentenced Aug. 3.

Also this week, the company chairman and president were sentenced on federal income tax fraud charges. They were convicted of deducting as business expenses more than $660,000 given to co-conspirators to falsely trade in the company.

They were both ordered to pay $831,400 in restitution to investors who lost money in the stock market trades.

Company Chairman Harold Bernard Phillips, 67, of Calabasas was sentenced to six months in prison and six months of home detention. His son and company President Douglas J. Phillips, 44, of Woodland Hills was sentenced to a year in prison.

Stephen Richard Friedman, 54, a former Toluca Pacific Securities broker who executed many of the transactions, is scheduled to be sentenced June 29, after pleading guilty to charges of securities fraud.

Akiva Bar, 50, of Valencia, and Rafael Harary, 52, of Newhall, were charged in the conspiracy, but are fugitives, Assistant U.S. Atty. David Z. Seide said.

In 1991 the Phillipses paid Bar $350,000 to increase trading in their company, Seide said. The increase drove up the value of stock in the Woodland Hills-based company and allowed them to sell a large amount of restricted stock the Phillipses owned.

Seide said that Bar, Harary and Paletz placed orders for stock they did not intend to buy and artificially inflated the price and volume of the stock trading.

From January to May 1991 company stock prices rose to about $3 a share. But by late June of that year, the E.N. Phillips stock price dropped to less than 50 cents a share, and investors lost more than $2 million.