Vegas El Rancho hotel figure arrested on fraud charge

Tuesday, Aug. 1, 2000 | 10:56 a.m.

SUN STAFF AND WIRE REPORTS

Disgraced financier Robert E. Brennan, who appeared in TV commercials urging investors to buy penny stocks before regulators labeled him a cheat, was arrested today in New Jersey and charged with bankruptcy fraud.

Two indictments were unsealed with Brennan's arrest, both relating to his cashing of $500,000 in casino chips five years ago.

These are the first criminal charges Brennan has faced in a career marked by frequent clashes with securities regulators. He was arrested at his Colts Neck home.

State prosecutors had claimed this year in a civil proceeding that Brennan attempted to hide a half-million dollars he got from cashing chips at the Mirage hotel-casino in Las Vegas.

The state suggested Brennan, 56, was improperly shielding assets to keep them from being used to pay off the $45 million he agreed to pay to aggrieved investors. Brennan responded that the matter had been "examined in minutia" four years ago and was only raised "to smear and embarrass me."

Brennan is known in Las Vegas for his association with the dilapidated El Rancho hotel-casino on the Las Vegas Strip. One of his companies, International Thoroughbred Breeders (ITB), announced plans in 1996 to create a $1 billion resort casino complex at the site of the El Rancho, which closed in 1992 and has not re-opened.

Those plans fell through and the company that sold the El Rancho to ITB, Las Vegas Entertainment Network, came under the scrutiny of securities regulators last year.

The regulatory concerns were over suspicious stock trading activity and arose after announcements LVEN made about several alleged business deals. These deals included one in which it offered to buy slot route operator Jackpot Enterprises of Las Vegas and another in which it claimed to be trying to sell the El Rancho on behalf of ITB.

Upscale condominium developer Turnberry Associates bought the El Rancho in May and plans to demolish the eyesore property this fall.

Brennan became nationally known in the 1980s through television commercials for his First Jersey Securities Inc. in which he stepped from a helicopter and told investors to "come grow with us."

He declared bankruptcy in 1995, when a federal judge in New York ruled that he cheated First Jersey investors and ordered him to pay what is now more than $78 million to the Securities and Exchange Commission.

The SEC charged Brennan employed "boiler room" tactics at First Jersey and manipulated the market in low-cost, high-risk shares of little-known companies -- the so-called "penny stocks" -- to fleece people who were pursued by a high-pressure sales force.

Brennan also settled a lawsuit brought by New Jersey by agreeing to pay $45 million to investors. That suit said that after closing First Jersey in the late 1980s, Brennan secretly controlled two other brokerages to run similar penny stock scams.

But the SEC and New Jersey authorities say Brennan has consistently sought to hide his assets overseas.

The five-count state indictment includes charges that Brennan failed to declare the money, and a six-count federal indictment charges him with making false statements in a bankruptcy proceeding. He was scheduled to appear in Superior Court in Monmouth County later today.

The state indictment could carry a penalty of up to 10 years in prison. Each of the six federal charges carries a penalty of up to five years in prison.