§ 2.9.3 FORMATION OF THE SPECIAL SECURITIES COMMITTEE

• Jurisdiction: Arizona

§ 2.9.3 Formation of the Special Securities Committee

The second catalyst for new securities legislation was a series of stock swindles in the late 1940s that the Corporation Commission was incapable of controlling. One of these schemes, involving a disbarred attorney³³⁸ and career criminal named Constantino Riccardi,³³⁹ accelerated the drive for new securities laws.

During 1948, a group of Arizona investors that Riccardi had defrauded in a mining swindle pressured the Corporation Commission to investigate.³⁴⁰ By then, Riccardi had at least a dozen arrests and had served prison time in California and New York.³⁴¹ When the Commission's investigation began, Riccardi was in New Jersey under arrest on new fraud charges involving a divorced princess and former wife of the Kresge store-chain owner, to whom he had proposed despite being married.³⁴² The Commission's investigation was front-page news that focused attention on the weaknesses in Arizona's securities laws and revealed that the Commission lacked the funds to hire the personnel to screen securities dealers and stock offerings like Riccardi's scam.³⁴³

The year after Riccardi's fraud made news, Edward "Bud" Jacobson, who would later become a long-time Snell & Wilmer partner,³⁴⁴ became an assistant attorney general with responsibility for enforcing Arizona's securities laws.³⁴⁵ At the time he was a 26-year-old lawyer.³⁴⁶ Jacobson quickly concluded that Arizona's securities laws needed to be strengthened.³⁴⁷ As a first step, he formed a Special Securities Committee that drafted new legislation to create a Securities Division within the Corporation Commission.³⁴⁸ He had the foresight to realize that he was too young and unknown to get a new law passed on his own. He solicited members of the Phoenix Chamber of Commerce and like-minded business groups to join the Committee³⁴⁹ and persuaded bankers, securities professionals, and other successful businessmen to serve on the Committee.³⁵⁰ Through the Securities Committee he created a credible sponsor for the legislation and marshaled support for it from the Phoenix business community.³⁵¹

--------

Notes:

^[338] Riccardi was disbarred in California and then obtained a license in Nevada. His Nevada license was revoked after the Nevada State Bar discovered that he had concealed his California disbarment. See State Bar v. Riccardi, 294 P. 537 (Nev. 1931).

^[339]Stock Promoter Wanted in East is 'Quite a Man', L.A. Times, Mar. 19, 1947, at 2 (describing Riccardi's...