Wall Street Crime And Punishment: Cort Randell And The National Student Marketing Corp. Fraud

Does crime pay?

Wall Street Crime and Punishment is a weekly series by Benzinga's Phil Hall that chronicles the bankers, brokers and financial ne’er-do-wells whose ambition and greed takes them in the wrong direction.

“I don't know quite how it happened that I'm making $1 million a month,” said Cort Randell in a May 1968 interview with Time Magazine. “I just sit in the office and talk to people.”

At 32 years old, Randell was presented in the media as epitomizing all of the virtues and none of the vices of LBJ-era American youth. His company, National Student Marketing Corp., was considered to be one of the most innovative ventures of the day, successfully tapping into the high school and college market with a precision that the old-school corporations could never truly achieve.

Two years later, Time Magazine revisited Randell, except the follow-up was to document his abrupt and harsh fall from grace. The company that was earlier hailed for its inventiveness was now under investigation by the U.S. Securities and Exchange Commission while the National Student Marketing Corp. stock had plummeted from a December 1969 high of $72 to an April 1970 nadir of $3.

“You can't take anything for granted – even success,” Randell deadpanned.

How did this bright young star of the corporate world go from a shining Point A to a tarnished Point B? The story is quite complex – especially when considers that Randell rolled past his tarnished Point B into a chain of schemes and controversies that showed his youthful indiscretions maturing into chronic lethal habits.

A Bright Young Talent: Cortes Wesley Randell was born in 1935, the son of a financial consultant whose clients included several Latin American governments. He graduated from the University of Virginia in 1959 with an engineering degree and initially worked for General Electric GE in the development of the Sea Wolf nuclear submarine and the Ballistic Missile Early Warning System before moving to ITT Corporation ITT in Chicago to concentrate on the developing the worldwide warning system at Offutt Air Force Base.

Randell became bored with working for others and decided to pursue an entrepreneurial route. He banged out a guide for college students seeking summer jobs and began marketing the publication for $2.95 on four college campuses in Wisconsin – his marketing campaign consisted of posters promising “high-paying, fun-filled positions” and the budget for this endeavor totaled $150.

Randell’s guide became so successful that he quit his ITT job and went into business for himself. The collegiate summer guide job went through three independently published editions before the New York City-based publisher Doubleday & Co. brought out a fourth edition for bookstore sales.

In 1966, Randell founded National Student Market Corp., with the goal of targeting the teenage and early-twenties crowd consumers – today, known as the Baby Boomer generation. The company had a funky business plan of marketing consumer products and diverse services on high school and college campuses, with promotions ranging from magazine subscriptions and membership in record clubs to over-the-counter items like antacid pills and mouthwash to trickier considerations like recruitment into the U.S. Navy – the latter was no mean feat, considering that nasty bit of business happening in Vietnam.

According to the May 1968 Time Magazine coverage, Randell employed “a network of 581 part-time campus representatives, who earn up to $4,000 a year distributing samples, doing market research and peddling fad items.” On April 24, 1968, Randell took his company public with shares selling at $6 – and that level swelled to $26.50 per share in a month.

The Wrong Turn: Within two years of going public, Randell’s firm acquired 27 different companies, ranging from an insurance brokerage aimed at the student market to a poster publisher. When Time Magazine revisited Randell in April 1970, the success of his enterprise was reflected in his personal wealth – he was pegged as the owner of a $600,000 estate in Virginia, a 55-foot yacht and a Lear Jet.

Randell's investors also profited from his business acumen: Time reported that National Student Marketing Corp.'s stock hit $52 – a princely sum for 1970 – before splitting two for one. Major Wall Street banks and brokerages plus the endowment funds at Harvard and Cornell Universities snatched up as many shares as they could.

Not everyone was enamored of Randell – Barron's tartly observed that Randell’s company seemed to be floating on the profits of its acquired firms and not from its own operations. The financial publication proved to be prescient, as Randell’s fortunes began to crumble.

During the first quarter of 1970, National Student Marketing Corp. lost $859,889. Randell tried to blame the deficit on a “mechanical error” that occurred in transferring data between accounting books – in reality, sales had dropped by more than $4 million. Even worse, the small army of campus representatives began to lose interest in their duties after being inundated with product samples and posters to distribute on campuses – many of those items were thrown out, creating wasteful losses.

By December 1969, Randell and the company’s executives knew they were on a sinking corporate ship and began to sell their shares in the company – Randell made $3 million short selling his company’s stock. Within two months, the board of directors ousted Randell and the company saw its headquarters staff slashed from 160 down to 18.

After his ouster, Randell confided to the New York Times that the company was “so concerned about the profitability of our subsidiaries and tracked them carefully that we forgot to look after our own marketing program's profitability. And, of course, we let our overhead run too high in relation to income.”

Alas for Randell, his problems ran a tad deeper than that.

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Justice Amid The Ruins: The decline and fall of National Student Marketing Corp. took down a lot of participants in its financial charade, including the prestigious New York City law firm White & Case and the accounting firm Peat, Marwick, Mitchell & Co.

White & Case took over National Student Marketing Corp.’s legal concerns after the company’s first law firm, Covington & Burling, dropped the company amid allegations of unethical behavior and false statements before and after its 1968 initial public offering. In 1972, the SEC charged the firm and one of its partners, Marion Jay Epley III, of fraud and deception in relation to their acquisition filings on behalf of the company.

The firm settled out of court in 1977 for nearly $2 million while Epley was banned for six months from any SEC-related work. This marked the first time since the firm’s creation in 1901 that it was the subject of any regulatory discipline.

Anthony M. Natelli, a partner at Peat, Marwick, and Joseph A. Scansaroli, a certified public accountant with the firm, were found guilty in 1974 of having made false and misleading statements in a proxy statement filed with the SEC in mid-1969 on behalf of Randell’s company, including the writing of $1.7 million in sales on the books when they were only projected sales. Peat, Marwick itself was not charged by the regulatory agency.

Natelli was handed a one-year prison sentence and a $10,000 fine, although his sentence was later reduced to 60 days. Scansaroli received a one-year sentence and a $2,500 fine; his sentence was later reduced to 10 days and his conviction was reversed upon an appeal.

Randell avoided the long arm of the law until 1975, when he pleaded guilty to four counts of stock fraud charges and was sentenced to 18 months in prison. He also was levied a $40,000 fine.

Bad Habits Never Die: After coming out of prison, Randell continued with a life of drama-heavy business. He became involved with the real estate investment firm National Commercial Credit Corporation, but that entity ran afoul of the SEC, which accused Randell and his business partners of “gross corporate mismanagement, self-dealing, the taking of second trust notes and cash valued at several hundred thousand dollars through a series of undisclosed transactions.” More than 100 people lost a total of over $1 million when the company failed.

In 1979, Randell was convicted of mail and stock fraud in connection with the National Commercial Credit Corp. and was sentenced to seven years in prison. Randell went to jail in 1981 and was released in 1984, at which point took on an executive role at Federal News Service, a transcription service covering congressional and White House events.

But Randell became entangled in litigation with the service’s founder, Richard Lee Boyd, and was eventually ousted from the company. He also was involved with United Savings Club, a product discount company that generated a surplus number of complaints to consumer protection agencies.

Randell re-emerged in 2000 as the creator of eModel.com, a platform for aspiring models – the Better Business Bureau’s Los Angeles chapter denounced the endeavor as a “scam.” Randell was also linked to Lou Pearlman, the music impresario who launched NSYNC and Backstreet Boys but was later hobbled by financial fraud charges – although he played no role in Pearlman’s spectacular fall from grace, the guilt-by-association link was impossible to ignore.

Randell’s last publicly-focused efforts occurred with appearances in a pair of videos: a 2013 production on behalf of the Young Life organization’s Christian-focused camps and a 2016 YouTube posting for nonprofit Intercessors for America, an advocacy group that promoted “practical teaching, news for prayer, and connections with others who are praying for our country.” But both efforts were so below the proverbial radar that his appearance failed to draw any attention from the business media that covered him for years.

Randell’s descent into obscurity was so swift that his death on December 29, 2020, went unnoticed beyond his family and friends. Indeed, this article is the very first by a major media source to call attention to his passing.

After his initial flurry of media attention, Randell was an elusive figure who rarely gave interviews – and when he did, his answers were often abrupt. An April 1977 exchange with a Washington Post reporter might have offered the most succinct self-analysis that he ever gave.

“I was never the financial genius they said,” Randell stated. “But I never said I was an angel either, because I'm not.”

(Screen shot of Randell from the 2013 Youth Life promotional video.)