Key Witness in Huge Ponzi Case Faces Sentencing This Week

9/2/2010 7:55:51 AM

Deanna Coleman, the government’s star witness in a big fraud case against convicted Ponzi schemer Tom Petters, is scheduled to be formally sentenced this week for her connection to the scam, the Associated Press reported. A longtime employee of Petters’ firm, the A.P. noted, Coleman voluntarily alerted authorities about her boss’s illegal activities in 2008 and began secretly recording his conversations shortly after that. With her assistance, the A.P. said, the government managed to prove that Petters had operated a $3.7 billion Ponzi scheme and send him to prison for a 50-year term. While Coleman herself could technically face up to five years behind bars, the A.P. said, the government has recommended a lenient sentence – and her attorney has requested no jail time at all – as a reward for her cooperation in the case. However, the A.P. added, Coleman must forfeit most of her assets whether she escapes prison time or not.

PCS Edventures!.com Accused of Artificially Inflating Its Stock

9/1/2010 10:39:57 AM

The U.S. Securities and Exchange Commission has filed charges against PCS Edventures!.com (OTC: PCSV.OB) for allegedly issuing false press releases about a bogus foreign contract in order to artificially inflate the price of its stock. According to the SEC, PCS announced that it had secured a $7.15 million contract in the Middle East that did not actually exist. PCS failed to disclose the truth for several months, the SEC says, while the company’s stock – lifted by the bogus news – posted gains in the meantime. The SEC has filed charges against PCS CEO Antohny A. Maher and former CFO Shannon M. Stith as well. The agency plans to secure financial penalties from all three defendants, while barring Maher and Stith from serving as officers or directors of any publicly traded companies in the future.

Former Centerpulse Executive Settles Charges Filed by SEC

9/1/2010 10:13:36 AM

Richard Jon May, a former division vice president for a company known as Centerpulse, has agreed to settle charges accusing him of manipulating the firm’s earnings eight years ago. According to the U.S. Securities and Exchange Commission, May helped Centerpulse overstate its earnings and understate its liabilities back in 2002. May will now pay more than $30,000 in order to settle the long-running case. By now, a number of other past Centerpulse insiders – including former CFO Urs Kamber – have inked settlements with the SEC as well.

Pair Indicted on Fraud Charges for Alleged Ponzi Scheme

9/1/2010 9:42:49 AM

Geoffrey A. Gish and Myra J. Ettenborough, key insiders at Weston Rutledge Financial Resources in Georgia, have been indicted for allegedly operating a multimillion-dollar Ponzi scheme. With Gish overseeing sales and Ettenborough managing day-to-day operations, federal prosecutors say, Weston Rutledge raised almost $29 million from investors by promising them generous returns and then misappropriated almost all of those funds. By the time that a court-appointed receiver assumed control of Weston Rutledge in mid-2006, the firm reportedly had only $1 million worth of investor funds left. Gish and Ettenborough have now been charged with 10 counts of mail and wire fraud apiece and, if convicted, face up to 20 years in prison for their crimes.

Head of Real Estate Firm Guilty of Multimillion-Dollar Loan Scam

9/1/2010 9:14:22 AM

Francis Alan Schmitz, the head of Long Grove Real Estate Partners in Illinois, pleaded guilty last week to scamming six different banks through a Ponzi-like scheme, the Chicago Daily Herald reported. According to court records, the newspaper said, Schmitz falsely claimed that he controlled a substantial trust fund when securing $6 million worth of loans from the banks. By the time that Schmitz’s long-running scheme finally came to an end earlier this year, the newspaper said, those banks had suffered more than $3 million in losses. Schmitz could have faced up to 30 years in prison for his crimes, the newspaper said, but prosecutors have recommended a lighter sentence – of six-and-a-half to eight years – instead.

Provident Royalties Insider Pleads Guilty to Big Scam

9/1/2010 8:54:25 AM

Joseph Blimline, a Dallas man connected to now-defunct Provident Royalties, pleaded guilty this week to fleecing 7,700 investors through two major oil-and-gas scams, the Associated Press reported. With help from Blimine, the A.P. said, Provident raised $535 million earmarked for specific energy projects and then used the money for other purposes instead. Provident has since declared bankruptcy, the A.P. noted, with Blimline’s remaining assets – estimated at just $3 million – placed under a court-appointed receiver’s control. Blimline has now officially pleaded guilty to fraud charges, the A.P. said, and faces up to 20 years in prison for his crimes.

Former Dell Finance Execs Accused of Securities Fraud

8/31/2010 7:41:26 AM

The U.S. Securities and Exchange Commission has filed civil fraud charges against two former finance executives at Dell (Nasdaq: DELL) for allegedly using “cookie-jar” accounting to manipulate the company’s past earnings reports. Robert W. Davis, Dell’s former chief accounting officer, has been accused of directing the company to hold back reserves in order to cover future expenses. Randall D. Imhoff, Dell’s former assistant controller, allegedly aided and abetted Davis in carrying out the scheme. Davis has agreed to pay more than $200,000 to settle the SEC’s charges, while Imhoff will pay almost $40,000 in restitution and penalties for his role in the alleged scam. Both men have been temporarily suspended from serving as accountants for publicly traded companies as well.

Shareholder Lawsuit Proceeds against Merrill and BofA

8/31/2010 7:19:42 AM

A federal court has cleared the way for a class-action shareholder lawsuit to move forward against Merrill Lynch, Bank of America (NYSE: BAC) and company leaders accused of misleading investors before the two banking giants merged. According to the complaint, the companies and their leaders improperly concealed huge Merrill Lynch bonuses and losses when securing approval for that controversial deal. If the lawsuit ultimately proves successful, it could generate billions of dollars in recoveries for investors who lost money after the big merger. “The court’s ruling is a major win … for shareholders of every company and for our financial system,” stated Ohio Attorney General Richard Cordray, who hopes to secure restitution payments for his state’s pension funds. “The court ruled that companies cannot pick and choose what they will tell their shareholders … We will continue to move forward aggressively with this action to hold these companies and executives accountable.” 

Alleged Con Artist Captured after Three-Plus Years on the Run

8/31/2010 6:51:47 AM

William L. Walters, a suspected con man from Colorado, has been extradited from Argentina to face fraud charges lodged against him more than three years ago in his home state. According to a May 2007 indictment, Walters raised more than $23 million by promising investors generous returns – of up to 40% -- on day trading and then used most of that money to finance a Ponzi scheme and cover his own personal expenses instead. He fled to Argentina ahead of his formal indictment, but the FBI finally tracked him down and secured his return to the U.S. earlier this month. “In this case, justice delayed will not result in justice being denied,” assured Colorado Attorney General John Suthers. “We look forward to presenting our case against Mr. Walters and securing justice for his victims.”

Suspected NY Ponzi Schemer Commits Suicide ahead of Plea

8/31/2010 6:32:06 AM

Ashvin Zaveri, a 71-year-old New York businessman suspected of running a multimillion-dollar Ponzi scheme, has reportedly shot and killed himself just weeks ahead of an important court date, the Associated Press reported. Zaveri faced criminal charges – and up to eight years in prison -- for allegedly raising $35 million for bogus energy investments, the A.P. said, and then using the money to make Ponzi-like payments and cover his own personal expenses. He was expected to plead guilty to fraud charges next month, the A.P. said, but wound up committing suicide last week instead.

Judge Orders Rothstein to Pay $363 Million to Ponzi Victims

8/31/2010 6:16:02 AM

Scott Rothstein, a disbarred attorney jailed for operating a massive Ponzi scheme, has been ordered to pay $363 million in restitution – including a portion of any prison wages he receives – to victims who lost money in his elaborate scam, the Associated Press reported. Although Rothstein raised $1.2 billion by marketing bogus legal settlements, the A.P. noted, government authorities expect to recover no more than $60 million for the victims of his crimes. He is currently serving a 50-year prison sentence, the A.P. said, and did not appear at the recent court hearing that determined the full amount of his restitution bill.

Former Beazer Executive Released until Fraud Trial

8/30/2010 11:12:46 AM

Michael T. Rand, the former chief accounting officer for Beazer Homes USA (NYSE: BZH), has been released from jail after being arrested last week for allegedly engaging in accounting fraud before departing from the company, The Wall Street Journal reported. Rand is the first Beazer insider to face criminal charges in the three-year-old case, the Journal noted, although CEO Ian J. McCarthy has fielded a so-called “Wells Notice” signaling possible civil charges ahead. Meanwhile, the Journal said, Rand has been charged with (among others) the following felonies: conspiracy, mail/wire fraud conspiracy, securities fraud, obstruction of justice, destruction of records, witness tampering and making false statements to a bank. Once a $79 stock, the Journal noted, Beazer collapsed to just 29 cents a share last year on housing concerns and its own legal woes. Although the stock bounced back to $7 in May, it has since fallen by about half to $3.62 a share. 

U.S. Seeks to Extradite Foreign Banker Accused of Ponzi Scam

8/30/2010 10:47:40 AM

The U.S. government is seeking to extradite David A. Smith, a Jamaican banker currently residing on the Turks and Caicos Islands, after filing charges against him for allegedly operating a massive Ponzi scheme, Reuters has reported. Smith already faces similar charges in the Turks and Caicos, Reuters noted, where he is scheduled to appear in court – and either plead guilty or face trial – in late September. He must likely resolve that case, Reuters said, before leaving to face charges here in the U.S. He is suspected of stealing $300 million from thousands of investors, Reuters added, by running one of the biggest financial frauds in Caribbean history.

McGinn Suffers Heart Attack amidst Federal Fraud Probe

8/30/2010 10:23:28 AM

Timothy McKinn, a named partner at a New York brokerage firm suspected of securities fraud, was hospitalized last week after suffering an apparent heart attack, the Times Union newspaper reported. Before falling ill, the newspaper noted, McKinn had come under government scrutiny for operating a possible $136 million Ponzi scheme. The U.S. Securities and Exchange Commission filed a formal complaint against McKinn’s firm earlier this year, the newspaper said, while federal investigators are moving forward with a criminal probe of their own. The firm allegedly owes investors $84 million, the newspaper added, but has less than $500,000 left in its account.

Judge to Rule Soon on Payment of Legal Bills in Stanford Case

8/30/2010 10:02:02 AM

A federal judge will soon determine whether accused Ponzi scheme operator R. Allen Stanford and two of his former finance executives, Gilbert Lopez and Mark Kuhrt, should be responsible for covering millions of dollars worth of legal bills stemming from the massive fraud case, the Associated Press reported. Lloyds of London had been footing the bill for those hefty legal fees, the A.P. explained, but the insurer now argues that the defendants violated a money-laundering clause that bars them from such coverage. Both sides presented their arguments last week to a federal judge, the A.P. said, who will rule on the matter at a later date. Accused of operating a $7 billion Ponzi scheme, the A.P. said, the defendants have been formally indicted on charges of mail fraud, wire fraud and money laundering. Stanford has been jailed since his arrest in mid-2009, the A.P. noted, while Lopez and Kuhrt have remained free on bail.

B-List Movie Producer Staring at Possible 25-Year Jail Sentence

8/30/2010 9:21:22 AM

Mahmoud Karkehabadi, a B-list movie producer linked to fraud in the past, could face up to 25 years in prison if he’s convicted on fresh charges involving a suspected Ponzi scheme, The Orange County Register reported. Karkehabadi (also known as Mike Karkeh) was arrested and jailed last week, the newspaper reported, after a grand jury indicted him on 89 felony counts for allegedly running a Ponzi-like scheme to finance his movies. Before that, the newspaper noted, Karkehabadi had come under fire for allegedly operating automobile and credit card scams as well. He has pleaded not guilty to the latest charges, the newspaper said, and is being held in custody in lieu of $11 million bail. Meanwhile, the newspaper added, Timothy Cho – an alleged co-conspirator – remains at large.

IRS Shifts Aim from UBS to Its Clients with Offshore Accounts

8/27/2010 8:30:01 AM

The Internal Revenue Service has announced plans to drop a high-profile lawsuit against UBS, The New York Times reported, now that the Swiss bank has supplied the agency with information about thousands of offshore accounts and moved closer to satisfying promises to release details on thousands more. The IRS sued UBS last year, the Times noted, one day after federal prosecutors secured a $780 million penalty against the bank for allegedly allowing clients to evade taxes through use of its secretive offshore accounts. UBS has since provided the agency with access to 2,000 of those accounts, the Times said, and is on track to deliver information on 2,450 additional accounts by this fall. The bank has agreed to reveal American clients with unreported accounts holding at least 1 million Swiss francs (or $977,000), the Times said, as well as U.S. citizens who operate “sham company accounts” holding similar sums.

Defunct Brokerage Firm Paying Millions to Settle Charges

8/27/2010 7:57:15 AM

FTC Capital Markets, a defunct New York brokerage firm, has agreed to pay more than $23 million to settle charges related to unauthorized trades in two client accounts, The Wall Street Journal reported. In addition, the Journal said, FTC Chairman Guillermo Clamens must pay more than $21 million under a similar deal as well. Nazly Cucunuba Lopez, the firm’s former operations manager, faced a much smaller penalty, the Journal said, but will not be forced to pay it due to her lack of financial resources. She has pleaded guilty to conspiracy and securities fraud in the meantime, the Journal added, and is currently awaiting sentencing for her crimes.

Big-Name Fugitive Finally Agrees to Face Old Fraud Charges

8/27/2010 7:34:34 AM

Asil Nadir, the former head of now-defunct Polly Peck International, ended 17 years in exile this week when he returned to Britain to face fraud charges lodged against him two decades ago, The New York Times reported. With Nadir at the helm, the Times said, Polly Peck once ranked among London’s biggest publicly traded company before coming under fire for alleged accounting fraud and collapsing into bankruptcy. Nadir then fled to his home country of Cyprus, the Times said, where lived in “lush exile” until surprising authorities with his return to Britain on Thursday. “He is a chancer, and I think he has convinced himself that he was hard done by,” a Turkish journalist told the Times. “And these cases are difficult to prove – especially 20 years on.”

Repeat Offender to Spend Decades in Prison for Investment Scam

8/27/2010 7:04:54 AM

Dennis Bolze, a convicted felon guilty of theft and bank fraud in the past, has been sentenced to 27 years and two months in prison – the maximum term suggested under federal guidelines – for scamming investors through a multimillion-dollar Ponzi scheme, the Knoxville News-Sentinel reported. Bolze raised about $21 million from his victims, the newspaper said, leaving them with $12 million in losses when his scheme collapsed in late 2008. At that time, the newspaper said, Bolze fled Tennessee for Pennsylvania – the scene of his earlier crimes – where he was later arrested by government authorities. He pleaded guilty to wire fraud and money laundering last November, the newspaper said, and – at 62 – will likely spend most, if not all, of his remaining years behind bars. “I’m fine with it, just so long as he doesn’t ever get out,” one of his victims told the newspaper. “If he does, I believe he would only swindle somebody else.”

Europeans Accused of Illegal Trades ahead of Potash Deal

8/26/2010 8:19:34 AM

Juan Jose Fernandez Garcia, a research analyst at a Spanish bank that advised BHP Billiton (NYSE: BHP) on its planned buyout of Potash (NYSE: POT), has been accused of engaging in illegal trading ahead of the proposed deal. Luis Martin Caro, another Spaniard, faces similar charges. According to the U.S. Securities and Exchange Commission, both men purchased out-of-the-money call options on Potash stock that quickly rose in value on news of the proposed acquisition. The SEC has secured a court order freezing more than $1 million worth of assets held by the two men, while banning them from destroying any relevant documents as it moves forward with its probe. The agency plans to seek full disgorgement of any ill-gotten gains, plus penalties and interest, from the defendants going forward.

Defendants Ordered to Pay Millions in Penny Stock Case

8/26/2010 7:47:19 AM

The U.S. Securities and Exchange Commission has ordered five penny-stock distributors to pay millions of dollars in restitution and penalties for allegedly selling billions of unregistered shares in microcap companies to the unsuspecting public. K&L International Enterprises and its leader, Lawrence A. Powalisz, must turn over $14 million for their role in the alleged scam. Signature Worldwide Advisors and its chief, Stephen W. Carnes, must pay almost $1 million. A fifth defendant, Signature Leisure, will chip in roughly $1 million as well. The SEC has also banned all five defendants from participating in any penny stock offerings for the next three years, while it continues to pursue cases against two other parties – Enzyme Environmental Solutions and Jared E. Hochstedler – implicated in the same alleged scam.

B-List Movie Producer Accused of Multimillion-Dollar Fraud

8/26/2010 7:20:34 AM

Mahmoud Karkehabadi, a B-list movie producer also known as Mike Karkeh, has been charged with 89 felonies – including grand theft and securities fraud – for allegedly operating a $9 million Ponzi scheme, Dow Jones reported. According to California Attorney General Edmund Brown, Dow Jones said, Karkehabadi secured “movie-production loans” from 150 investors by offering them swift and remarkable returns but failed to deliver on those lofty promises. Karkehabadi instead “ran a cold and calculated scam,” Brown stated in the article, “making promises he never intended to keep and using the funds of new victims to pay off the earlier ones.” Formally arraigned on Tuesday, Dow Jones said, Karkehabadi faces up to 25 years in prison if convicted of all his alleged crimes.

'Mobster' Headed to Prison after Rothstein-Aided FBI Sting

8/26/2010 6:59:58 AM

Roberto Settineri, a suspected mobster from Italy, pleaded guilty this week to money laundering charges after Scott Rothstein – a convicted Ponzi scheme operator – helped nail him in an FBI sting, the Associated Press reported. Rothstein agreed to secretly record conversations with the reputed gangster, the A.P. said, who incriminated himself by agreeing to launder $10 million dollars and shred documents connected to Rothstein’s $1.2 billion scam. According to court documents, the A.P. said, Settineri planned to launder the money by purchasing artwork and offered to “eat the papers if needed” in order to protect Rothstein. Settineri could have faced up to 30 years in prison if convicted at trial, the A.P. said, but will likely serve only four years now as a result of his guilty plea. Meanwhile, the A.P. added, Rothstein himself is already serving a 50-year sentence as punishment for his own massive crimes.

Jamaican Financier Indicted on Fraud Charges in the U.S.

8/25/2010 9:11:23 AM

David Smith, a Jamaican financier already shut down by authorities in his home country, now faces fraud and money laundering charges here in the U.S., the Associated Press reported. According to court documents, the A.P. said, Smith promised big returns to 6,000 members of a so-called “investment club” but then used his clients’ money “to finance a lavish and expensive lifestyle” for himself instead. Last week, the A.P. said, U.S. authorities formally indicted Smith – who currently resides in Turks and Caicos – and are now seeking $128 million in assets, including a fancy Florida home, from the alleged con man.

SEC on Track to Suspend Record Number of Stocks This Year

8/25/2010 8:54:14 AM

The U.S. Securities and Exchange Commission has already suspended trading in 202 stocks so far this year – up from 183 during the first nine months of 2009 – as it moves toward a new record in 2010, USA Today reported. The agency suspended a total of 234 stocks in 2009, the newspaper said, a big jump from the 98 suspensions recorded just two years earlier. Regulators have focused particular attention on so-called “shell companies,” the newspaper noted, outfits with limited assets and operations that are particularly vulnerable to stock manipulation. “Many of the companies being suspended are nothing more than a post office box and a ticker symbol,” the newspaper explained. “Regulators are stepping up efforts to weed out some of the smallest and most questionable publicly traded companies.”

Former Beazer Homes Exec Indicted on Fraud Charges

8/25/2010 8:31:08 AM

Michael T. Rand, the former chief accounting officer for Beazer Homes USA (NYSE: BZH), has been indicted on multiple charges for allegedly participating in a scheme to manipulate the company’s financial results. Between 2000 and 2007, the FBI says, Rand violated securities laws in two primary ways: by executing a secret deal with another company that allowed Beazer to recognize revenue and cash flow on purported sales of “model homes”; and by practicing so-called “cookie-jar accounting” so that Beazer could meet its financial targets. He has now been charged with the following crimes: conspiracy, securities fraud, obstruction, witness tampering, false statements to a financial institution, misleading conduct and destruction of records. He faces up to 30 years in prison and $1 million in fines if convicted on the most serious counts. Beazer itself has already entered into a deferred prosecution agreement that requires the company to pay $50 million in restitution for its own role in the alleged scam.

Tennessee Financial Adviser to Spend 78 Months behind Bars

8/25/2010 8:07:16 AM

William Walter Spencer, a former Tennessee-based financial adviser, has been sentenced to 78 months in prison for operating an elaborate Ponzi scheme. Over the course of a 12-year period ending in late 2009, federal prosecutors say, Spencer defrauded roughly 100 victims – most of them members of his own church – in the following ways: offering them inflated returns on so-called “personal loans” secured by bogus collateral; promising to repay the notes in full in six months to a year; lying about the value of his assets and his ability to satisfy his obligations; failing to invest any of the funds and using the money for other purposes instead. All told, prosecutors estimate, Spencer embezzled almost $1.9 million from the victims of his scam. He now faces $1.46 million in restitution payments as well as six-and-a-half years in jail.

Cook Sentenced to 25 Years for Devastating Ponzi Scheme

8/25/2010 7:28:33 AM

Trevor Cook, the mastermind of a $158 million Ponzi scheme, was sentenced this week to 25 years in prison for his crimes. Between January 2007 and July 2009, the FBI said, Cook fleeced more than 900 investors by promising them generous returns on foreign currency trades and then diverted much of that money for other purposes instead. He has been jailed since January, the FBI said, because he refused to surrender more than $35 million worth of frozen assets – including $27 million in offshore accounts and three luxury automobiles – but has now agreed to cooperate with government authorities seeking recoveries for his victims. A federal judge portrayed Cook’s actions as “retched, tawdry and cheap,” the FBI noted, when ordering the 38-year-old fraudster to spend the next quarter-century of his life in jail.

KMS Financial Inks $1 Million Deal to Settle Ponzi Charges

8/24/2010 1:02:25 PM

KMS Financial Services, a Seattle-based securities firm, has agreed to pay almost $1 million in restitution to victims of a former KMS broker who operated an illegal Ponzi scheme, the Associated Press reported. Last month, the A.P. noted, the ex-broker -- Arthur Heffelfinger -- pleaded guilty to criminal charges stemming from the financial scam. Under the terms of a deal inked with securities regulators in Montana (where Heffelfinger was based), the A.P. said, KMS will pay $975,000 in restitution and another $50,000 in fines in order to settle the case.

Leeb President Sanctioned over Penny-Stock Trading Business

8/24/2010 12:48:52 PM

Eugene Miller, the president of now-defunct Leeb Brokerage Services, has been sanctioned by regulators for failing to properly oversee his firm’s lucrative penny-stock trading business, StockWatch reported. According to the U.S. Securities and Exchange Commission, StockWatch said, Miller’s New York-based firm allowed promoters to dump millions of shares of penny stocks – ignoring obvious red flags raised by those trades – because it valued revenue over compliance. Before it closed, StockWatch noted, Leeb reportedly generated almost half of its commission income from its penny-stock business. In addition to Miller himself, StockWatch said, the following Leeb insiders have been charged with securities violations: brokers Robert Bloomfield, Victor Labi and John Earl Martin Sr.; and Robert Gorgia, Leeb’s former chief compliance officer, who reportedly portrayed the firm’s penny-stock business as a “compliance nightmare.” The SEC has fined Miller $50,000 and suspended him from the industry for one year, StockWatch said, while it continues to pursue its case against the remaining defendants.

Criminal Charges Dropped against Former Westar Execs

8/24/2010 12:21:46 PM

Federal prosecutors have abandoned a long-running fraud case against two former executives of Westar Energy (NYSE: WR), The New York Times reported, after a recent Supreme Court ruling essentially gutted the government’s case. The U.S. Department of Justice originally filed charges in 2003 against the two defendants – former Westar CEO David Wittig and his top lieutenant Douglas Lake – for allegedly looting the company, the Times noted, but saw the first trial end in a hung jury and convictions in a second trial later overturned. Prosecutors have now dropped their charges against the defendants altogether, the Times said, because they were relying on violations of the so-called “honest services” law – seriously weakened by a new Supreme Court decision – to secure convictions in the case. “The law no longer supported our position,” a federal prosecutor stated in the newspaper. So “we were duty-bound not to go forward with the prosecution.”

First Defendant Pleads Guilty in Disney Insider Trading Case

8/24/2010 12:03:53 PM

Yonni Sebbag, the boyfriend of an ex-assistant to a Walt Disney (NYSE: DIS) executive, pleaded guilty this week to insider trading charges, Dow Jones reported. Sebbag and his girlfriend, Bonnie Hoxie, were arrested in May for allegedly hatching a scheme to sell advance information about Disney’s financial results to at least 20 different hedge funds, Dow Jones explained. Sebbag pleaded guilty on Monday to conspiracy to commit securities and wire fraud, Dow Jones said, and now faces up to 33 months in prison for his crimes. Hoxie faces similar charges, Dow Jones added, and is reportedly discussing a “possible resolution” to her case as well.

Regulators Freeze Assets of Longbranch and Its Leader

8/23/2010 9:22:28 AM

The U.S. Commodity Futures Trading Commission has secured a court order freezing the assets of Houston-based Longbranch Group International and its leader, Jeremiah C. Yancy, after filing charges against the defendants earlier this month for operating a suspected Ponzi scheme. According to the CFTC, the defendants raised more than $1 million from dozens of investors – including members of a church where Yancy served as a pastor – for currency trading and then misappropriated roughly half of those funds. The CFTC is seeking full restitution, plus financial penalties, from both Longbranch and its leader. The agency has banned the defendants, who are scheduled to appear in court on Sept. 1, from destroying any relevant documents in the meantime.

Morningstar Issued 5-Star Rating on Suspected Ponzi Scheme

8/23/2010 8:54:30 AM

A hedge fund connected to a suspected $16 million Ponzi scheme sported a five-star rating from Morningstar – earning trust from unsuspecting investors – before it ultimately collapsed, The Philadelphia Inquirer reported. In a Morningstar report tracking its performance, the newspaper said, the Life’s Good STABL Mortgage Fund showed remarkably healthy and consistent gains – without any dips – in the years leading up to its demise. “If I’m a financial adviser and I’m looking at a perfect step-up performance report,” an attorney stated in the article, “I have to know something is wrong.” For its part, the newspaper said, Morningstar emphasized that such ratings are based entirely upon returns reported by hedge funds themselves and are not subject to the same third-party verification used when evaluating mutual funds.

Canadian Mobsters Outsourcing High-Tech Services for Fraud

8/23/2010 8:33:57 AM

Canadian organized crime groups are retaining “black market hackers-for-hire” to break into brokerage accounts in an effort to bolster their profits from securities fraud, the Calgary Herald reported. In addition, the newspaper said, suspected mobsters are relying on popular social networking sites – such as Facebook and Twitter – to issue fake news releases and other promotional materials used to defraud investors as well. “Criminal groups are constantly adapting to exploit new opportunities for illicit profit and take advantage of communication and transportation technologies that increase the scope and range of their unlawful activities,” Canadian authorities stated in the article. “Financial crime is becoming a big issue, and it’s one of the fastest-growing areas organized crime is getting involved in.”  

European Fugitive Pleads Guilty to Fraud, Tax Charges in the U.S.

8/23/2010 8:11:54 AM

Christopher Bass, a European fugitive who fled his own country to escape criminal charges several years ago, has pleaded guilty to fraud charges stemming from an elaborate investment scam that he launched after arriving here in the U.S. Between January 2007 and February 2010, the FBI says, Bass solicited $5.5 million from hundreds of investors by promising them remarkable returns – of up to 4.55% per month – and then used most of that money to make Ponzi-like payments and cover his own personal expenses instead. Moreover, the FBI says, Bass also failed to properly report his illicit income to U.S. tax authorities. He recently pleaded guilty to two felonies, mail fraud and tax evasion, and will be formally sentenced for his crimes later on this year.

Former Rothstein Law Partner Could Face Criminal Charges

8/23/2010 7:46:18 AM

Stuart Rosenfeldt, the former law partner of convicted Ponzi scheme operator Scott Rothstein, could face criminal charges soon for his alleged role in the now-defunct law firm’s $1.2 billion financial scam, the Palm Beach Daily Business Review reported. According to sources familiar with the case, the newspaper said, federal prosecutors hope to indict Rosenfeldt – as well as other partners at the firm – for allegedly profiting from the massive scam and then using some of their proceeds to make tax-deductible donations to high-profile politicians. For example, the newspaper said, Rosenfeldt himself charged $1 million on the firm’s credit card for personal items and charitable donations that he may have then used for tax deductions. For his part, the newspaper said, Rosenfeldt has denied any knowledge of the firm’s illegal activities and has blamed the scheme on Rothstein – who is cooperating with authorities – instead. “The A-bomb is Rothstein,” one expert told the newspaper. “Rothstein has cooperated. That could be monumentally hurtful or monumentally helpful to the partners. If he says they knew what was going on, then it’s game over.”

Tennessee Accountant Charged with Securities, Wire Fraud

8/20/2010 9:13:05 AM

Ernest E. Choat Jr., a Tennessee-based certified public accountant, has been accused of stealing money from trust funds that he was hired to oversee. Between September 2004 and May 2006, prosecutors say, Choat illegally withdrew assets from the trust funds and used the proceeds for his own personal expenses. He was arrested this week on 15 counts of securities fraud, 13 counts of wire fraud and three counts of engaging in monetary transactions in criminally derived property.

Illinois Day Trader Receives Eight-Year Prison Sentence

8/20/2010 8:49:26 AM

Kevin G. Carney, an Illinois businessman accused of fleecing investors by promising them remarkable returns, has been sentenced to eight years in prison on multiple felony charges. According to government prosecutors, Carney wooed his victims by offering them 20-percent returns on day trades using specially designed software that could detect the best time to buy and sell securities. However, prosecutors say, Carney never delivered those promised gains. He pleaded guilty this week to several different charges – including theft, securities fraud and financial exploitation of an elderly person – and now faces $1.3 million in restitution payments, as well as a lengthy prison term, as punishment for his crimes.

Leader of 'Clean Coal' Firm to Plead Guilty to Fraud Charges

8/20/2010 8:30:03 AM

Dorothy Geisler-Tragardh, a partner at a “clean coal” firm known as Praxis Resource, has agreed to plead guilty to fraud charges for scamming investors who sank millions into the energy company, the Associated Press reported. Geisler-Tragardh allegedly sold shares of Praxis for $56 apiece, the A.P. said, when they were only worth 30 cents instead. She raised an estimated $2.5 million from the stock-selling scheme, the A.P. said, and then allegedly spent some of the proceeds on a luxury waterfront home and Picasso artwork. She faces one year of home confinement and three years of probation, the A.P. said, and must pay $1.9 million in restitution to victims who lost money in the scam.

Trio to Spend Years in Prison for Long-Running Investment Scam

8/20/2010 8:02:41 AM

A federal judge this week ordered three members of a stock-fraud ring – Radcliffe Bent, Michael Berteletti and Alexander Klepach – to spend years behind bars for operating a multimillion-dollar scam that lasted for a decade. Brent served as the sole owner and COO of Covenant Consulting, the FBI says, a New York firm that claimed to specialize in venture capital funding but was actually just a shell corporation with no legitimate business operations. Together with his co-conspirators, the FBI says, Bent sold investors securities in Covenant and two other shell companies he controlled (Cambridge Berskshire Group and Crown Estates Development) even though he had previously been banned by securities regulators from engaging in such activities. Bertelleti worked as a New York stockbroker, the FBI says, who solicited investors for Covenant and helped Bent promote the stock of a now-defunct Florida company known as SavvyData. Klepach, a drug dealer currently serving a 78-month prison sentence on federal narcotics charges, helped launder money for the investment fraud. Bent and Berteletti pleaded guilty to fraud and money laundering charges, receiving prison sentences of 110 months and 60 months respectively. Klepach, who pleaded guilty to money laundering, has been sentenced to 60 months as well.

Prime Time Trio Banished from the Penny Stock Industry

8/19/2010 1:39:51 PM

Federal regulators have cracked down on three former insiders at Prime Time Group (which later became a microcap stock known as Hunt Gold) for alleged securities violations by banning them from future participation in penny stock offerings. According to the U.S. Securities and Exchange Commission, the trio – John A. Mattera, Troy K. Metz and Dallas L. Robinson – misled Prime Time investors by issuing bogus news about the company and its business operations. In addition, the SEC says, Mattera engaged in illicit “gypsy” stock trades that allowed him to transfer company shares to promoters who were touting the stock. The SEC has now ordered Mattera to disgorge $70,000 in illicit gains – and pay an equal sum in financial penalties – while permanently banning him from the penny-stock industry. Metz and Robinson must pay $25,000 apiece and face a five-year industry ban for their own involvement in the alleged scam.

Thompson Consulting Fined for Making Risky Investments

8/19/2010 12:47:10 PM

The U.S. Securities and Exchange Commission has sanctioned Thompson Consulting and its principles – Kyle J. Thompson, David C. Condie and E. Sherman Warner – for allegedly pushing hedge-fund clients into unsuitable investments. The defendants deviated from their public investment policies, the SEC says, when they used client funds for subprime mortgages and other risky securities. Ultimately, the SEC says, two hedge funds suffered almost total losses on those ill-advised investments. The SEC has now secured a formal judgment against Thompson Consulting itself, which must disgorge $400,000 in order to settle the agency’s charges.

Nebraska Broker Hit with Multimillion-Dollar Fine

8/19/2010 12:20:08 PM

Paula Turner, a registered broker based in Nebraska City, has been ordered to pay $4.5 million to former clients who lost money on unsuitable investments that she recommended to them, Dow Jones reported. According to the Financial Industry Regulatory Authority (FINRA), Dow Jones said, Turner served as part of an advisory firm that sold risky securities to 150 investors – many of them elderly clients from rural farming communities – by promising them big payoffs that never materialized. The group allegedly convinced investors to participate in private placements for two firms that later became PrimEdge, Dow Jones explained, a company that currently trades for a fraction of a penny a share. Turner must now repay her past clients, Dow Jones said, while her former colleagues – Rebecca Engle and Brian Schuster – face criminal charges for their own role in the alleged scam.

Connecticut Swindler to Spend More Than a Decade in Jail

8/19/2010 9:17:50 AM

Steven Gurnee, a Connecticut businessman who operated multiple financial firms, faces 12 years in prison after pleading “no contest” to multiple counts of larceny, forgery and securities fraud, The Day newspaper has reported. According to government authorities, the newspaper said, Gurnee fleeced one of his disabled clients and bilked other investors by selling them fraudulent securities. In addition to serving prison time, the newspaper said, Gurnee must repay his victims in full and refrain from serving as a broker or working in the securities industry. Originally arrested three years ago, the newspaper noted, Gurnee is scheduled to be formally sentenced this November for his crimes.

'In God We Trust' Leader Convicted of Wire Fraud

8/19/2010 6:38:56 AM

Byron Keith Brown, the CEO of several financial firms carrying the “In God We Trust” (IGT) name, has been convicted of fraud for operating a multimillion-dollar online investment scam. According to federal prosecutors, Brown raised $17 million from his clients and then used much of their funds to make Ponzi-like payments and purchase a fleet of luxury vehicles for himself. Based upon evidence presented during his three-week trial, Brown deceived investors in the following ways: portraying himself as an accomplished financial adviser when he had personally filed for bankruptcy in the past; claiming to run offices in major cities – including London, New York City and Washington, D.C. – when he actually operated out of a rented mailbox and a “virtual office” with phone-answering and mail-forwarding services; and using computer software that tricked investors into believing that they were viewing legitimate account information that in fact did not exist. Brown was found guilty this week of wire fraud and money laundering, felony charges that carry maximum prison terms of 20 years and 10 years apiece. He is scheduled to be formally sentenced this November for his crimes.

SEC Files Civil Fraud Charges against Jersey over Bond Sales

8/19/2010 6:15:06 AM

Taking aim at a state for the first time ever, The Wall Street Journal reported, the U.S. Securities and Exchange Commission this week filed civil fraud charges against New Jersey for allegedly misleading investors when raising billions of dollars for its underfunded pension plans. According to the SEC, the Journal said, New Jersey overstated the health of its two largest pension plans -- the $34 billion Teachers’ Pension and Annuity Fund and the $28 billion Public Employees’ Retirement System – when selling bonds to investors seeking safe, tax-free returns. The state settled the case without admitting the charges or paying any financial penalties, the Journal said, but promised to set a strong example with full disclosures going forward. “New Jersey has never failed to pay a bond holder and never will,” a state official emphasized in the article. Moreover, the state “aims to have the best bond disclosure in the nation and will continue to strive to achieve that goal.” The SEC continues to investigate several other states, the Journal noted, which have also managed to raise huge sums by selling bonds despite their precarious financial condition.

Suspected Con Artist Indicted for Alleged Securities Fraud

8/18/2010 8:55:32 AM

Patrick Wiley, a suspected con artist from Detroit, has been indicted on securities fraud charges for allegedly stealing more than $300,000 from an out-of-state investor, the Associated Press reported. According to state prosecutors, the A.P. said, Wiley and alleged co-conspirator Darren Dobson convinced their victim to sink $45,000 into a bogus venture involving wealthy people in London. When the defendants failed to deliver promised returns on that investment, the A.P. said, they sought even more money from their victim to supposedly cover overseas trips aimed at recovering the lost funds. Wiley was formally indicted this week, the A.P. noted, while Dobson was indicted on similar charges six months ago.

Owner of Dawson Trading Accused of Ponzi Scheme

8/18/2010 8:36:32 AM

Joseph A. Dawson, the head of a suburban Chicago investment firm known as Dawson Trading, has been charged with operating a multimillion-dollar Ponzi scheme. Between 2004 and September of 2009, the FBI claims, Dawson raised $3.7 million from dozens of investors – including former clients of his “LEAP” fund – by selling them stakes in his investment firm and promising them up to 80% of any trading profits that the firm received. When doing so, the FBI says, Dawson misled his clients about both the safety of those investments and the profitability of his firm. He then used a significant portion of his clients’ funds for personal items, the FBI says, including a home, a swimming pool and three automobiles. He has formally been charged with wire fraud, which carries a maximum penalty of 20 years in prison and requires mandatory restitution payments.

Galleon Defendant Blames Past Love Affair for His Actions

8/18/2010 8:12:00 AM

Robert Moffat, a former IBM (NYSE: IBM) executive who once aspired to become the company’s next CEO, has blamed an “intimate” relationship with a key defendant in the Galleon Group insider trading case for his own role in the alleged scam, the Associated Press reported. According to new court documents, the A.P. said, Moffat supplied tips to Danielle Chiese – a former hedge fund manager accused of helping Galleon founder Raj Rajaratnam orchestrate a massive insider-trading scheme -- in an effort to impress her during their past love affair. Moffat claims that he never knew that Chiese would share that information with others, the A.P. said, and that he never aimed to profit from the illegal scam himself. He has asked to be sentenced to probation on securities fraud charges, the A.P. added, but federal prosecutors have requested a six-month prison term instead.

Cohmad Securities Sanctioned in Madoff-Related Investigation

8/18/2010 7:40:12 AM

State regulators have cracked down on Cohmad Securities, a now-defunct New York investment firm, for directing client funds into Bernard Madoff’s multibillion-dollar Ponzi scheme and then allegedly failing to cooperate with authorities who were investigating the case, The Boston Globe reported. Between 2001 and 2005, the Globe said, Cohmad allegedly generated $37.4 million – or 90% of its revenue – by collecting referral fees from Madoff and then allowed one of its brokers to destroy records documenting the convicted swindler’s bogus trades. Cohmad voluntarily surrendered its business license a year after Madoff’s scam came unraveled, the Globe said, but allegedly refused to cooperate with government authorities examining its role in the massive investment fraud. Regulators have now ordered Cohmad to provide a full accounting of all the clients that it referred to Madoff, the Globe said, while imposing a $200,000 fine against the shuttered firm as well.

Oklahoma Pair Could Face Life in Prison for Pumping Stocks

8/18/2010 7:08:29 AM

David Gordon and Richard Clark, two Oklahoma businessmen convicted of operating a $41.8 million “pump-and-dump” scheme, could face the equivalent of life in prison when they are formally sentenced this month for their crimes, StockWatch has reported. Prosecutors have recommended a 30-year jail term from Gordon, StockWatch said, a Tulsa attorney who would be 78 years old by the time that sentence came to an end. They have requested a much longer 255-year sentence for Clark, StockWatch said, who is already 62 and obviously would not live long enough to complete such a term. Gordon is hoping for a more lenient sentence of five to 10 years instead, StockWatch said, while Clark has requested an even lighter punishment of no more than six months in prison that could be served as home confinement. Earlier this year, StockWatch noted, both men were convicted of illegally pumping four different penny stocks – National Storm Management, Deep Rock Oil and Gas, Global Beverage Solutions and International Power Group – and then dumping their overpriced shares.

Convicted Felon Accused of Multimillion-Dollar Scam

8/17/2010 9:12:57 AM

Andrew S. Mackey, a New York businessman convicted on prostitution-related charges decades ago, has now been accused of stealing $10 million from 180 investors by promising them remarkable gains – of up to 700% annually – through a Ponzi scheme involving bogus loan warranties, Courthouse News Service reported. According to New York Attorney General Andrew Cuomo, the news service said, Mackey promised investors they could pay off their home mortgages on the cheap through a fraudulent warranty program involving big upfront payments and generous interest rates. “Your total out-of-pocket expenses after five years is only $109,960, and you now own a $200,000 home,” states an advertisement for the program cited by the news service. “That’s right! YOU FINANCED $200,000, BUT ONLY PAID BACK $109,960 … Please note the true beauty of this program.” The promises sure caught the attention of Cuomo, the news service observed, who has now accused Mackey and alleged co-conspirator Inger Jensen of orchestrating a multimillion-dollar Ponzi scheme.

Trio Arrested for Allegedly Operating Big Ponzi Scheme

8/17/2010 8:38:11 AM

FBI agents have arrested three people – Alan Flesher, Wayne Flesher and Nancy Khalial – suspected of running a $26 million Ponzi scheme that fleeced hundreds of investors from across the country, the Associated Press reported. According to a grand jury indictment, the A.P. said, the trio convinced 700 people to invest in so-called “ad toppers” – or advertisements featured on ATMs, gas pumps and vending machines – and then used most of the money on personal expenses instead. Two of the defendants have been released on bail, the A.P. said, while the third – Wayne Flesher – still remained in government custody at press time.

Businessman Pleads Guilty in Paradigm Stock Fraud Case

8/17/2010 8:19:33 AM

Daniel O’Riordan, the former leader of Paradigm Tactical Products, pleaded guilty last week to securities fraud for making false statements regarding the sale of stock in his company several years ago, The Boston Globe reported. O’Riordan allegedly filed papers for a fictitious private placement, the newspaper said, and then sold the stock – pumped up by bogus press releases – on the open market instead. He could face up to 20 years in prison and $5 million in fines, the newspaper said, when he is formally sentenced for his crimes.

Guilty Plea Anticipated from 'Mobster' Outed by Rothstein

8/17/2010 8:05:10 AM

Roberto Settineri, a suspected mobster exposed by convicted Ponzi scheme operator Scott Rothstein, is expected to plead guilty next week to obstruction of justice and money laundering charges, the Associated Press reported. Settineri was arrested in a government sting targeting alleged Mafia figures earlier this year, the A.P. said, after he shared incriminating information with Rothstein during secretly recorded conversations. Settineri originally pleaded not guilty to the government’s charges in March, the A.P. said, but he recently filed court documents indicating that he now plans to plead guilty instead. Meanwhile, the A.P. noted, Rothstein is already serving a 50-year prison sentence as punishment for his own crimes.

Convicted Ponzi Scheme Operator Could Face Life in Prison

8/17/2010 7:42:52 AM

Dennis Bolze, a Tennessee businessman convicted of operating an elaborate Ponzi scheme, could face the equivalent of life in prison if government prosecutors get their way, The Knoxville News Sentinel reported. According to court documents, the newspaper said, Bolze raised $21.58 million from investors – many of them “financially vulnerable or unsophisticated” – and then used most of that money to cover Ponzi-like payments and finance his own personal expenses. He pleaded guilty to wire fraud and money laundering under an agreement with government authorities, the newspaper said, who are now seeking a stiff penalty – at the high end of recommended guidelines – as punishment for his crimes. Already 60, the newspaper noted, Bolze could spend the rest of his life in prison under a proposed recommendation that calls for him to serve 27 years to 33 years behind bars. A federal judge is scheduled to formally sentence Bolze next week, the newspaper added, and has already indicated that he favors a lengthy prison term as well.

Former Zoltek CFO Accused of Accounting Fraud by SEC

8/16/2010 7:41:54 AM

The U.S. Securities and Exchange Commission has sanctioned Kevin J. Schott, the former CFO of Zoltek (Nasdaq: ZOLT), for allegedly violating accounting rules by arranging secret payments to an outside consulting firm several years ago. According to the SEC, Schott orchestrated the unauthorized payments and then concealed them from the company and the outside auditors hired to review its books. As a result, the SEC says, Schott caused Zoltek to issue misleading financial statements and then certified those filings himself. Without admitting or denying any wrongdoing, Schott has agreed to pay a $20,000 fine in order to settle the SEC’s charges.

Alleged Boiler Room Operators Sanctioned in Penny Stock Case

8/16/2010 7:38:13 AM

Edward M. Denigris and William Dyer, the suspected leaders of a “boiler room” operation, have been ordered to pay more than $1 million in restitution and penalties for allegedly defrauding investors who purchased shares in a penny stock known as Amante Corp. From May 2008 to October 2009 – when regulators cracked down on the suspected scam – the defendants allegedly sold millions of dollars worth of Amante stock by falsely claiming that the shares were poised for incredible gains ahead of a bogus initial public offering. “There was no basis for the defendants’ statements about the high returns investors would realize on their investment in Amante stock because those statements were predicated on a fictitious IPO,” the U.S. Securities and Exchange Commission stated last fall. “And Amante has no current or future business prospects to support such an increase in its stock price.” Last week, the SEC secured a court order requiring the defendants to pay a combined $1.29 million in restitution and fines and barring them from participating in any offerings of penny stocks in the future.

Arizona Regulators Demand Restitution for Fraud Victims

8/16/2010 7:33:24 AM

The Arizona Corporation Commission has ordered MJG Enterprises and its two leaders, Marguerite Jeane Gerhart and Anthony Boscarino, to pay $4.6 million in restitution and penalties for allegedly misappropriating investor funds. According to state officials, the defendants defrauded more than 1,500 investors when posing as accomplished traders selling interests in oil wells and complex – but unregistered – securities. The defendants not only lacked experience trading in such securities, state officials say, but they also misused some of the investor funds they received. They must now return the $4.36 million they raised for their alleged investment scam and pay $250,000 in financial penalties as well.

Ordained Ministers to Repay Funds from Alleged Scam

8/16/2010 7:29:02 AM

Ron Mainse, an ordained minister who serves as a leader at Crossroads Christian Communications in Canada, has been ordered to repay $138,000 that he collected from a suspected multimillion-dollar Ponzi scheme, The Hamilton Spectator reported. Mainse received the payments as commissions from Gordon Driver, the newspaper said, who has been accused of running a $14 million Ponzi scheme involving almost 200 investors. David Rutledge, Mainse’s cousin and an ordained minister himself, has been ordered to repay $263,000 that he allegedly generated from the same investment scam, the newspaper said. Both men must pay financial penalties in addition to restitution, the newspaper added, and refrain from trading securities or serving as company officers down the road.

Alleged Ponzi Scheme Operator Hit with Fraud, Theft Charges

8/16/2010 7:24:57 AM

Robert L. Gallman, the suspected mastermind of a $1.5 million Ponzi scheme, has been arrested for allegedly engaging in theft and an organized scheme to defraud. According to government authorities, Gallman represented himself as a financial advisor offering safe investments with generous double-digit returns. After raising money from investors, however, Gallman allegedly used the funds to pay off earlier clients or finance his own personal expenses – including the purchase of various automobiles – instead. He has now been apprehended, following a year-long investigation into his alleged crimes.

Insiders at Heaven Investments Accused of Real Estate Fraud

8/16/2010 7:21:29 AM

Federal prosecutors have filed criminal charges against eight insiders at Heaven Investments, a California-based real estate firm, for allegedly orchestrating a multimillion-dollar financial scam. According to government authorities, the defendants raised more than $11.4 million from investors by promising them double-digit returns on safe real estate projects and then used the money for Ponzi-like payments and other purposes instead. They have now been charged with multiple counts of mail fraud and wire fraud, felonies that carry maximum prison sentences of 20 years apiece. The following Heaven Investment insiders were formally charged: CEO Akbar Bhamani; Vice Presidents Aly Khan Bhamani and Zainulabidin Akbar Bhamani; finance executives Laila Bhamani and Feroza Bhamani; operations director Ken Sarna; marketing director John Pierre Quintana; and loan officer Shaun Bhamani.

Apple Insider Faces Criminal Charges for Alleged Kickbacks

8/16/2010 7:16:33 AM

Paul Shin Devine, a California-based manager for Apple (Nasdaq: AAPL), has been indicted on multiple felony charges for allegedly taking kickbacks from foreign suppliers of iPhones and iPod accessories, the Associated Press reported. Devine allegedly received more than $1 million for providing confidential information to Asian Apple suppliers, the A.P. said, who then used that information to secure favorable contracts from the company. Devine was arrested on Friday, the A.P. said, on felony charges of wire fraud, money laundering and kickback violations.

Regulators Seek to Halt Suspected Oil and Gas Scam

8/13/2010 8:43:44 AM

The U.S. Securities and Exchange Commission is seeking to halt further investments in Northamerican Energy Group, an alleged oil-and-gas scam led by Houston-based Jon C. Ginder, and place a receiver in charge of the company’s assets. Between February 2008 and May 2010, the SEC says, the company and its leader fraudulently raised $3.5 million from more than 50 investors by promising them remarkable returns – of up to 40% -- on oil and gas wells with poor output and, in some cases, no recent production history at all. Ginder then used much of those funds for unauthorized purposes, the SEC says, with some of it going to an advertising campaign designed to lure even more victims into the scam. In addition, Ginder allegedly pocketed $1.3 million worth of illicit profits for himself. Going forward, the SEC plans to seek full restitution – plus penalties and interest – from Ginder and his firm.

Ex-Wall Street Brokers to Keep Bonuses Despite Convictions

8/13/2010 8:39:06 AM

Eric Butler and Julian Tzolov, two former brokers for big-name Wall Street firms, can hold onto their multimillion-dollar signing bonuses even though they failed to honor their contracts after being accused of securities fraud, The Wall Street Journal reported. Morgan Stanley (NYSE: MS) paid the two men $4.45 million worth of signing bonuses when hiring them away from Credit Suisse (NYSE: CS), the Journal said, where they had allegedly fleeced investors by selling them risky auction-rate securities. Morgan Stanley later accused the pair of fraudulently securing the big bonuses, the Journal said, and initiated arbitration proceedings in an effort to secure repayment of those funds. However, the Journal said, the Financial Industry Regulatory Authority recently sided with the brokers – without giving any reason – and allowed them to keep the bonuses instead. Both men have by now been formally convicted, the Journal noted, with Butler receiving a five-year prison term and Tzolov currently awaiting sentencing for his crimes.

New Zealand Ponzi Scheme Victims May Face Total Losses

8/13/2010 8:31:30 AM

Investors who sank almost $18 million into a suspected Ponzi scheme operated by New Zealand couple Mike and Jackie Bradley could face total losses, the New Zealand Herald reported, despite the recent sale of the pair’s multimillion-dollar mansion. A firm charged with liquidating the couple’s assets found no evidence that they had ever invested any client funds, the newspaper said, and discovered that their $4.7 million mansion carried a substantial mortgage that could limit any proceeds. Meanwhile, the newspaper said, the Serious Fraud Office could soon reach a decision about whether to charge the couple – credited by some with launching the country’s financial advice industry – with criminal misconduct as a result of their alleged investment scam.

Mortgage Loan Solicitor Accused of Illegal Home-Flipping Scam

8/13/2010 8:12:54 AM

Nuno J. Sousa, a New Jersey mortgage loan solicitor, faces fraud charges for allegedly scheming to fleece banks through a multimillion-dollar real estate scam. According to government prosecutors, Sousa located so-called “straw buyers” – some of them fictitious – to secure loans for overvalued foreclosed homes in an illegal house-flipping scheme. The straw buyers made no payments on those loans, prosecutors say, leaving mortgage lenders with massive losses as a result. Sousa was arrested this week on the following charges: first-degree conspiracy, first-degree money laundering, second-degree securities fraud and second-degree theft by deception. If convicted, Sousa could face up to 20 years in prison on the first-degree felonies and up to 10 years in prison on the second-degree crimes. An alleged co-conspirator, Genilza R. Nunes, was arrested six months ago on similar charges.

Jailed Money Manager Agrees to Plead Guilty to More Charges

8/13/2010 8:08:55 AM

Marcus Schrenker, a former money manager already serving time for faking his own death, has agreed to plead guilty to securities fraud for bilking investors – including members of his own family – out of more than $1 million, the Associated Press reported. Schrenker was sentenced to four years in prison last year, the A.P. noted, after he staged his death in a plane crash in an effort to escape from his financial problems. He could now face another 10 years in prison, the A.P. said, as a result of his actual investment scam.

Former CEO of MCSI Pleads Guilty to Securities Fraud

8/13/2010 8:05:29 AM

Michael E. Peppel, the former CEO of a now-defunct computer company known as MCSI, has pleaded guilty to fraud charges for artificially inflating the firm’s revenue in an effort to boost its stock price. Between January 2000 and April 2003, federal prosecutors claim, Peppel falsified MCSI’s financial results and then tried to conceal proceeds from the scheme by transferring millions of dollars between his personal banking accounts. A former Nasdaq-traded company with more than 1,300 employees, MCSI wound up filing for bankruptcy at the end of the scam. Peppel pleaded guilty this week to one count each of conspiracy, securities fraud and money laundering. He could face up to 20 years in prison when he is formally sentenced for his crimes. MCSI’s former CFO, Ira H. Stanley Jr., previously pleaded guilty to similar charges and is currently awaiting sentencing as well.

Convicted Felon Indicted for Suspected Investment Scam

8/13/2010 8:01:45 AM

Anthony Mark Boscarino, a convicted felon who ran an Internet-based sports-handicapping business known as Mike’s Lock Club, has been indicted on dozens of felony charges for allegedly fleecing investors and evading tax payments on his illicit proceeds. According to the FBI, Boscarino raised more than $7.68 million from investors for a “fictitious high-limit slot machine player who made regular trips to Las Vegas” and then diverted most of that money to his own casino accounts. After stealing millions from investors, the FBI says, Boscarino then failed to pay taxes on those funds and misled federal authorities who were investigating his actions. As a previously convicted felon, the FBI says, Boscarino also broke the law when purchasing three firearms and taking possession of those weapons. He has now been charged with the following felonies: 51 counts of wire fraud; 17 counts of money laundering; eight counts of mail fraud; and several counts of tax evasion and firearms violations. If convicted, Boscarino could face up to 20 years in prison for his crimes.

Head of N.J. Real Estate Firm Arrested on Fraud Charges

8/13/2010 7:57:27 AM

Eliyahu “Eli” Weinstein, the head of a New Jersey-based real estate firm, has been arrested for allegedly operating a $200 million investment scam targeting fellow Orthodox Jews. Beginning in 2005, the FBI says, Weinstein conspired with others to fleece Jewish investors by selling them interests in real estate properties with overstated values that – in many instances – he did not even own. He then used the proceeds for other purposes, the FBI claims, leaving investors and lenders with massive financial losses in the process. “Weinstein is charged with offering an array of lucrative investment opportunities that served the single purpose of fattening his wallet,” U.S. Attorney Paul Fishman stated. “It is always offensive when someone steals from others to finance his own luxurious lifestyle. But it is especially galling to exploit a community with whom one shares an inherent trust.” Weinstein has been formally charged with one count each of bank fraud and wire fraud, felonies that carry maximum prison sentences of 30 years and 20 years respectively. One of his alleged co-conspirators, Vladimir Siforov, has been charged with one count of wire fraud as well.

Mormon Insurance Agent Lands in Prison for Securities Fraud

8/13/2010 7:52:41 AM

R. Dean Udy, a Utah insurance agent who has held leadership positions within the Mormon church, is now sitting behind bars for allegedly fleecing his flock through a multimillion-dollar Ponzi scheme, the Standard-Examiner newspaper reported. Udy pleaded guilty to securities fraud charges stemming from the $20 million scam, the newspaper said, and has been ordered to serve between one year and 15 years in prison as punishment for his crimes. Udy and his son have also been charged with bank fraud, the newspaper added, and are scheduled to go on trial in that case later on this year.

Former ING Investment Broker Sentenced to 80 Months in Jail

8/13/2010 7:48:47 AM

Rhonda Breard, a former Seattle investment broker licensed by ING Financial Partners, has been sentenced to 80 months in prison for stealing more than $12 million from her clients over a 10-year span, The Seattle Times reported. Breard could have faced up to a decade in prison for committing mail fraud, the newspaper said, but received a lighter sentence due to her “admirable” cooperation with authorities seeking to identify and compensate the victims of her scam. ING has already repaid almost half of those victims in full, the newspaper noted, and is currently negotiating to repay the rest. During a court hearing this week, the newspaper said, Breard actually suggested that she deserved a harsher penalty instead. “I think I should get the maximum amount of years, personally,” Breard stated in the article. “I don’t feel like I deserve any breaks.”

Money Manager Pleads Guilty to Operating Ponzi Scheme

8/11/2010 8:01:43 AM

William Huber, the owner of an Illinois-based investment firm known as Hubadex, pleaded guilty this week to operating a long-running Ponzi scheme that cost its victims millions, the Naples Daily News reported. During a courtroom hearing on Tuesday, the newspaper said, Huber admitted that he raised $15 million for bogus investments and then spent some of that money on fancy homes and other personal expenses. “Huber lured investors into his scheme by touting his trading prowess,” a federal regulator stated in the article. “He fabricated his investment returns to collect performance fees he never earned in order to support his lavish lifestyle.” Huber pleaded guilty to mail fraud and money laundering, the newspaper said, and could face up to 20 years in prison when he is sentenced this December for his crimes.

Madoff 'Net Winners' Seek to Reverse Courtroom Setback

8/11/2010 7:37:39 AM

A lawyer representing clients who made money on Bernard Madoff’s multibillion-dollar Ponzi scheme has filed an appeal seeking to reverse a recent courtroom decision that would exclude them from recovering additional funds, Reuters reported. In a courtroom filing this week, Reuters said, a lawyer for so-called “net winners” in Madoff’s Ponzi scheme – or those who actually withdrew more money than they invested with the convicted con man – argued that her clients, like other Madoff victims, should be entitled to restitution payments provided by the U.S. Securities Investor Protection Corp. Attorney Helen Chaitman portrayed many of those investors as elderly victims, Reuters said, who have already spent their previous gains and still need money for medical care. “When customers’ statements show the purchase of real securities, the customers have a legitimate expectation that they own those securities’ positions,” Chaitman stated in the article. “And SIPC has an obligation to insure those positions, up to $500,000 in replacement securities.” Madoff spent decades fleecing investors through his record-breaking $65 billion Ponzi scheme, Reuters noted, before pleading guilty to fraud charges in 2009 and receiving a 150-year prison sentence for his crimes.

California Brokers Arrested for Alleged Securities Fraud

8/10/2010 9:34:24 AM

Leesa Marie Ward, the owner of California-based Ward Real Estate Brokerage & Foreclosure Services, has been arrested and charged with numerous felonies for allegedly bilking investors through a multimillion-dollar house-flipping scam, The Record newspaper reported. According to government prosecutors, the newspaper said, Ward and two of her assistants – Alison Ann Jensen and Sharon Lee Graham – stole $4.5 million from dozens of investors by promising them generous returns on refurbished homes and then failing to make those payments. Prosecutors have filed 46 felony charges against Ward and Jensen, the newspaper said, while setting their bail at $3 million apiece. They have filed 10 related charges against Graham, the newspaper said, who is expected to surrender to authorities by next week.

Regulators File Charges against Former CFO of Skin-Care Firm

8/10/2010 7:21:24 AM

Federal regulators this week filed civil fraud charges against Karl Redekopp, the former CFO of International Commercial Television (OTC: ICTL.PK), for allegedly overstating the company’s sales of anti-aging products promoted through infomercials on the Home Shopping Network. According to the U.S. Securities and Exchange Commission, Redekopp fraudulently reported ICTV’s sales of “Derma Wand” wrinkle-reduction appliances when “the products still sat unsold in the company’s warehouse.” By doing so, the SEC says, Redekopp allowed ICTV to transform millions of dollars worth of company losses into bogus profits instead. “Redekopp violated fundamental principles of accounting to fraudulently boost ICTV’s bottom line and conceal its true financial health from investors,” the SEC stated. “Unfortunately, ICTV’s auditors turned a blind eye to the company’s financial irregularities and failed to fulfill their role in investor protection.” The SEC has filed charges against ICTV’s auditors – Steven H. Dohan, Nancy L. Brown and Erez Bahar – and the company itself as well.

SEC Fines Penny Stock Promoter and Bans Him from Industry

8/10/2010 6:47:17 AM

The U.S. Securities and Exchange Commission has ordered Jason M. Genet, an Arizona-based penny stock promoter, to pay more than $2.5 million for his alleged participation in “an elaborate stock-manipulation scheme” involving shares of a now-defunct company called China Energy Savings Technology. According to the SEC, Genet “played a crucial role” in an “illegal pump-and-dump” scheme that artificially inflated the company’s shares before they were delisted in late 2006. Genet personally pocketed more than $1.7 million from the scheme, the SEC says, and must now return that full amount – plus another $800,000 in interest and penalties – as a result of his alleged misconduct. In addition, Genet may not participate in any penny-stock offerings for the next five years. Several codefendants in the case have previously fielded similar punishments for their involvement in the alleged scam as well.

Merck under Investigation for Possible Bribery Violations

8/10/2010 6:13:16 AM

Merck (NYSE: MRK), one of the world’s largest drug manufacturers, has fielded inquiries from the U.S. government about possible bribes paid by the company for business overseas, The New York Times reported. In a regulatory filing issued this week, the Times said, Merck disclosed that both the U.S. Department of Justice and the U.S. Securities and Exchange Commission had sent the company letters seeking “information about activities in a number of countries and reference the Foreign Corrupt Practices Act.” Like many giant drug makers, the Times noted, Merck relies on emerging markets – such as China, Russia and India – as key sources of growth. For its part, the Times added, Merck has portrayed the inquiry as part of a broader industry review while saying that it operates a compliance program designed to ensure that the company adheres to anti-bribery laws.

Whistleblower Awards Could Spark Surge in SEC Complaints

8/9/2010 7:25:15 AM

The U.S. Securities and Exchange Commission expects to see a dramatic rise in fraud tips from corporate insiders, the Irish Times reported, thanks to generous new rewards offered under sweeping Wall Street reforms. Going forward, the newspaper said, tipsters will receive 10% to 30% of any recoveries secured through regulatory sanctions or securities lawsuits resulting from their assistance with such cases. With handsome seven-figure bounties now possible, the newspaper said, the SEC is already preparing for a significant response. “We already have systems in place, which we’re improving, for dealing with thousands of tips every year,” an SEC official told the newspaper. “If this can help us bring cases more efficiently and quickly, it will make us a more effective regulator.”

Accountant Surrenders License for Involvement in Scam

8/9/2010 7:20:56 AM

Mark S. Riddle, a Tennessee-based certified public accountant, has been forced to surrender his professional license as punishment for his involvement in a multimillion-dollar Ponzi scheme. Riddle served as the CPA for Robert McLean, who killed himself a day before his scheduled appearance at a 2007 bankruptcy hearing tied to the big investment scam. McLean allegedly spent client funds on charity donations and luxury items, such as homes and automobiles, before the alleged scheme came unraveled. Riddle has been ordered to serve six years of probation, while forfeiting his CPA license, for his own role in the scam.

Defendant Escapes Prison Time in New York Ponzi Scheme Case

8/9/2010 7:16:29 AM

Lorenzo Altadonna, a registered representative for New York-based Watermark M-One Financial, has avoided prison time for his involvement in a multimillion-dollar Ponzi scheme by agreeing to testify against others connected to the scam, the Buffalo News reported. Altadonna admitted that he kept recruiting investors for M-One Financial, the newspaper said, even after realizing that the firm was fleecing its clients through illegal activities. He pled guilty to securities fraud in April, the newspaper said, and agreed to testify against Guy W. Gane – the alleged ringleader of the scam – and two other defendants, attorney James F. Lagona and consultant Ian Campbell Gent, who also worked for the firm. Altadonna could have faced up to 20 years in prison for his own involvement in the scam, the newspaper noted, but wound up with a much lighter sentence of just three years’ probation instead. However, the newspaper added, Altadonna has been ordered to make $1.8 million in restitution payments to his clients as well.

Gambler to Seek Restitution Payments at the Poker Table

8/9/2010 7:12:17 AM

Samuel McMaster Jr., a former insurance agent accused of bilking elderly investors, hopes to repay his victims with potential winnings at the poker table, The Independent has reported. Last week, the newspaper said, a federal judge agreed to allow McMaster – a professional poker player – to participate in an upcoming poker tournament in an effort to recoup funds he stole from investors for past gambling activities and other personal expenses. McMaster has been ordered to repay his victims almost $500,000, the newspaper noted, through monthly payments of at least $7,500 apiece. If he falls behind on his payments more than once, the newspaper added, he faces immediate sentencing on multiple felony charges. McMaster recently pleaded guilty to securities fraud, the newspaper said, and could spend up to 12 years in prison for his crimes.

Seller of Suspicious Timeshare Leases Ordered to Pay Millions

8/9/2010 7:08:21 AM

Richard E. Riner and his Texas-based firm, Southwest Income Marketing, have been ordered to pay more than $4 million in restitution and penalties for allegedly participating in a massive investment scam involving bogus timeshare leases. Between 1999 and 2005, the U.S. Securities and Exchange Commission says, Riner helped Michael E. Kelly – the suspected ringleader of the alleged financial scam – raise $428 million by selling timeshare investments in Cancun hotels with the promise of generous returns. Riner and other unregistered sales agents then pocketed more than $72 million in undisclosed commissions, the SEC says, while using money from new clients – rather than proceeds from bogus timeshare leases – to pay off earlier investors. Riner has been ordered to pay $3.94 million in restitution and interest, plus $120,000 in civil penalties, as a result of his alleged misconduct. Meanwhile, the SEC continues to pursue similar cases against other defendants involved in the alleged scam.

California Investment Adviser Accused of $10 Million Scam

8/9/2010 7:01:55 AM

Richard H. Nickles, the head of California-based Innovative Advisory Services, faces fraud charges for allegedly operating a multimillion-dollar Ponzi scheme that left two dozen victims – many of them elderly – with massive financial losses. According to federal prosecutors, Nickles solicited clients by running newspaper ads promising guaranteed returns on low-risk bonds and then used the proceeds for Ponzi-like payments and investments in much riskier securities. Nickles collected more than $10 million from his victims, prosecutors say, who lost an estimated $6.2 million in the illegal scam. He was formally charged with mail and securities fraud last week, less than a month after he was arrested and placed in custody for his alleged crimes.

Head of First United Funding Charged with Fleecing Banks

8/9/2010 6:57:31 AM

Corey N. Johnston, the owner of Minnesota-based First United Funding (FUF), has been slapped with felony charges for allegedly fleecing multiple banks through an $80 million Ponzi-like scheme and than failing to pay taxes on the proceeds from his elaborate scam. With Johnston serving as its leader, federal prosecutors say, FUF sold loans to various banks and then sold the same loans to other financial institutions as well. For example, prosecutors say, FUF sold two loans worth a combined $15 million to Western National Bank and later solicited more than $45 million from other banks for those same notes. Johnston allegedly used the proceeds from new loans to pay off older loans, following the pattern seen in classical Ponzi schemes, while using some of the money for personal expenses without paying taxes on the funds. He has been charged with bank fraud and filing false tax returns, felonies that carry maximum jail terms of 30 years and three years respectively.

SEC Punishes Navistar Insiders for Alleged Accounting Games

8/6/2010 9:31:13 AM

The U.S. Securities and Exchange Commission has sanctioned more than half a dozen Navistar (NYSE: NAV) insiders – including current CEO Daniel C. Ustian and former CFO Robert C. Lannert – for allegedly overstating the company’s financial results during a five-year period ending in 2005. Under the terms of a settlement inked this week with the SEC, Ustian and Lannert must return $2.37 million worth of stock and cash that they received as bonuses when the alleged fraud occurred. The SEC has also banned Mark T. Schwetschenau, the company’s former controller, from practicing before the commission for a one-year period as a result of his participation in the alleged scam. The SEC has levied the following financial penalties against Navistar insiders as well: James W. McIntosh, $150,000; Thomas M. Akers, $100,000; James J. Stanaway, $50,000; and Ernest A. Stinsa, $25,000.

SpongeTech Leaders Formally Indicted for Securities Fraud

8/6/2010 9:03:56 AM

Steve Moskowitz and Michael Metter, the former leaders of SpongeTech Delivery Systems (OTC: SPNG.PK), were formally indicted this week for allegedly orchestrating an elaborate pump-and-dump scheme, the New York Post has reported. Both executives are accused of fabricating revenue for SpongeTech, the Post said, in order to inflate the company’s revenue and the price of its heavily traded penny stock. They were indicted Wednesday on multiple felony charges, the Post said, including securities fraud, conspiracy to commit money laundering and perjury.

British Executive Jailed for Involvement in Huge Scam

8/6/2010 8:50:45 AM

William “Bill” Godley, the former head of international sales for Imperial Consolidated Group, has been sentenced to three-and-a-half years in prison for his involvement in one of the biggest Ponzi schemes in the history of the United Kingdom, the Daily Mail reported. From 1998 to 2002, the newspaper said, Godley allegedly helped Imperial carry out a $200 million scam that left almost 3,000 investors – including Hollywood celebrity Wesley Snipes and some professional athletes – with massive losses. Godley originally pleaded guilty to fraud charges several years ago, the newspaper noted, but saw his sentencing postponed until criminal trials against Imperial directors Jared Brook and Lincoln Fraser came to an end. Both Brook and Fraser were cleared of fraud charges earlier this year, the newspaper added, when two juries failed to reach verdicts after lengthy courtroom trials.

Former eContent President Headed to Prison for Fraud

8/6/2010 8:01:14 AM

John P. Sgarlat, the former president of a penny-stock company known as eContent, has been sentenced to 66 months in prison on fraud and money laundering charges. According to federal prosecutors, Sgarlat illegally issued eContent stock to pay so-called consultants who never provided any services to the company. In addition, prosecutors say, Sgarlat sold more than 435,000 shares of his own eContent stock to a stock promoter who engaged in fraudulent promotional activities. Sgarlat also participated in a separate money laundering scheme, prosecutors say, by collecting funds from victimized investors and then depositing the money in a secret account so that he could avoid paying taxes on the income. In addition to prison time, Sgarlat faces restitution payments of $1.5 million and tax penalties of more than $300,000.

SEC Takes Aim at Financial Firm Over Suspected Ponzi Scheme

8/5/2010 9:47:46 AM

The U.S. Securities and Exchange Commission has filed court papers seeking to shut down C.J.’s Financial, a Detroit-area investment firm, for operating a suspected Ponzi scheme, the Associated Press reported. According to the SEC, the A.P. said, CJ’s leader Candice Campbell raised more than $1 million from investors by promising them 10% monthly returns that were “too good to be true.” Campbell allegedly used only a small portion of that sum to make actual investments, the A.P. said, while spending most of it on personal items – such as vacations, cars and laser surgery – instead.

Former Insurance Agent Pleads Guilty to Securities Fraud

8/5/2010 9:31:50 AM

Samuel A. McMaster, a former Albuquerque insurance agent, pleaded guilty this week to fleecing 20 of his clients through a $500,000 investment scam. While running Santa Fe Financial Group, prosecutors say, McMaster solicited investors by promising them generous interest rates on promissory notes and certificates of deposit and then used their money for other purposes instead. He pleaded guilty on Wednesday to 26 felonies, including securities fraud and selling unregistered securities, and now faces up to 12 years in prison for his crimes.

'Boiler Room' Operators Face Charges over Suspected Scam

8/5/2010 9:19:27 AM

Six men connected to a suspected California “boiler room” face civil fraud charges for allegedly bilking investors through a multimillion-dollar green energy scam. Between early 2008 and February of 2009, the U.S. Securities and Exchange Commission says, the owners and sales force at Kensington Resources raised $11 million from 200 investors buying unregistered shares in American Environmental Energy (OTC: AEEI.PK) and then kept most of the proceeds for themselves. Those charged include the following: Kensington leaders Joseph R. Porche and Larry R. Crowder; and Kensington salesmen Konrad C. Kafarski, Carlton L. Williams, Gary K. Juncker and Dale J. Engelhardt. Two of the defendants, Crowder and Engelhardt, are repeat offenders sanctioned for violating securities laws in the past.

SEC Demands Millions in Case Involving Hoax Buyout Deals

8/5/2010 8:54:45 AM

The U.S. Securities and Exchange Commission has ordered the estate of Hazem Al-Braikan, a deceased financial adviser from Kuwait, to return all of the illicit profits he generated by fabricating news of buyouts involving two companies – Harman International Industries (NYSE: HAR) and Textron (NYSE: TXT) – and then selling their stocks after they soared on the announcements. Al-Braikan allegedly carried out his scam last year, triggering charges by the SEC, and has died since that time. His estate has now agreed to pay more than $2.5 million to settle the case, while his former employer and another financial firm – whose clients profited from the alleged scam – will disgorge $3.6 million in illicit gains as well.

Deacon Faces 270 More Charges for Alleged Investment Scam

8/5/2010 8:24:19 AM

Harrison Jones, a Florida deacon suspected of fleecing church members and other investors, was arrested this week on 270 new felony charges for his alleged operation of a multimillion-dollar investment scam, The News Herald reported. While running the Financial Planning Center, the newspaper said, Jones allegedly raised up to $6 million for investments in fast-food restaurants and then used the money for Ponzi-like payments and his own personal expenses instead. Jones was originally arrested in June on several grand theft charges, the newspaper said, but has now been charged with the following felonies as well: 106 counts of securities fraud; 56 counts of securities sales by an unregistered dealer; 55 counts of selling unregistered securities; 38 additional counts of grand theft; 14 counts of grand theft from a person 65 years of age or older; and one count of engaging in an organized scheme to defraud. If convicted, the newspaper said, Jones could spend decades in prison as punishment for his alleged crimes.

Suspected Ponzi Schemer Now Charged in Bank Fraud Case

8/5/2010 7:58:57 AM

Luis Felipe Perez, a Florida businessman already accused of operating a $40 million Ponzi scheme, now faces fresh charges for his alleged involvement in a bank loan scam. According to federal prosecutors, Perez conspired with two other defendants – accountant Berta Sanders and Wachovia loan officer Richard Garcia – to fleece Wells Fargo (now Wachovia) by securing millions of dollars worth of fraudulent loans. Perez allegedly recruited borrowers and referred them to Sanders, who worked together with Garcia to prepare fraudulent loan applications that went on to win approval. The trio sought a total of $12 million from the bank, prosecutors say, which suffered $10 million in losses as result of the scam. All three men have now been charged with conspiracy to commit bank fraud, while Garcia has been charged with six counts of receiving gifts to procure loans as well.

Former Deloitte Vice Chairman Sanctioned for Insider Trading

8/5/2010 7:32:50 AM

Thomas P. Flanagan, the former vice chairman of clients and markets at Deloitte and Touche, has been ordered to pay more than $1 million to settle charges that he profited by trading in the stocks of companies hired by his accounting firm based on inside information. Between 2005 and 2008, the U.S. Securities and Exchange Commission says, Flanagan traded in the securities of multiple Deloitte clients – including Best Buy (NYSE: BBY), Sears (Nasdaq: SHLD) and a company acquired by Walgreen (NYSE: WAG) – with advance knowledge of material information about their financial results and/or acquisition plans. Flanagan also allegedly shared tips with his son Patrick T. Flanagan, who traded on that nonpublic information as well. All told, the SEC estimates, the Flanagans pocketed almost $500,000 in profits from their illicit transactions. They must now pay a combined $1.1 million, with the elder Flanagan responsible for almost all of that, in order to settle the agency’s charges.

Government Seeks More Assets from Former Madoff Assistant

8/4/2010 11:32:53 AM

Federal prosecutors are demanding more assets from Annette Bongiorno, a longtime aide to convicted Ponzi scheme operator Bernard Madoff, as they seek to recover funds for victims of the multibillion-dollar scam, Reuters has reported. In court filings this week, Reuters said, government authorities ordered Bongiorno to deliver more than $5.1 million worth of assets – up from $2.7 million previously – that were allegedly purchased with money generated from Madoff’s $65 billion Ponzi scheme. Specifically, Reuters said, prosecutors are now seeking control of two Bongiorno-owned homes and a Mercedes Benz.

Currency Trader Sentenced to Prison on Wire Fraud Charges

8/4/2010 11:02:12 AM

Darren Lee Shanks, a Utah-based currency trader, was sentenced to federal prison this week for fleecing investors through a Ponzi-like scheme, the Associated Press reported. According to government prosecutors, the A.P. said, Shanks convinced investors that he was an accomplished currency trader – racking up monthly gains of up to 16% -- and then stole $1.7 million of their funds. He has been convicted of wire fraud, the A.P. noted, and has been ordered to serve more than three years in prison as punishment for his crimes.

Ponzi Scheme Operator to Spend Four Years behind Bars

8/4/2010 10:46:53 AM

Kevin Halverson, a Washington businessman accused of operating a scam involving tickets to the Super Bowl and other major events, has been sentenced to more than four years in prison as punishment for his crimes, the Associated Press reported. According to court records, the A.P. said, Halverson courted investors by claiming he could buy and resell event tickets at a generous profit and then used their money to make Ponzi-like payments and cover his own personal expenses instead. He pleaded guilty to felony charges in May, the A.P. said, and has been ordered to pay more than $7.6 million in restitution to the victims of his scam.

Genesis Founder Sentenced to Prison on Tax Evasion Charges

8/4/2010 10:29:04 AM

John S. Lipton, a founder of the controversial Genesis Fund, has been sentenced to 70 months in prison for defrauding the government and failing to pay taxes on income generated from a suspected Ponzi scheme. According to federal authorities, Lipton conspired with other Genesis insiders to operate a multimillion-dollar Ponzi scheme and then conceal the scam from authorities by moving it offshore. Lipton pleaded guilty to tax violations in April, while three other defendants in the case – Richard B. Leonard, Victor H. Preston and Teresa R. Vogt – have entered guilty pleas as well. Four remaining defendants face trial on similar charges next year.

Former Policeman Sentenced to 10 Years for Ponzi Scheme

8/4/2010 9:41:23 AM

Donald C. Lacey, a former Virginia police officer, has been sentenced to 10 years and one month in prison for bilking at least 70 investors – including his own relatives and friends – through a $10 million Ponzi scheme, the Associated Press reported. According to federal prosecutors, the A.P. said, Lacey courted his victims by promising them generous returns on a house-flipping business and then used their money to make Ponzi-like payments and finance his own lavish lifestyle instead. Lacey pleaded guilty in March to mail fraud and engaging in unlawful monetary transactions, the A.P. said, and had hoped for a lenient sentence – below that recommended under federal guidelines – this week. A federal judge denied that request on Tuesday, the A.P. noted, agreeing with federal prosecutors that Lacey had carried out a “devastating” crime. Lacey faces another courtroom hearing in September, the A.P. added, when the judge will determine how much restitution he must pay.

Fair Finance Trustee Offers Little Hope for Recovering Lost Funds

8/3/2010 9:15:22 AM

The trustee seeking recoveries for investors in Ohio-based Fair Finance this week estimated that one of the firm’s owners – Timothy Durham – blew threw $54 million in client funds, the Akron Beacon Journal reported, and offered little hope that he can recover that huge pile of cash. Based on forensic accounting evidence, the newspaper said, Durham spent millions on (among other things) the following: real estate and interior decorating; gambling and resort vacations; paintings by Picasso, Renoir and other famous artists; and dozens of luxury vehicles. In addition, the newspaper said, Durham’s firm allegedly diverted $11 million to Dan Laiken – the former head of National Lampoon – before he was charged with alleged securities fraud. Although court records indicate that government authorities have investigated Fair Finance as a possible Ponzi scheme, the newspaper said, they have so far filed no criminal charges against Durham or others connected to the firm.

FINRA Cracks Down on Rising Number of Investment Scams

8/3/2010 8:38:12 AM

The Financial Industry Regulatory Authority (FINRA) has been cracking down on a rising number of Ponzi schemes and other investment scams that target yield-hungry investors with promises of generous returns, Reuters reported. Due to the “razor-thin” interest rates being paid on traditional investment vehicles, Reuters said, swindlers have managed to lure growing crowds of victims – including elderly retirees – into financial scams offering remarkable payouts that are too good to be true. As a result, Reuters said, FINRA recently issued a warning about high-yield investment programs promising quick double-digit and even triple-digit returns. “We’re seeing a steady number of cases coming in,” FINRA stated in the article. And “we have a number of these cases under investigation. As we’ve gone into an economic decline, it has helped bring more of these schemes to light.” 

Financial Adviser Sanctioned for Allegedly Bilking Investors

8/3/2010 8:06:53 AM

The U.S. Securities and Exchange Commission has cracked down on Gregory Todd Froning, a Texas-based financial adviser, for allegedly misappropriating more than $800,000 in client funds. Between 2005 and 2009, the SEC says, Froning sold investments in his now-defunct financial firm and then funneled that money into his own banking account. He used the proceeds for personal expenses, the SEC says, such as adult entertainment and retail purchases over the Internet. Under a proposed settlement, the SEC has arranged to ban Froning from the industry and seek financial penalties against him going forward.

Ex-Controller Pleads Guilty to Embezzlement, Tax Charges

8/3/2010 7:36:03 AM

Franklin R. Derochemont, the former controller of a construction company founded by anti-government figure Ralph Hughes, has pleaded guilty to embezzling millions of dollars from the firm and then failing to pay taxes on that income, the St. Petersburg Times reported. While working as a finance executive at Cast-Crete (formerly known as Florida Engineered Construction Products), the newspaper said, Derochemont allegedly stole more than $5.3 million from the company by submitting phony invoices to an unnamed accountant and then accepting kickbacks from his accomplice. Derochement then proceeded to materially understate his income during his final years at the firm, the newspaper said, which was established by an anti-tax crusader (who died in 2008) and allegedly failed to pay $300 million in taxes itself. Under the terms of his plea deal, the newspaper said, Derochemont has agreed to forfeit his ill-gotten gains and cooperate with government authorities involved in related investigations. He will be formally sentenced within the next three months, the newspaper added, and could face up to 20 years in prison for his crimes.

Insurance Agent Sentenced to Seven-Plus Years for Fraud

8/3/2010 7:05:03 AM

Lavern Huelsmann, an Illinois-based insurance agent, has been sentenced to 87 months in prison for operating a financial scam targeting elderly investors. While running Senior Retirement Services, prosecutors say, Huelsmann raised almost $2 million from his clients and then used the money to make Ponzi-like payments and cover his own personal expenses. Specifically, prosecutors say, Huelsmann improperly spent client funds on the following: building and decorating his Illinois residence; gambling; and financing his personal investments and unrelated business ventures. He has been ordered to pay his victims $1.82 million in restitution.

Ex-Crossfire Energy Manager Settles Insider Trading Charges

8/2/2010 8:07:26 AM

Vernon Arnold Krikke, a former manager at Crossfire Energy Services, has paid $80,000 to settle charges that he engaged in illegal insider trading when selling the company’s stock. According to the Alberta Securities Commission, Krikke knew that Crossfire faced serious financial difficulties when he sold 314,500 shares of stock shortly before the company was placed into receivership in early 2008. Krikke escaped $48,880 in losses by selling his stock, the ASC said, but wound up repaying that entire amount – in addition to more than $30,000 in penalties – as a result of his misconduct.

Past Newpark Resources CFO Sanctioned for Alleged Fraud

8/2/2010 8:01:28 AM

Matthew W. Hardey, the former CFO of Newpark Resources (NYSE: NR), has been ordered to pay $75,000 and barred from serving as an officer or director of any publicly traded company for allegedly cooking Newpark’s books back in the early 2000s. According to the U.S. Securities and Exchange Commission, Hardey conspired with two other defendants – L. Cyrus DeBlanc, a former Newpark subsidiary CFO, and Quality Mat President Joe E. Penland – to record bogus transactions that allowed Newpark to avoid writing off more than $4 million in aging debt. In addition, the SEC says, Hardey misled Newpark’s outside auditors about the nature of those transactions. The SEC has already fined Hardey’s codefendants, while implementing an officer-and-director bar against DeBlanc as well.

Jailed Minnesota Businessman Seeks New Trial in Ponzi Case

8/2/2010 7:57:26 AM

Tom Petters, a Minnesota businessman convicted of operating a $3.65 billion Ponzi scheme, is seeking a new trial that will allow him to share previously blocked evidence against his accusers in a more neutral setting outside of his home base, Reuters has reported. In a courtroom brief filed on Friday, Reuters said, Petters asked an appeals court for a fresh trial so he could present evidence against some of his accusers – including one involved in the witness protection program – who testified against him in his original case. “His accusers … were amongst the most prolific liars, forgers and con artists in recent memory,” Petters’ attorneys stated in the article. “By their own admission, they conned most everyone they contacted for more than a decade. One of them was secretly in the federal witness security program because of his long record of committing similar grandiose frauds.” Sentenced this April to 50 years in prison, Reuters noted, Petters has consistently maintained that he never knew about the massive fraud being orchestrated by his own company.

Former New Century Executives Fined over Subprime Reserves

8/2/2010 7:53:01 AM

Three ex-leaders at New Century Financial – former CEO Brad Morrice, CFO Patti Dodge and Controller David Kenneally – must pay almost $1.5 million in financial penalties to settle charges that they misled investors about the company’s subprime mortgage business. According to the U.S. Securities and Exchange Commission, the defendants engaged in fraudulent accounting practices that caused New Century to understate its subprime loan repurchase obligations and materially overstate its financial results. Without admitting or denying wrongdoing, the defendants have agreed to pay the following amounts in order to settle the SEC’s charges: Morrice, $791,345; Dodge, $550,000; and Kenneally, $182,500.

N.Y. Mets Owner Faces Lawsuit over Madoff-Related Losses

8/2/2010 7:47:59 AM

New York Mets owner Fred Wilpon and his investment firm, Sterling Equities Associates, have been hit with a lawsuit over losses suffered by Sterling employees in Bernard Madoff’s multibillion-dollar Ponzi scheme, Reuters has reported. According to the complaint, Reuters said, Sterling invested more than $16 million – or 92% of its 401(k) retirement assets – in Madoff’s massive scam. The lawsuit seeks class-action status, Reuters said, covering hundreds of Sterling 401(k) plan participants who lost their retirement savings as a result of Madoff’s record-breaking fraud.

Charges Filed against Suspected Leader of British Ponzi Scheme

8/2/2010 7:44:22 AM

Kautilya Nandan Pruthi, the owner of London-based Business Consulting International, has been charged with multiple felonies for allegedly operating Britain’s largest-ever Ponzi scheme, the Daily Express reported. According to London police, the newspaper said, Pruthi cheated hundreds of investors – including former British cricket star Darren Gough, singer Jerome Flynn and other celebrities – out of almost $150 million during the four-year scam. He has been charged with 22 counts of fraud, the newspaper said, as well as money laundering, obtaining a money transfer by deception and unauthorized financial activity. Originally arrested a year ago, the newspaper added, Pruthi is scheduled to appear in court this September.

Sunshine Empire Leader Hit with Long Jail Sentence for Scam

8/2/2010 7:33:25 AM

James Phang Wah, head of a multilevel marketing outfit known as Sunshine Empire, has been sentenced to nine years in prison for running the largest Ponzi scheme in Singapore history, The Straits Times reported. Between August 2006 and October 2007, the newspaper said, Sunshine Empire raised $180 million by selling so-called “lifestyle packages” to thousands of customers and then used the proceeds to make Ponzi-like payments to early investors while enriching Phang and fellow Sunshine leader Jackie Hoo Choon. Portrayed by the court as a key player in the scheme, the newspaper said, Hoo was sentenced to seven years in prison for his own role in the scam. The two men could have faced life imprisonment, the newspaper noted, under sentencing guidelines for their most serious crimes.

Ponzi Scheme Operator Sentenced to 15 Years

8/2/2010 7:26:10 AM

Peter C. Son, a California businessman, has been sentenced to 15 years in prison for operating a $62 million Ponzi scheme that targeted fellow Korean-Americans, The San Francisco Chronicle reported. According to government officials, the newspaper said, Son fleeced 500 investors by promising them incredible returns on foreign currency trades and then used their money to make Ponzi-like payments and finance his luxurious lifestyle instead. Son allegedly spent some of that money on a $2.6 million home, the newspaper said, which features 17 rooms, a swimming pool and a massive four-car garage. He has been ordered to pay restitution, the newspaper added, with the exact sum to be determined at a later date.

Ponzi Victim Pleads Guilty to Bilking SunTrust Bank

7/30/2010 9:28:43 AM

Thomas Oppold, a South Carolina home builder, pleaded guilty this week to charges that he used loan funds from SunTrust Bank (NYSE: STI) – specifically earmarked for a real estate project – to invest in a doomed Ponzi scheme, The Post and Courier reported. According to courtroom testimony, the newspaper said, Oppold had hoped to make a quick return on his investment and then use the proceeds to help salvage a troubled housing project. However, the newspaper said, he wound up losing his money when the multimillion-dollar Ponzi scheme came unraveled just a few weeks after that. Since then, the newspaper noted, the operator of that scam – James G. Ossie of CRE Capital – has been sentenced to 82 months in prison for his crimes. Oppold himself could face up to 30 years in prison for his own misconduct, the newspaper said, but may qualify for a more lenient sentence due to the circumstances of his case.

Convicted Felon Faces Charges for Alleged Investment Scam

7/30/2010 9:00:08 AM

The U.S. Commodity Futures Trading Commission has filed charges against Robert Mihailovich, Sr. – a convicted felon who spent more than two years in prison for engaging in mail fraud – and his firm, Growth Capital Management, for allegedly defrauding investors through a foreign currency scam. According to the CFTC, Mihailovich raised more than $30 million from investors by falsely portraying himself as an expert currency trader with a perfect track record and concealing his criminal background. In addition, the CFTC says, Mihailovich hid his involvement with Growth Capital Management from regulators by listing his son as the firm’s principal officer instead. Mihailovich allegedly launched his scheme in mid-2008, when he was still on supervised release for his earlier crime. The CFTC is seeking financial penalties and an industry ban against him going forward.

Ex-Mortgage Broker Sentenced to Five Years on Fraud Charges

7/30/2010 8:35:16 AM

Eric S. Murphy, a former mortgage broker stripped of his license last year, has been sentenced to five years in prison for defrauding investors who sank money into his home loan business in Maine, the Bangor Daily News reported. According to government authorities, the newspaper said, Murphy raised money from investors to finance home loans and then proceeded to use the money for unrelated business and personal expenses. He previously rejected a plea deal that would have sent him to prison for just 18 months, the newspaper noted, and decided to take his chances on a jury trial instead. This week, the newspaper said, the jury found Murphy guilty of three felonies – securities fraud, forgery and theft by deception – and the presiding judge immediately sentenced him to prison following the verdict. He began serving his five-year sentence on Thursday, the newspaper added, and will remain on probation for four years after his release.

Citigroup Paying $75 Million to Settle Subprime Complaint

7/30/2010 8:09:14 AM

Following in the footsteps of Goldman Sachs (NYSE: GS), The New York Times reported, Citigroup (NYSE: C) has agreed to settle civil fraud charges that accused the company of concealing material information about its investments in subprime mortgages. Under a deal inked this week with the U.S. Securities and Exchange Commission, the Times said, Citigroup will pay $75 million for allegedly failing to report its full exposure to subprime losses several years ago. In addition, the Times said, two Citigroup insiders – former CFO Gary Crittenden and the former head of investor relations – must pay a total of $180,000 in fines as well. “The rules of disclosure are simple,” the SEC stated in the article. “If you choose to speak, speak in full and not in half-truths.” Recently, the Times noted, Goldman Sachs paid $550 million to settle a similar subprime mortgage-related complaint of its own.

Billionaires Targeted by SEC for Alleged Securities Fraud

7/30/2010 7:43:48 AM

Samuel and Charles Wyly, two Dallas-based brothers worth billions, face civil fraud charges for allegedly concealing massive insider sales at four companies where they held leadership roles, The New York Times reported. According to the U.S. Securities and Exchange Commission, the Times said, the brothers reaped $550 million in unreported gains over the course of 13 years by secretly selling stock through offshore accounts in Sterling Software -- a firm they founded and later sold to CA Technologies (Nasdaq: CA) for $4 billion in stock – and three other companies that counted them as insiders and major holders. If the SEC successfully proves its case and secures repayment of those proceeds, the Times noted, the agency could emerge with one of its biggest judgments ever for alleged securities fraud. Through their attorney, the Times added, the Wyly brothers have responded to the complaint by portraying it as a “misapplication of the law.”

Former Nicor Chief Ordered to Pay Big Financial Penalty

7/29/2010 10:23:57 AM

Thomas Fisher, the former CEO of Nicor (NYSE: GAS), has been ordered to pay a six-figure penalty for allegedly misleading investors about a decade ago. From 1999 to 2002, the U.S. Securities and Exchange Commission says, Fisher and two other Nicor executives materially overstated the company’s revenues and then caused the company to improperly account for those inflated sales. When the misstatements eventually surfaced, the SEC says, Nicor saw its stock plummet by more than 40% -- resulting in massive investor losses – on the news. Fisher must now pay $825,000 in disgorgement and interest as a result of his alleged misconduct.

SEC Sanctions Defendants in Geotec Securities Fraud Case

7/29/2010 10:09:20 AM

The U.S. Securities and Exchange Commission this week sanctioned Geotec (OTC: GETC.PK) and three individual defendants – Stephen D. Chanslor, Bradley T. Ray and William Richard Lueck -- suspected of violating securities laws. According to the SEC, the defendants misled Geotec investors about the company’s business operations and its financial results. The agency has therefore banned all three men from serving as officers or directors of any publicly traded companies, while ordering Chanslor and Ray and to pay financial penalties as well. In addition, the SEC has suspended Chanslor – a CPA – from serving as an accountant for any public companies for the next three years.

Investors Threaten to Sue Three Banks over K1 Ponzi Losses

7/29/2010 9:44:37 AM

Three European banks – Barclays (NYSE: BCS), HSBC (NYSE: HBC) and Rabobank – face a potential lawsuit over losses suffered by investors in an alleged $390 million Ponzi scheme operated by the founder of the K1 hedge funds in Germany, the Financial Times has reported. Barclays helped sell certificates backed by K1, the newspaper explained, while HSBC and Rabobank provided banking services to the hedge fund operation. A lawyer for the investors has signaled plans to seek settlements or legal actions against the banks, the newspaper said, which suffered massive losses in the suspected scam as well.

Accounting Firm Agrees to Pay Millions to Victims of Scam

7/29/2010 9:23:13 AM

Kaufman Rossin, a Miami-based accounting firm, has agreed to pay $9.6 million to help cover losses suffered by its clients in a massive Ponzi scheme, the Palm Beach Daily Business Review reported. In a lawsuit filed last November, the newspaper explained, Kaufman Rossin clients had accused the firm of failing to perform proper due diligence before allowing their funds – supposedly earmarked for investments in electronics – to be funneled into a $3.65 billion Ponzi scheme operated by jailed con artist Tom Petters. Kaufman Rossin filed a proposed settlement in court on Monday, the newspaper said, offering to pay out the maximum limit covered by the firm’s insurance policy.

Money Laundering Convictions Overturned in Big Fraud Case

7/29/2010 8:45:05 AM

A federal appeals court this week overturned money laundering convictions against two former executives of National Century Financial Enterprises who are currently serving time for related crimes as well, the Associated Press reported. In a ruling this week, the A.P. said, the court determined that prosecutors had failed to prove that Donald Ayers and Roger Faulkenberry conspired to commit money laundering while operating a $1.9 billion fraud that ultimately bankrupted their company. But the court upheld securities fraud convictions against the two men, the A.P. said, who must therefore remain in jail for those crimes.

Jailed Con Artist Sentenced for Another Investment Scam

7/29/2010 8:22:08 AM

Hamilton Alan Bird, a former hedge fund manager who is already serving a 24-year jail term for securities fraud, has been sentenced to another four years in prison for a second scam he carried out while awaiting punishment for his original crime, The Gazette newspaper reported. According to a grand jury, the newspaper said, Bird raised almost $700,000 by promising investors generous returns on foreign currency trades and then used at least part of that money to pay legal bills stemming from his earlier investment fraud. In the previous case, the newspaper noted, Bird operated a hedge-fund scam that left 330 victims with more than $12 million in losses. “It astounds me that this individual would take money from investors knowing that he had already pled guilty to fraud,” Colorado Securities Commissioner Fred Joseph stated in the article. “The only thing that could stop him is put him in jail, which is where he is now and will be for quite a while.” 

Florida Stock Broker Sentenced to Eight Years for Ponzi Scheme

7/29/2010 7:57:49 AM

Michael Joseph Dimare, a former stock broker for ING and John Hancock, has been sentenced to 100 months in prison for fleecing almost two dozen investors – many of them elderly – through a $3.5 million Ponzi scheme, The Florida Times-Union reported. According to court records, the newspaper said, Dimare promised his clients generous returns on bogus “tax-free corporate bonds” and then tricked them into believing they were making money when he was misappropriating their resources instead.  Dimare’s attorney had sought a lighter five-year sentence because his client has no past criminal record, the newspaper said, but the judge ruled that Dimare had committed a “serious, serious economic crime” that exceeded those normally carried out by typical first-time offenders. Based on their testimony in court, Dimare’s victims apparently agreed. “I was the victim of a violent crime once,” one of Dimare’s former clients stated in the article. “It’s the same sensation, the same utter terror. If the money’s all gone, how are you supposed to live?” 

Connecticut Hedge Fund Manager Pleads Guilty to Massive Fraud

7/29/2010 7:30:24 AM

Paul Greenwood, manager of the WG Trading hedge fund in Connecticut, pleaded guilty this week to securities fraud for operating a long-running investment scam that left its victims with up to $900 million in losses, Reuters reported. Since 1996, Reuters said, Greenwood and his partner Stephen Walsh allegedly raised billions of dollars from major institutions – including charities, pension plans and Carnegie Mellon University – by promising to invest the money in a conservative stock-based index and then issued notes to conceal trading losses and misappropriated funds. Government authorities claim the men treated the funds as their own “personal piggy bank,” Reuters said, spending at least $130 million on lavish lifestyles that included fancy homes and expensive teddy bears. Greenwood has pleaded guilty to six different felony charges, Reuters said, and could face up to 85 years in prison when he is formally sentenced later on this year. He is currently cooperating with government investigators, Reuters added, while his former partner continues to maintain his innocence and move forward with plans to fight similar charges in court.

Former Rock Star Accused of Operating Big Ponzi Scheme

7/28/2010 8:30:45 AM

Kevin Peek, a guitarist for the 1980s rock band Sky, has been accused of defrauding investors – most of them fellow Australians – through a $90 million Ponzi scheme, the Advertiser reported. Peek is suspected of running a company called Reseau International Trading, the newspaper said, which allegedly engaged in no real trading operations but simply raised money from new investors to pay off earlier investors instead. Peck has already been convicted of fraud in the past, the newspaper said, and received a three-year prison sentence for that crime. He has also filed for bankruptcy twice, the newspaper added, and apparently violated Australian laws against running a company while in the midst of bankruptcy proceedings.

Starr's Brothers Reluctant to Post Homes as Security for Bail

7/28/2010 8:05:53 AM

Kenneth Starr, a New York money manager suspected of fleecing celebrity clients through a multimillion-dollar Ponzi scheme, could be released from jail if his brothers change their minds and agree to post their homes as collateral for his bail, the Star Tribune reported. U.S. District Judge Shira Scheindlin agreed this week to release Starr if his brothers secured a $10 million bond with their homes and other property, the newspaper reported, but his siblings seemed reluctant and offered other assets – including a rare book collection – as collateral for a smaller bond instead. Although Starr’s wife insisted that her husband poses no flight risk, the newspaper said, Scheindlin insisted that his brothers must post their homes in order to secure his freedom. “Either they really believe in the guy,” he stated in the article, “or they don’t.” Starr has been in jail since May, the newspaper noted, when he was arrested for allegedly engaging in securities fraud by operating a $59 million Ponzi scheme.

Half of Madoff 'Winners' Could Face Clawback Lawsuits

7/28/2010 7:40:06 AM

Investors who profited from Bernard Madoff’s massive Ponzi scheme could face “clawback” lawsuits seeking recoveries for other investors who lost money in the multibillion-dollar scam, Reuters has reported. Irving Picard, the court-appointed trustee charged with liquidating Madoff’s assets, has indicated that he may sue 1,000 former Madoff clients – about half of the “net winners” who actually made money on their investments – if they do not offer to return their gains under voluntary settlements instead, Reuters stated. Picard has already rejected the vast majority of the claims he has received so far, Reuters noted, while approving only $5.5 billion worth of claims for payments down the road. At last count, Reuters added, Picard had recovered about $1.5 billion worth of funds to cover those future payments.

UBS Investment Banker Signals Possible Plea Deal in Fraud Case

7/27/2010 8:53:05 AM

UBS investment banker Igor Poteroba waived his right to indictment proceedings this week, Dow Jones reported, signaling the possibility of a plea deal with prosecutors who have accused him of insider trading. According to government officials, Dow Jones said, Poteroba supplied his friend Alexei Koval with inside information about proposed healthcare merger deals in which UBS served as an advisor. Both Poteroba and Koval were arrested on securities fraud charges in March, Dow Jones noted, and have remained in custody ever since.

Ex-GlobeTel CEO Sentenced to Prison for Securities Fraud

7/27/2010 8:33:24 AM

Former GlobeTel Communications (OTC: GTEL.OB) CEO Timothy Huff has been sentenced to four years in prison for conspiring to commit securities fraud by cooking the company’s books, the South Florida Business Journal reported. Huff and former GlobeTel CFO Thomas Y. Jimenez allegedly inflated the company’s revenue by creating bogus sales invoices, the newspaper said, and then supplied fraudulent backup documents for those transactions to the company’s independent auditors. In addition, the newspaper said, Huff and Jimenez allegedly issued stock to themselves and other GlobeTel insiders as compensation and then improperly disguised those payouts as loans. Huff pleaded guilty to one conspiracy charge in April, the newspaper noted, while Jimenez pleaded guilty to tax evasion charges 18 months ago.

Fund Manager to Surrender Assets to Rothstein Trustee

7/27/2010 8:09:41 AM

George Levin, the wealthy manager of the primary feeder fund that helped finance Scott Rothstein’s $1.2 billion Ponzi scheme, has agreed to surrender most of his assets to the bankruptcy trustee seeking recoveries for creditors of Rothstein’s now-defunct law firm, the Palm Beach Daily Business Review reported. Under the largest settlement in the Rothstein case to date, the newspaper said, Levin – who has an estimated net worth of $100 million to $200 million – will turn over most of the real estate properties and business interests he currently owns. However, the newspaper said, Levin will be allowed to retain his $4.2 million waterfront home and receive 15% of the proceeds that result from the sale of his other assets. Meanwhile, the newspaper noted, the bankruptcy trustee has secured similar – but smaller – multimillion-dollar settlements from at least two other businessmen tied to the Rothstein case as well.

SEC Agrees to Pay Whistleblowers Record-Breaking Bounty

7/27/2010 7:46:02 AM

The U.S. Securities and Exchange Commission has agreed to pay a Connecticut couple a record-breaking $1 million bounty for their assistance with a major insider trading case involving Pequot Capital Management founder Arthur Samberg, The Washington Post reported. Karen Kaiser, the ex-wife of a former Microsoft (Nasdaq: MSFT) insider, and her husband provided crucial information that allowed the SEC to secure a $28 million settlement – including $10 million in penalties – against Samberg for allegedly trading in Microsoft’s stock based on inside information, the newspaper explained. Previously, the newspaper noted, the SEC had paid out only a handful of minor awards – ranging from $3,500 to $55,220 – under its whistleblower program and had limited those bounties to cases involving insider trading. But a new law signed by President Obama last week could greatly expand both the size and the number of future rewards, the newspaper said, since it promises up to 30% of any penalties received for cases involving violations of any securities laws.

Fugitive Extradited to Face Fraud Charges in California

7/26/2010 12:40:24 PM

Ronald Paul Shade, a former California resident who spent the past two years living in Thailand, has been extradited to face charges stemming from his alleged operation of a real estate scam. Between 2006 and 2008, government prosecutors say, Shade solicited money from investors – many of them elderly – by promising them generous returns on short-term investments. However, prosecutors say, Shade actually used that money to finance an illegal Ponzi scheme instead. He was placed in custody, with his bail set at $3.9 million, following his arrest at the Los Angeles International Airport earlier this month. He has been scheduled to appear at a preliminary hearing this week.

Four Focus Financial Insiders Slapped with Criminal Charges

7/26/2010 12:23:28 PM

Four insiders at Florida-based Focus Financial Group face criminal charges for allegedly operating a multimillion-dollar Ponzi scheme targeting Haitian-American investors. According to federal prosecutors, the defendants raised $8 million from more than 600 Haitian-Americans by promising them generous returns on safe investments in businesses that would benefit their communities. But the defendants never generated the guaranteed profits, prosecutors say, and used funds from new investors to pay off earlier investors instead. All told, government authorities estimate, investors lost roughly $6 million as a result of the suspected scam. The following defendants have been charged with conspiracy to commit mail fraud and conspiracy to commit money laundering for their roles in the alleged investment scam: Maxo Francois, Jean Fritz Montinard, Aiby Pierre-Louis and Maguy Nerus. Meanwhile, the U.S. Securities and Exchange Commission has already ordered Focus Financial and its three principals – Francois, Montinard and Pierre-Louis – to pay $5.9 million in disgorgement, plus penalties and interest, as a result of their alleged misconduct.

Ex-Leader of Brokerage Firm Convicted of Stock Manipulation

7/26/2010 11:59:38 AM

Laurence Isaacson, former owner of the Thornhill Group brokerage firm in Boca Raton, has been convicted of conspiracy to commit securities fraud for his role in a four-year stock manipulation scam allegedly orchestrated by the Lancer hedge funds. According to federal prosecutors, the Lancer funds purchased large blocks of restricted stock in various “shell” companies and then directed brokers – including Isaacson -- to buy the stock on the open market at much higher prices. Isaacson was sanctioned by securities regulators for failing to disclose his affiliation with several of those shell companies before his recent trial, which led to a guilty verdict last week. He is scheduled to be formally sentenced for his crimes in October. “Financial frauds continue to make victims out of investors who entrust brokers to handle their money wisely,” FBI agent John V. Gillies stated when announcing the verdict. “As demonstrated in this case, when brokers commit fraud, law enforcement and regulatory action is important to maintain the integrity of the securities market.”

Former NASD Official Attracts Scrutiny in Stanford Ponzi Case

7/26/2010 11:20:26 AM

Bernard Young, a former district director for the National Association of Securities Dealers, has received a “Wells notice” from the Securities and Exchange Commission that could lead to civil fraud charges for his suspected involvement in a multibillion-dollar Ponzi scheme, The Wall Street Journal reported. Young spent almost a decade working as a director in the NASD’s office in Dallas, the Journal explained, before later becoming the chief compliance officer for a brokerage firm operated by suspected Ponzi scheme operator R. Allen Stanford. Young held that post for three years, the Journal noted, remaining at Stanford until a court-appointed receiver took control of the embattled firm in early 2009. He now works at a consulting firm in Texas, the Journal added, where he helps brokers and other investment professionals comply with securities laws.

Madoff Trustee Seeks Billions from Fairfield Feeder Fund

7/26/2010 10:57:07 AM

The trustee charged with recovering losses suffered by victims of Bernard Madoff’s massive Ponzi scheme has ordered Fairfield Greenwich Group, a major “feeder fund” for Madoff’s operation, to pay $3.6 billion in damages for the firm’s alleged involvement in the scam, The New York Times reported. In a newly amended complaint, the Times said, Madoff trustee Irving H. Picard has accused Fairfield and dozens of other defendants – including Fairfield founders Walter Noel, Jeffrey Tucker and Andres Piedrahita – of improperly pocketing generous payouts before Madoff’s $65 billion Ponzi scheme collapsed. Notably, the Times said, Picard has estimated that the three Fairfield founders collected $390 million in Madoff-related distributions alone. “Every dollar the defendants purportedly ‘earned’ and every dollar they kept to unjustly enrich themselves,” Picard’s lawyers stated in the article, “was stolen money” that should be returned. For its part, the Times noted, Greenwich has vehemently denied that the firm or its employees knew about the massive fraud or assisted with it in any way.

Two New York Accountants Charged with Ponzi Scheme

7/26/2010 10:20:09 AM

Laurence M. Brown and Ronald Mangini, two New York-based accountants, face civil fraud charges for allegedly operating a multimillion-dollar Ponzi scheme. According to the U.S. Securities and Exchange Commission, the defendants promised generous returns on investments in Infinity Reserves-Tennessee – a former client of the firm – even though the company had ceased operations more than a decade ago. The two men raised more than $2.1 million from their alleged investment scam, the SEC says, and then funneled at least $1.6 million to themselves and members of their family. Brown, described by the SEC as a “repeat securities law offender,” also faces criminal charges for his role in the alleged scam. He was sanctioned by the SEC – and barred from the securities industry – for another offering fraud more than 15 years ago.

Accused Ponzi Scheme Operator Pleads Guilty to Felony Charges

7/26/2010 9:54:14 AM

Donald Anthony Young, a money manager accused of pocketing more than $20 million through a long-running Ponzi scheme, pleaded guilty last week to one count each of mail fraud and money laundering, The Philadelphia Daily News reported. Young allegedly raised $96 million from his clients for investments in blue-chip stocks, the newspaper said, and then diverted more than $23 million of those funds for his own personal use. So far, the newspaper noted, a court-appointed receiver has recovered about $10 million and distributed those funds to investors who lost money in the scam. Going forward, the newspaper said, Young could face up to 14 years in prison when he is formally sentenced this October for his crimes.

Florida Currency Trader Guilty of $37 Million Ponzi Scheme

7/26/2010 9:28:01 AM

Beau Diamond, a Florida-based currency trader, was found guilty last week of 18 felonies stemming from his operation of a $37 million Ponzi scheme, the Sarasota Herald-Tribune reported. The son of bestselling “Fit for Life” author Harvey Diamond, the newspaper said, Beau Diamond launched an investment firm in the spring of 2006 and began fudging client returns eight months later. By the end of 2008, the newspaper said, Diamond was valuing his clients’ investments at $45.8 million – concealing massive trading losses -- while less than $150,000 actually remained in their accounts. Convicted of multiple counts of wire and mail fraud, the newspaper noted, Diamond could face more than 20 years in prison when he is formally sentenced for his crimes.

Investment Adviser Sentenced to 151 Months for Stock Fraud

7/26/2010 9:00:03 AM

Gregory Vincent Cronin, the former operator of Virginia-based Innovative Investment Advisors, has been sentenced to 151 months in prison for fleecing investors through a $6.8 million securities scam. From 2002 to 2009, prosecutors say, Cronin convinced friends and relatives – as well as former clients who invested with him when he worked at a major bank – to allow his new firm to manage their money for them. Although Cronin promised to invest client funds in blue-chip stocks that were reportedly performing well, prosecutors say, he actually used the money to trade risky stock index options that lost considerable sums instead. “This was an unthinkable crime that devastated family and close friends who trusted Mr. Cronin with their entire life’s savings,” U.S. Attorney Neil MacBride stated when announcing the sentence. “He lied to his victims, and now everything they had is gone. The financial and emotional devastation left in his wake will be extremely difficult to rebuild – all because of one man’s greed.” Convicted of mail fraud and securities fraud in May, Cronin will spend more than 12 years in prison – followed by another three years on supervised release – as punishment for his crimes.

Young Ponzi Scheme Operator Sentenced to 30 Years in Jail

7/26/2010 8:26:30 AM

Matthew Pizzolato, a 26-year-old Louisiana man who portrayed himself as one of the top financial planners in the country, has been sentenced to 30 years in prison for operating a multimillion-dollar Ponzi scheme, The Times-Picayune reported. Between 2005 and 2009, the newspaper said, Pizzolato raised $19.5 million from more than 160 victims – many of them elderly – by promising them guaranteed, risk-free investments with high rates of return. He then used $10 million for risky investments, the newspaper said, and “frittered away” millions more on luxury items – including a home, a BMW, jewelry and vacations – for himself. Pizzolato has been ordered to pay $15 million in restitution, the newspaper said, although prosecutors noted that he has already “squandered” much of the money generated from the scam. Meanwhile, the newspaper noted, Pizzolato will serve at least 27 years of his 30-year sentence even if he receives credit for good behavior.

SEC Secures Default Judgments in Two Separate Fraud Cases

7/9/2010 9:49:01 AM

The U.S. Securities and Exchange Commission recently secured default judgments in fraud cases involving Prime Time Group (also known as Hunt Gold Corp.) and Winning Kids, after the named defendants failed to answer charges filed by the agency. In the first case, the SEC had accused Prime Time and fellow defendant Johnny Ray Arnold of fraudulently evading stock-registration laws. The agency is seeking financial penalties against both defendants, and has barred Arnold from participating in any future penny-stock offerings in the meantime. In the second case, the SEC accused former Winning Kids sales agent Robert Comiskey of participating in a fraudulent stock offering that raised $2 million from investors across the country. He has been ordered to pay almost $100,000 in disgorgement and interest, and faces civil penalties to be determined at a later date.

Parents of 'Doodle Bra' Inventor Slapped with Fraud Charges

7/9/2010 8:49:19 AM

The parents of Rachel Segal, teenage inventor of the so-called “Doodle Bra,” have been charged with fraud for allegedly bilking investors who sank money into the product, the Mail Tribune reported. Randolph and Betty Segal were arrested this week, the newspaper said, following a 10-month investigation into the family’s business venture. They are accused of selling investors stock in Doodle Bra, the newspaper said, and then never delivering the promised shares. Now released from custody, the newspaper said, the couple has been charged with multiple counts of theft and securities fraud.

Former BankEast Director Accuses Company of Fraud

7/9/2010 8:36:32 AM

Terry Dotson, a former board member at BankEast in Tennessee, has filed a lawsuit against the company and its chairman, Fred Lawson, for allegedly engaging in securities fraud, The Knoxville News Sentinel reported. According to the complaint, the newspaper said, Lawson convinced Dotson to invest $1 million in BankEast without disclosing risks associated with bad loans to commercial real estate borrowers. In addition, the newspaper said, BankEast allegedly loaned Dotson $1 million to purchase stock in the company that is now essentially “worthless.” Dotson is seeking at least $1 million in damages, the newspaper said, as well as forgiveness of his loan.

SEC to Follow DOJ in Case against Celebrity Adviser

7/9/2010 8:16:20 AM

The U.S. Securities and Exchange Commission has taken a back seat to the U.S. Department of Justice in pursuing fraud charges against celebrity money manager Kenneth Starr, The New York Times reported. A federal judge this week delayed the civil case against Starr, the Times explained, allowing federal prosecutors to move forward with their own case against the disgraced financial adviser first. Once a trusted money manager for several Hollywood stars, the Times noted, Starr has been accused of stealing $60 million from his clients and faces multiple counts of securities and wire fraud.

Criminal Charges Filed against JP Morgan over Stock Offering

7/9/2010 8:12:49 AM

Argentina authorities have filed criminal charges against JP Morgan (NYSE: JPM) for allegedly helping Grupo Clarin, the country’s largest media conglomerate, manipulate its stock price when it took the company public several years ago, Reuters reported. According to the complaint, Reuters said, JP Morgan withheld material information in an effort to artificially inflate Clarin’s stock price at the time of that IPO. Clarin went public at almost $10 a share in 2007, Reuters explained, but later lost roughly 80% of its value. Argentina authorities have been pursuing Clarin itself for years, Reuters added, claiming that the company knowingly sold overvalued shares to the country’s pension funds.

Judge Maintains Asset Freeze in Big Securities Fraud Case

7/9/2010 8:09:03 AM

A federal judge this week refused to free up assets held by the wife of New York investment adviser David Smith, whose shuttered firm – Albany-based McGinn, Smith & Co. – is accused of mismanaging $136 million worth of client funds, the Times Union reported. The U.S. Securities and Exchange Commission filed fraud charges against McGinn, Smith in April, the newspaper explained, and then secured a court order freezing assets controlled by defendants connected to the firm. The agency named Smith’s wife, Lynn, as a relief defendant in the case, the newspaper said, freezing her assets – including a $2 million stock account and a home in Florida – at that time. Although the judge lifted an asset freeze on a $4 million trust fund established for the Smith’s children, the newspaper said, he kept the freeze on the stock account and the couple’s home – transferred late last year into the wife’s name alone – in place. “In this instance, Lynn Smith has likely received ill-gotten gains through the multiple deposits into her stock account,” the judge stated in the article. Moreover, “the SEC has demonstrated a likelihood of success in proving that these assets were jointly owned by David Smith and that the 2009 transfers into Lynn Smith’s name alone were solely for the fraudulent purpose of shielding David Smith’s assets from seizure.” Federal prosecutors have launched a criminal investigation of McGinn, Smith in the meantime, the newspaper noted, although they have filed no charges against anyone connected to the failed investment firm so far.

Canadian Regulators Issue Penalties for Insider Trading

7/8/2010 8:42:38 AM

The Alberta Securities Commission has ordered Charles Alexander Mark Lenko and his company, Kylscap Creek Holdings, to pay more than $20,000 in penalties for trading in shares of Profound Energy (OTC: PFXYF.PK) based on inside information. Lenko admitted that his firm purchased 20,000 shares of Profound Energy after secretly learning that his employer, Paramount Energy Trust (Toronto: PMT-UN.TO), planned to buy the company. He pocketed $10,400 in illicit profits when the deal was announced, but must now pay almost twice that amount – and refrain from trading stocks for the next two years -- as a result of his misconduct.

Lawyer Implicated in Galleon Case Inks Deal with the SEC

7/8/2010 8:22:35 AM

Brien Santarlas, a former attorney at the Ropes & Gray law firm, has agreed to settle civil charges stemming from his alleged involvement in a massive insider-trading scheme that toppled the once-mighty Galleon Group hedge fund. Under a deal inked last week with the U.S. Securities and Exchange Commission, Santarlas must return $32,500 in trading profits – and pay an equal amount in penalties – for his alleged participation in the scam. He has been suspended from practicing law in the securities arena as well. Santarlas has pleaded guilty to felony charges of securities fraud in the meantime, and is currently awaiting sentencing for his crimes.

Another Energy Services Firm Nailed for Bribes in Nigeria

7/8/2010 8:00:16 AM

U.S. authorities have levied another massive fine against an energy services company for allegedly bribing Nigerian officials in exchange for lucrative contracts in that country. This time, the U.S. Securities and Exchange Commission and the U.S. Department of Justice have ordered ENI – a European company that once traded here in the U.S. -- and its former Snamprogetti subsidiary to pay a combined $365 million in civil and criminal penalties to settle charges stemming from the alleged bribes. Federal authorities have already levied similar fines against several other companies, including KBR and its former parent Halliburton (NYSE: HAL), demanding $1.28 million in penalty payments from those involved in the alleged scheme so far.

Convicted Ponzi Scheme Operator Sentenced to Five Years in Jail

7/8/2010 7:25:31 AM

Cary Kahn, a Colorado day trader, has been sentenced to five years in prison for operating a multimillion-dollar Ponzi scheme, the Daily Camera reported. While running the Double Eagle hedge fund, the newspaper said, Kahn raised more than $2 million from investors by promising them generous double-digit returns and then spent much of that money on gambling and drugs. Kahn pleaded guilty to mail fraud in March, the newspaper said, and must now serve five years in prison – followed by five years of supervised release – as punishment for his crimes. Moreover, the newspaper added, Kahn has been ordered to pay $1.8 million in restitution as well.

Stanford Denied Bail Once Again ahead of Trial on Ponzi Charges

7/8/2010 6:58:21 AM

For the third time, Reuters reported, a federal judge has refused to release Allen Stanford from jail while he prepares to defend himself against charges that he operated a $7 billion Ponzi scheme. U.S. District Judge David Hittner denied Stanford’s latest bail request this week, Reuters said, rejecting Stanford’s argument that his ongoing incarceration violates his constitutional rights. Hittner acknowledged that the situation “may be frustrating for Stanford and his attorneys, and the accommodations much less ‘posh’ than Stanford prefers,” Reuters said, but ultimately decided that “there is no evidence that it is so burdensome as to impede his ability to prepare for trial.” Viewed as a potential flight risk, Stanford has spent 19 months in jail since he was first arrested for his alleged crimes.

Ex-Regulator Avoids Prison in Dreier Ponzi Scheme Case

7/8/2010 6:29:34 AM

Robert L. Miller, a former New Jersey money manager who once worked as a staff attorney for the U.S. Securities and Exchange Commission, has been sentenced to two years of probation for aiding convicted felon Marc Dreier with a $700 million Ponzi scheme, Dow Jones reported. Miller admitted that he helped Dreier sell promissory notes by posing as an institutional investor, Dow Jones explained, but he insisted that he never realized that those promissory notes weren’t real. He blamed his actions on alcohol problems, Dow Jones added, and said he has since undergone treatment and reformed his life. The judge agreed, Dow Jones said, rewarding Miller with probation for his turnaround and quick cooperation with authorities. Miller pleaded guilty to securities and wire fraud in November, Dow Jones noted, and could have faced up to 20 years in prison – the same penalty Dreier himself received -- for his crimes.

CFTC Files Charges over Alleged $28 Million Ponzi Scheme

7/7/2010 8:45:17 AM

The U.S. Commodity Futures Trading Commission has filed charges against Florida-based Trade LLC and its three leaders – Phillip Milton, Gregory Center and William Center – for allegedly operating a $28 million Ponzi scheme disguised as a legitimate commodities-trading pool. Between May 2007 and July 2009, the CFTC says, the defendants convinced at least 900 investors to sink money into the so-called trading pool and then proceeded to misappropriate almost half of their funds. Specifically, the CFTC says, the defendants invested only $15 million in commodities – and consistently lost money on those trades – while spending $9.6 million on themselves and using the rest to make Ponzi-like payments to early investors in the alleged scam. The CFTC has secured a court order freezing the defendants’ assets and will seek full restitution, plus penalties and interest, as it moves forward with its case. The U.S. Securities and Exchange Commission has filed charges against three of the defendants – Trade LLC, Milton and Gregory Center – as well.

Past Bristol-Myers Executives Ink Deferred Prosecution Deals

7/7/2010 8:18:37 AM

Two former Bristol-Myers Squibb (NYSE: BMY) executives – including past CFO Frederick Schiff – have won deferred prosecution agreements that resolve securities fraud charges filed against them five years ago, CFO magazine reported. Together with former Bristol-Myers Executive Vice President Richard Lane, the magazine said, Schiff had been accused of engaging in a “channel-stuffing” scheme that allowed the company to boost its sales results and meet Wall Street projections. But a 2008 court ruling “eviscerated the government’s case” just ahead of the scheduled trial, the magazine explained, and an appeals court ultimately upheld that decision this spring. As a result, the magazine noted, Schiff has managed to secure a deferred prosecution deal – without admitting any wrongdoing – and will see the charges dropped from his record as long as he stays out of trouble for the next year.

Former Integrity Bank Execs Plead Guilty to Fraud Charges

7/7/2010 7:45:18 AM

Douglas Ballard and Joseph Todd Foster, former executive vice presidents at the “faith-based” Integrity Bank in Georgia, have pleaded guilty to fraud charges stemming from a loan scam blamed for the bank’s collapse, The Atlanta Journal-Constitution reported. The men were indicted two months ago, the newspaper explained, on charges involving bad loans to a third defendant – Florida hotel developer Guy Mitchell – who ranked as the bank’s largest borrower before it failed two years ago. Ballard pleaded guilty to conspiracy to commit bank fraud and bribery, the newspaper said, while Foster pleaded guilty to securities fraud for dumping Integrity stock based on inside information ahead of the company’s demise. Mitchell has pleaded not guilty to the charges he faces, the newspaper added, and is currently awaiting trial for his alleged crimes.

Ex-Stratton Oakmont Insider Sentenced to 85 Years in Jail

7/7/2010 6:54:18 AM

Irving Stitsky, a former insider at the notorious Stratton Oakmont boiler room, was sentenced to 85 years in prison on Tuesday by a judge who labeled him an “inveterate con man,” Reuters has reported. This time, Reuters said, Stitsky was charged with fleecing 250 investors through a $23 million real estate scam and convicted of multiple felonies – including conspiracy, mail fraud and wire fraud – following a three-week jury trial late last year. Stitsky was barred from the securities industry for his role at Stratton Oakmont in the late 1980s, Reuters explained, and was sentenced to prison in yet another case four years later. This week, Reuters noted, a federal judge described Stitsky’s latest crime as a “vast securities fraud” that warranted the “very severe punishment” – equal to a life sentence – that the serial con man ultimately received.

SEC Files Fraud Charges after Waterford Fund Collapses

7/6/2010 8:35:12 AM

The U.S. Securities and Exchange Commission has filed charges against Travis L. Wright, a Salt Lake City businessman, for allegedly selling fraudulent promissory notes issued by Waterford Loan Fund. According to the SEC, Wright convinced approximately 175 investors to buy more than $145 million worth of Waterford notes by making a number of bogus claims. For example, the SEC says, Wright misled investors by: 1) assuring them that their money would be used only for loans secured by commercial real estate, when he used the funds for loans involving unrelated investments instead; 2) stating that their promissory notes were secured by interests in a trust, when no such trust existed; and 3) failing to disclose that he was using their money to finance a lavish lifestyle for himself. The SEC is seeking full disgorgement, plus penalties and interest, from the defendant. Waterford has been placed under the supervision of a Chapter 11 trustee in the meantime, with its assets set to be liquidated for the benefit of creditors who lost money in the alleged scam.

Two British Ponzi Suspects Acquitted at Third Trial

7/6/2010 8:31:22 AM

Jared Brook and Lincoln Fraser, two British businessmen suspected of operating a massive Ponzi scheme, were acquitted this week after a jury refused – once again – to convict them of fraud, The Guardian reported. An initial trial against the men unraveled due to legal errors, the newspaper explained, and a second one ended in a stalemate that forced the judge to discharge the jury. The defendants were accused of fleecing thousands of investors from around the world, the newspaper said, by promising them generous returns and “total asset protection” through a company – known as the Imperial Consolidated Group – that later collapsed. A third defendant pleaded guilty to conspiracy to defraud three years ago, the newspaper said, but the jury did not know this when it cleared Brook and Fraser this week of similar crimes.

Criminal Charges Filed over Suspected Yellow Pages Scam

7/6/2010 8:27:38 AM

Federal prosecutors last week filed criminal charges against three Florida business executives – Mark Stuart Smith, Christopher Jon Gregory and Marian Phelan – suspected of operating a $425 million Yellow Pages scam, The Florida Times-Union reported. According to the complaint, the newspaper said, the defendants operated two companies known as United Directories and Yellow Pages United that were not affiliated with any established telephone directories. Beginning in mid-2004, the newspaper said, the company allegedly fleeced hundreds of thousands of businesses by billing them for ad renewals that appeared to be tied to well-known Yellow Pages directories instead of their own obscure company. Since then, the newspaper said, government officials have fielded more than 100,000 complaints from customers who claimed they were misled led by the company and improperly billed for bogus services. All three defendants were arrested on Wednesday, the newspaper said, and charged with money laundering. In addition, the newspaper said, Smith and Gregory were charged with conspiracy to commit mail fraud as well.

Lengthy Prison Term Ordered for Stock Manipulation Scheme

7/6/2010 6:59:19 AM

Michael J. Muzio, a Florida businessman accused of fleecing Haitian-American investors, has been sentenced to 163 months in prison for a stock-manipulation scheme involving a bogus company that claimed to sell pre-paid services in Haiti. According to federal prosecutors, Muzio issued misleading press releases about International Business Ventures Group – “a public shell corporation with no assets and virtually no business activities” – and then executed “wash trades” through two accounts under his control in order to create the impression of legitimate investor interest in the stock. Meanwhile, prosecutors say, IBVG offered investors the chance to buy free trading shares in the company but then sent them restricted stock that could not be sold and proved to be worthless in the end. Muzio was convicted in February of the following felonies: one count of conspiracy to commit wire fraud, two counts of substantive wire fraud, six counts of securities fraud and two counts of lying to government officials. He has now been ordered to serve more than 13 years in prison and faces restitution payments, to be determined at an upcoming hearing, as well.

Prominent Bank Fraud Suspect Dies of Apparent Suicide

7/6/2010 6:53:36 AM

Dieter Frerichs, a German hedge fund manager suspected of operating a massive pyramid scheme, reportedly killed himself in Spain this weekend when police officers tried to arrest him, The New York Times reported. Frerichs served as the director of the K1 Invest and K1 Global funds, the Times said, which allegedly bilked private investors and banks – including Barclays (NYSE: BCS) and JP Morgan Chase (NYSE: JPM) – out of more than $375 million through an international scam. Frerichs was reportedly sunbathing when officers showed up at his home on Saturday, the Times said, and shot himself in the head before officers could serve a warrant for his arrest. “It is not normal to be sunbathing with a bag that has a gun,” a police spokeswoman told the newspaper. “But that’s what he did.” Authorities had planned to extradite Frerichs to Germany, the Times added, where he was wanted on charges of bank fraud.

Former Broker Pleads Guilty to Operating Ponzi Scheme

7/2/2010 8:28:33 AM

Arthur L. Heffelfinger, a former broker at KMS Financial Services in Montana, pleaded guilty this week to felony charges stemming from his operation of a long-running Ponzi scheme, the Associated Press reported. Heffelfinger raised more than $2 million from investors over the course of an eight-year period, the A.P. said, and then used most of that money to make Ponzi-like payments and cover his own personal expenses. He pleaded guilty on Thursday to theft and operation of a pyramid promotional scheme, the A.P. said, but pleaded not guilty to a third felony count of exploiting an older person whom he allegedly scammed as well.

Court Overturns Conviction of Former Ahold Executive

7/2/2010 8:07:43 AM

Citing poor jury instructions and a “flawed” trial, Reuters reported, a federal appeals court this week overturned the conviction of Mark Kaiser – a former marketing executive at the US Foodservice unit of giant Dutch retailer Ahold – for his alleged role in an $800 million accounting fraud. Kaiser was originally sentenced to seven years in prison back in May of 2007, Reuters noted, after he was found guilty of conspiracy, making false filings and six counts of securities fraud. However, Reuters said, an appeals court found that the presiding judge in that case issued vague jury instructions and admitted “highly prejudicial” testimony that may have improperly influenced the verdict. Kaiser has remained free on bail throughout his appeal, Reuters noted, and will now win the opportunity for a new trial.

'Free-Riding' Trader Headed to Prison for Elaborate Scam

7/2/2010 7:42:46 AM

Sean M. Daly, a day trader from Virginia, has been sentenced to 41 months in prison for so-called “free-riding” – which involves placing stock orders with insufficient funds – and then taking elaborate steps in an effort to escape his resulting losses. According to federal prosecutors, Daly ordered millions of dollars worth of stock that he could not afford with the hope that the shares would rise during the three-day waiting period before his bill for those orders actually came due. Daly then issued false research reports in an effort to push the stocks higher and generate risk-free gains, prosecutors say, and refused to take delivery of the shares that wound up losing ground instead. By doing so, prosecutors say, Daly stuck broker-dealers on the other sides of those trades with sizable losses. Convicted on one count of securities fraud, Daly faces more than $5.7 million in restitution payments in addition to his court-ordered prison time.

Fund Managers to Face Greater Accountability under New Rule

7/2/2010 7:15:38 AM

Financial watchdogs in the United Kingdom have adopted a new rule, known as the “Stewardship Code,” that calls for fund managers to actively monitor the boards and performance of the publicly traded companies in which they invest, The Daily Telegraph reported. Specifically, the newspaper said, the new code – passed by the UK’s Financial Reporting Council and facing review by the full Financial Services Authority – would require fund managers to ensure that “company boards and committee structures are effective, that independent directors provide adequate oversight, including by meeting the chairman and, where appropriate, other board members” and by attending shareholder meetings themselves. In addition, the newspaper said, fund managers would be asked to keep a “clear audit trail” of their private meetings with companies and records of their votes on shareholder issues to help ensure that they identify problems early and ultimately minimize any investor losses. Hailed as a “significant step forward” by shareholder advocates, the newspaper said, the new measure seeks to greatly increase the accountability of institutional shareholders who were labeled as “absentee landlords” during the financial crisis.

Smart Online Takes Aim at Auditor and Brokerage Firm

7/1/2010 9:05:27 AM

Smart Online (OTC: SOLN.OB), a North Carolina-based software firm that recently settled a class-action shareholder lawsuit accusing the company of securities fraud, is now targeting its auditor and a brokerage house in an effort to secure additional recoveries for investors, The News & Observer reported. In a pending lawsuit, the newspaper said, Smart Online claims that Sherb & Co. should have detected signs of fraud when it was auditing the company’s books. Smart Online has also taken aim at Jesup and Lamont Securities, the newspaper said, which employed a broker who was convicted on fraud charges related to the company’s stock-manipulation scheme. Former Smart Online CEO Dennis Michael Nouri was convicted on fraud charges as well, the newspaper noted, and received an eight-year sentence for his crimes.

'Son of Prince' Jailed for Suspected Ponzi Scheme

7/1/2010 8:35:53 AM

Guy de Chimay, a Manhattan financier who claimed to be the son of a Belgium prince, has been jailed without bail for allegedly operating a $7 million Ponzi scheme, the New York Daily News reported. De Chimay allegedly wooed investors with claims that he managed money for Belgium royalty, the newspaper said, and then used their funds to pay off credit cards, divorce lawyers and other personal expenses. Although he touted $200 million under management, the newspaper said, regulators found just $135 in his accounts. “His scheme involved all manner of deceit,” Manhattan District Attorney Cyrus Vance stated in the article. “He lied about who he was (and) how he was managing his clients’ finances … He even forged bank documents to back up his bogus story.” After fleeing from authorities who launched a probe of his activities, the newspaper said, de Chimay was recently captured and formally charged with grand larceny, forgery and securities fraud.

Troubled Stanford Receiver Placed in Receivership Itself

7/1/2010 8:10:54 AM

Vantis, a foreign accounting firm hired last year to liquidate the assets of Stanford International Bank, has been placed into receivership and is now being liquidated itself, The Daily Telegraph reported. Originally known for offering “aggressive” tax advice to celebrities, the newspaper said, Vantis hoped that its job with Stanford – a banking conglomerate suspected of operating a $7 billion Ponzi scheme – would propel it into the big league. However, the newspaper said, the arrangement seemed to expose Vantis as an amateur player that relied on aggressive accounting tricks for its growth. The firm saw its shares suspended earlier this month, the newspaper noted, and most of its assets sold at a deep discount this week. “In this business, you should be able to make money and cover your costs,” the CEO of a rival firm told the newspaper. “If you are not managing that, you are making some pretty fundamental mistakes.”

House Passes Sweeping Bill to Overhaul Financial System

7/1/2010 7:47:04 AM

The U.S. House of Representatives on Wednesday approved a sweeping bill designed to revamp the country’s financial system and protect it against future meltdowns, The New York Times reported. Backed my most House Democrats and a handful of Republicans, the Times said, the measure would empower the government to: 1) liquidate failing financial companies and sell them off in pieces so that taxpayers would not fund their rescue; 2) establish a systemic risk council to uncover potential threats to the financial system; 3) create a powerful consumer protection bureau; 4) expand regulatory oversight of hedge funds and ratings agencies; 5) curtail the ability of banks to invest and trade in their own accounts; and 6) implement new regulations for derivatives like the complex vehicles that helped fuel the last financial crisis. “If this bill were to fail,” House Speaker Nancy Pelosi stated in the article, “we would be preserving a status quo that has left our economy in a wretched state.” The Senate will likely vote on the measure after the Fourth of July holiday, the Times said, and is currently expected to pass the massive overhaul as well.

Veraz Networks Settles Case Involving Alleged Bribery

6/30/2010 9:45:37 AM

Veraz Networks (Nasdaq: VRAZ), a California-based telecommunications firm, has agreed to pay $300,000 to settle civil fraud charges stemming from alleged bribes paid to foreign officials in exchange for business contracts. During 2007 and 2008, the U.S. Securities and Exchange Commission says, Veraz arranged bribes to officials in China and Vietnam and then failed to properly record the payments on its books. In addition, the SEC says, Veraz failed to implement effective internal controls that would have prevented such bribes in the first place. Without admitting or denying any wrongdoing, Veraz has agreed to pay the fine and refrain from similar violations in order to settle the SEC’s charges.

Financial Adviser Charged with Selling Risky Investments

6/30/2010 9:28:05 AM

Jeffery S. Preston and his California-based company, Life Wealth Management, face civil fraud charges for allegedly selling unsuitable investments to clients of the firm. According to the U.S. Securities and Exchange Commission, Preston breached his fiduciary duties by investing $6.9 million worth of client funds in unsecured promissory notes issued by a real estate firm that ultimately defaulted on the loans. Preston allegedly received an early warning from his attorney about the “enormous risk” associated with such investments – and even began to doubt the viability of the investments himself – but continued to sell them to his clients anyway. The SEC is seeking full disgorgement of any ill-gotten gains, plus penalties and interest, from both Preston and his company.

Regulatory Target Accused of Stashing away Gains from Scam

6/30/2010 9:08:22 AM

Executives at Retirement Value, a Texas firm suspected of fraudulently selling investments tied to death benefits, have now been accused of funneling $1.1 million in ill-gotten gains to a second firm under their control, the Austin American-Statesman reported. According to the Texas State Securities Board, the newspaper said, Retirement Value President Dick Gray – “a recidivist who has repeatedly engaged in illegal sales of securities through fraudulent schemes” – and his partner, Wendy Rogers, transferred about $1 million out of the firm’s account the day after regulators filed an emergency cease-and-desist order against the company. The defendants allegedly placed the money in a separate account operated by Hill Country Funding, the newspaper said, another company that Gray controls. Texas regulators filed charges against Retirement Value and Gray last month, the newspaper noted, and has since placed the investment firm into receivership. In a new complaint filed this week, the newspaper said, the regulators added Rogers and Hill Country Funding as named defendants in the case. “In the course of the ongoing investigation, we discovered that there are additional culpable parties that defrauded the public in conjunction with Retirement Value and Richard ‘Dick’ Gray,” a spokesman for the Texas State Securities Board stated in the article. “Our latest court filing names additional parties we believe defrauded investors, and they need to answer for their actions.”

SEC Levies Multimillion-Dollar Fine over Timeshare Scheme

6/30/2010 8:03:46 AM

The U.S. Securities and Exchange Commission has ordered Carl Q. Lee and his company, Carl Lee and Associates, to pay almost $2.4 million in disgorgement and penalties for allegedly operating a timeshare scam. The SEC has also filed charges against Michael E. Kelly, portrayed as the mastermind behind the suspected scam, and more than 20 other defendants as well. From 1999 to 2005, the SEC says, Kelly conspired with Lee and others to raise $428 million – with at least $136 million of that transferred from legitimate IRA accounts – by promising investors generous returns on timeshare rentals in Cancun. However, the SEC says, Kelly relied on money from new investors to pay out the so-called returns on those timeshare leases instead. Kelly also failed to disclose risks associated with the investments, the SEC says, and the fact that brokers pocketed sizable commissions – of up to 27% -- on the transactions. Although the SEC has settled charges against Lee and his company, the agency continues to pursue actions against Kelly and other defendants implicated in the case.

Ponzi Scheme Operator Pleads Guilty to Mail and Wire Fraud

6/30/2010 7:39:22 AM

James Powell, the owner of several dubious Ohio-based investment firms, has pleaded guilty to fraud charges stemming from a Ponzi scheme that cost its victims roughly $10 million. Beginning in 2002, the FBI says, Powell’s Capital Investments started offering generous returns on promissory notes purportedly backed by a real estate portfolio owned by two other companies that he controlled. Powell told investors that both the size and the value of that real estate portfolio had rocketed over time, the FBI says, although most of the property – which was owned by others – was either in foreclosure or a state of disrepair. Powell pleaded guilty this week to conspiracy to commit mail fraud and wire fraud, felonies that carry maximum prison sentences of 20 years apiece. He will be formally sentenced this September for his crimes.

Convicted Felon Faces Charges over Suspected Ponzi Scheme

6/30/2010 7:20:30 AM

Robert Stinson, a convicted felon who launched several investment firms after his release from prison, has been charged with securities fraud for allegedly operating a $16 million Ponzi scheme, The Philadelphia Inquirer reported. According to the U.S. Securities and Exchange Commission, the newspaper said, Stinson raised millions of dollars from 140 investors by promising them double-digit returns on real estate projects and then used most of their money to make Ponzi-like payments and finance his luxurious lifestyle instead. For example, the newspaper said, Stinson allegedly spent more than $200,000 on Mercedes-Benz automobiles during a three-day span this spring alone. A federal judge this week issued a court order freezing Stinson’s assets, the newspaper said, and scheduled a formal hearing for the case next month. Stinson has previously been convicted of five felonies, the newspaper added, the latest in 2001 for bank fraud.

Former SEC Lawyer Compensated for Dismissal over Pequot Case

6/30/2010 6:59:40 AM

Gary J. Aguirre, a former staff attorney for the U.S. Securities and Exchange Commission, has secured a record wrongful-termination settlement almost five years after he was fired while pursuing an insider-trading case against Pequot Capital Management – once the world’s largest hedge fund -- and its co-founder Arthur Samberg, The New York Times reported. Aguirre began examining suspicious trades by Pequot and Samberg in 2004, the Times explained, but saw his probe come to an abrupt end when he was fired after attempting to question John J. Mack – a Samberg friend and incoming CEO of Morgan Stanley (NYSE: MS) – the following year. The SEC finally interviewed Mack much later, the Times said, but ultimately closed the investigation without taking any action. However, the Times said, the SEC recently filed a new insider-trading case against Pequot and Samberg – focusing on some of the same transactions originally flagged by Aguirre – and secured a $28 million settlement from the defendants. Meanwhile, the Times said, Aguirre has won a record $775,000 settlement from the SEC for the salary he would have earned during the four years and 10 months that have passed since he was originally fired.

Stock Promoter Banned from Industry over Sedona Tout

6/29/2010 9:30:03 AM

The U.S. Securities and Exchange Commission has barred Robert J. Chapman from participating in future penny-stock offerings due to his alleged involvement in a past stock-manipulation scheme. During 2002 and 2003, the SEC says, Chapman conspired with others to inflate the share price of Sedona Software Solutions – a company with no assets or revenues – by distributing analyst reports that misled investors into believing that the company had merged with a mining operation that owned legitimate gold mines. In fact, the SEC says, Chapman personally prepared one of those reports himself. The SEC has now banned Chapman from the penny-stock industry and ordered him to pay financial penalties that will be determined by the court at a later date.

SEC Files Complaint against Firm over Inflated CD Returns

6/29/2010 9:16:15 AM

The Oklahoma Securities Commission has accused Firstar Financial Group and its principals, John Hamilton and Robin Peck, of defrauding retirees by promising them “grossly inflated returns” on certificates of deposit and other investment vehicles, the Courthouse News Service reported. From 2007 through June of this year, the publication stated, the defendants allegedly ran newspaper ads promoting their firm as a “safe money solution” that offered high returns on CDs and several other types of investments. “Most, if not all, of the certificates of deposit offered by defendant Firstar are products of Discover Bank and Ally Bank,” regulators stated in the article. “However, at no time material hereto, has Discover Bank or Ally Bank offered certificates of deposit with (interest) rates as high as those advertised by Firstar.” In addition to the CDs, the publication stated, the defendants allegedly sold bonds backed by life insurance policies that had been acquired by a firm barred by Texas regulators from participating in the business. Going forward, the publication stated, Oklahoma regulators plan to seek full disgorgement -- plus financial penalties -- from the defendants in the case.

Piccoli Aide Pleads Guilty to Charges in Big Ponzi Case

6/29/2010 8:47:25 AM

Kathleen Fuoco, the sole employee of a fraudulent investment firm controlled by convicted Ponzi scheme operator Richard Piccoli, has pleaded guilty to felony charges for her role in the $25 million scam. According to her plea agreement, Fuoco came to realize that the firm was operating a scam but continued to work there anyway – without properly reporting her income -- while failing to contact authorities about the crimes. She pleaded guilty this week to misprision of a felony and willful failure to file tax returns, which carry maximum prison sentences of three years and one year respectively. Meanwhile, Piccoli himself is currently serving a 20-year prison sentence for masterminding the multimillion-dollar scam.

Bogus 'Federal Reserve Bank' Underwriter Headed to Jail

6/29/2010 8:29:35 AM

Pamela Terry, a California woman who posed as an underwriter for the Federal Reserve Bank, has been sentenced to eight years in prison for operating a $3.8 million commercial loan scam. According to federal prosecutors, Terry promised borrowers extremely low interest rates on multimillion-dollar loans if they made advance payments covering so-called “minimum capital requirements” that generally covered about 15% of the total loan amount. However, prosecutors say, Terry never secured the loans and used those upfront payments to cover personal expenses – including costs associated with her daughter’s recording career – instead. She has now been ordered to fully repay her victims in addition to serving her prison time. Terry was a “financial predator,” the judge stated when imposing the sentence. “She was willing to profit off people who placed their trust in her and became ensnared in her web of lies.” 

Technip Slapped with Massive Fines for Alleged Bribery

6/29/2010 8:07:01 AM

Technip, a Paris-based energy services company that used to trade on the New York Stock Exchange, has been ordered to pay $338 million in fines to settle criminal and civil charges that it violated that Foreign Corrupt Practices Act (FPCA). Between 1995 and 2004, the U.S. Securities and Exchange Commission said, Technip and other members of TSKJ – a four-company joint venture that included Halliburton’s (NYSE: HAL) former KBR division – paid more than $180 million in bribes to Nigerian officials in exchange for multibillion-dollar contracts in the liquefied natural gas (LNG) industry. By now, the SEC noted, Halliburton and KBR have already paid big fines to settle similar charges. Together with Technip’s new fines, the SEC said, the combined sanctions – totaling $917 million – represent the largest fines ever paid to settle charges stemming from alleged FCPA violations. Of the $338 million in penalties levied against Technip, $240 million resulted from criminal charges and the remaining $98 million covered related civil charges filed by the SEC.

SEC Cracks Down on Suspected $105 Million Ponzi Scheme

6/29/2010 7:15:09 AM

The U.S. Securities and Exchange Commission has secured a court order freezing the assets of Daniel Spitzer, a purported fund manager based in the Virgin Islands who is suspected of running a $105 million Ponzi scheme. From at least 2004 to the present, the SEC claims, Spitzer fleeced 400 investors by promising them generous returns on funds specializing in foreign currency trades. To win over those investors, the SEC says, Spitzer falsely claimed that the funds had never lost money and had in fact delivered annual returns of more than 180%. But Spitzer used only a fraction of the funds that he raised on actual investments, the SEC says, and he generally lost money on those. Rather, the SEC says, Spitzer spent the bulk of his clients’ funds on Ponzi-like payments to earlier investors and personal expenses – including big casino gambling bills – for himself. The SEC is now seeking full restitution, plus penalties and interest, from the defendant.

Former Boston Provident CFO Sentenced to Prison for Fraud

6/29/2010 6:52:14 AM

Ezra Levy, the former CFO and chief trader for Boston Provident, has been sentenced to more than five years in prison for stealing $3 million from the Manhattan-based hedge fund, The Wall Street Journal reported. According to government prosecutors, the Journal said, Levy diverted $2.45 million from the fund – and scored another $537,000 by selling it overpriced stock – which he transferred to his own personal account. Levy allegedly used that money for personal items, the Journal said, such as real estate, credit card payments and an Aston Martin automobile. “I am a flawed man,” Levy stated in the article. “I made mistakes I will spend the rest of my life making amends for.” Levy pleaded guilty this March to securities and wire fraud, the Journal said, and will now spend five years and seven months in prison as punishment for his crimes.

BroCo Investments Sanctioned for Suspicious Online Trading

6/28/2010 10:24:22 AM

Federal regulators have ordered BroCo Investments and Valery Maltsev, a defendant tied to the suspicious firm, to repay $400,000 that they allegedly obtained through fraudulent trades in online brokerage accounts. According to the U.S. Securities and Exchange Commission, the defendants and suspected unnamed co-conspirators executed unauthorized trades through accounts at Scottrade while taking the profitable sides of those transactions through their own account at Genesis Securities. “There is ample evidence that BroCo ignored obvious signs of fraud,” a court recently ruled in the case. The Genesis account “generated trading profits so large and so rapid that no reasonable executive could have believed that they were legitimate … Those returns are unattainable in the real world.”  The SEC has frozen the defendants’ assets while it moves forward with its investigation of the case.

SEC Shuts Down Alleged Scam Targeting Mormon Investors

6/28/2010 9:53:58 AM

The U.S. Securities and Exchange Commission has taken aim at five different companies, as well as four individuals, suspected of defrauding Mormon investors through a multimillion-dollar Ponzi scheme. According to the SEC, the defendants convinced their victims to invest $3.6 million in Zufelt Inc. by portraying the company as a profitable credit card business that could deliver huge returns of up to 220%. However, the SEC says, the defendants misused that money by spending it on other purposes – including commissions, bonuses, gifts and Ponzi-like payments – instead. The SEC has therefore filed charges against the following defendants and frozen their assets while it moves forward with its investigation of the case: Zufelt Business Services (doing business as Zufelt Inc.); Silver Leaf Investments; JCN Inc.; JCN Capital; JCN International; Anthony C. Zufelt; Joseph A. Nelson; David M. Decker; and Cache D. Decker. The agency has also named the following as relief defendants in the case: Jennifer M. Zufelt (Zufelt’s former wife); Shae L. Morgan (Zufelt’s girlfriend; Garth W. Jarman (Zufelt’s brother-in-law); Eric R. Nelson (Nelson’s brother); and Kevin J. Wilcox (a relative of Nelson’s wife).

Art Dealer Pleads Guilty to Fraud for Operating Ponzi-Like Scam

6/28/2010 9:25:33 AM

Donald Seybold, an Oregon-based art dealer, has pleaded guilty to wire fraud for allegedly scamming investors through a Ponzi-like scheme, the Associated Press reported. According to government prosecutors, the A.P. said, Seybold promised his clients that he would use their funds to buy and resell art at a profit but spent the money making Ponzi-like payments to earlier investors instead. Accused of bilking 200 victims out of more than $3 million, the A.P. said, Seybold is scheduled to be formally sentenced this November for his crimes.

Suspected Ponzi Schemer Pleads Not Guilty to Charges of Fraud

6/28/2010 9:14:00 AM

Matthew J. Ryan, the head of American Integrity Financial, has pleaded not guilty to fraud charges stemming from his alleged operation of a multimillion-dollar Ponzi scheme, the Times Union newspaper reported. According to federal authorities, the newspaper said, Ryan raised $5 million through his fake investment firm and then used the money to build a small real estate empire that now consists of run-down buildings riddled with code violations and foreclosure proceedings. Indicted earlier this month on one count of securities fraud and nine counts of mail fraud, the newspaper said, Ryan has been released after posting a $50,000 bond.

Former ICP Portfolio Manager Banned from Securities Industry

6/28/2010 8:51:57 AM

Aamer Abdullah, former head of the asset-backed and mortgage-backed securities desk at ICP Asset Management, has been barred from working in the securities industry, Dow Jones reported. Abdullah agreed to the industry ban on Friday, Dow Jones said, just days after the U.S. Securities and Exchange Commission sued ICP and its CEO Thomas Priore for allegedly defrauding clients who purchased so-called “collateralized debt obligations” that plummeted in value after the housing market collapsed. While Abdullah inked a partial settlement with the SEC (without admitting or denying any wrongdoing), Dow Jones noted, both ICP and Priore have proclaimed their innocence and vowed to vigorously defend themselves against the government’s charges.

Ponzi Scheme Operator Slapped with Maximum 20-Year Term

6/28/2010 8:23:58 AM

M. Derrick Peninger, a convicted Ponzi scheme operator who stole an estimated $7 million from his clients, has been sentenced to 20 years in prison – the maximum jail term allowable – as punishment for his crimes, The Post and Courier newspaper reported. Although Peninger pocketed less money than others who’ve run similar investment scams, the newspaper said, he misled government authorities – and even failed to appear for his original sentencing date – before a federal judge handed down the tough penalty last week. Accused of fleecing a broad range of victims, the newspaper noted, Peninger was convicted last year on eight counts of mail fraud and one count of lying to an FBI agent. “Peninger was not very discerning with his victims,” the judge stated in the article. “He victimized young and old, people who entrusted him with their life savings. He victimized the healthy and those who were ill. And it didn’t make any difference to him.” Peninger will spend his days at the Butner Federal Correctional Complex, the newspaper said, the same prison where notorious fraudster Bernard Madoff is serving a 150-year sentence for a far more elaborate -- and expensive -- Ponzi scheme.

Goldman Sachs on the Hook for Losses from Ponzi Scheme

6/28/2010 7:49:29 AM

In the first ruling of its kind, The New York Times reported, Goldman Sachs (NYSE: GS) has been ordered to pay $20.58 million for allegedly assisting a failed hedge fund with a suspected $250 million Ponzi scheme. Goldman served as the prime broker for the Bayou Group, the Times explained, a Connecticut-based hedge fund that collapsed in 2005 when government authorities began investigating the firm for suspected fraud. As the custodian of Bayou’s assets and a lender to the firm, the Times said, Goldman allegedly knew that the hedge fund was suffering losses even as it was reporting profits in its marketing materials for investors. After losing an arbitration hearing over the matter last week, the Times said, Goldman must now return all of the money it oversaw for Bayou in the three years leading up to the hedge fund’s collapse. “This case shows that you can’t just stick your head in the sand when a fraud is going on in your shop,” an attorney involved in the case told the newspaper. Goldman “argued that you could, and the panel disagreed.”

Regulators Halt Suspected Scam Targeting Federal Employees

6/28/2010 7:13:31 AM

The U.S. Securities and Exchange Commission has secured a court order halting further investments in a suspected $34 million Ponzi scheme targeting law-enforcement agents and other federal employees, the Associated Press reported. According to the SEC, the A.P. said, the Federal Employee Benefits Group fleeced hundreds of government workers by promising them safe investments in a bond fund that did not actually exist. As the leader of that firm, the A.P. said, Kenneth Wayne McLeod allegedly used the funds for his own lavish lifestyle – which included annual trips to the Super Bowl for himself and 40 of his friends – instead. McLeod died last week of an apparent self-inflicted gunshot wound, the A.P. said, and his assets have now been frozen while regulators move forward with their investigation of the case. The SEC aims to seek restitution and civil penalties from McLeod’s estate, the A.P. added. “McLeod victimized law-enforcement agents and other government employees who dedicated their lives to the service of this country,” the SEC stated in the article. “The victims gave years of public service, and McLeod stole their futures.”

Wesley Snipes Seeks Appeal after Adviser Accused of Fraud

6/25/2010 10:03:18 AM

Wesley Snipes has asked an appeals court to review his conviction on tax-evasion charges, the Associated Press reported, because his former advisor – suspected con artist Kenneth Starr – acted as a key witness in the case against him. Like several other big-name celebrities, the A.P. noted, Snipes relied on Starr for financial services before federal authorities charged the money manager last month with alleged securities fraud. Suspected of stealing $59 million from his clients, the A.P. said, Starr testified against Snipes in the trial that led to the movie star’s conviction and subsequent three-year prison sentence.

Former Brocade CEO Sentenced to 18 Months in Backdating Case

6/25/2010 9:00:38 AM

Gregory Reyes, the former CEO of Brocade Communications (Nasdaq: BRCD), has been sentenced to 18 months in prison and ordered to pay $15 million in fines for profiting from illegally backdated stock options, The San Francisco Chronicle reported. Reyes was convicted of securities fraud in March, the newspaper explained, after a federal appeals court had overturned a previous conviction on similar charges last year. The first corporate executive prosecuted over backdated stock options, the newspaper noted, Reyes is currently considering an appeal.

Congress Finalizes Sweeping Bill to Overhaul Financial System

6/25/2010 6:47:13 AM

Voting along party lines, the Associated Press reported, Congress this week approved a sweeping bill designed to overhaul the financial system and protect it against meltdowns in the future. Under a proposal approved by committees in both houses of Congress, the A.P. said, banks could be forced to seriously curtail – but not entirely eliminate – risky investments, involving derivatives trades and internal hedge funds, that helped fuel the financial crisis. With Senate and House versions of the measure now packaged into one bill, the A.P. said, Congress could vote on the final proposal before the July 4 holiday. “It took a crisis to bring us to the point where we could actually get this job done,” Congressional backers of the overhaul stated in the article. “It is reassuring to know that, when public opinion gets engaged, it will win.”

Apollo Group Faces Massive Payment to Shareholders

6/25/2010 6:28:08 AM

The Apollo Group (Nasdaq: APOL) faces a huge legal bill – totaling up to $280 million – after an appeals court reversed a judge’s decision to lower damages awarded to shareholders who filed a class-action lawsuit against the company for allegedly deceiving them about its recruiting practices. When announcing the ruling this week, plaintiffs attorneys portrayed the decision as a “stunning victory” for investors and the first decision of its kind since passage of the Private Securities Litigation Reform Act in 1995. “We brought this case to protect the interests of investors,” the law firm stated. “As we thanked the jury over two years ago for their close attention to the evidence in the case -- and for keeping their eyes on the real story of what happened at this company -- we are pleased that the Court of Appeals gave our appeal the consideration it deserved and reinstated the jury verdict in favor of Apollo shareholders.” With the entire for-profit education industry under fire for its enrollment practices, Apollo had already seen its stock take a big hit even before this week’s legal setback.

California Hedge Fund Manager Accused of Forex Trading Scam

6/25/2010 6:23:04 AM

Glenn Kane Jackson, the owner of San Francisco-based Highlands Capital Management, has been arrested on criminal charges for allegedly defrauding investors through a foreign-exchange trading scam. The U.S. Commodity Futures Trading Commission has filed charges against Jackson and his firm as well. Between January of 2006 and December of 2009, the CFTC claims, the defendants raised at least $4.3 million from investors by claiming a remarkable success rate with forex trades. Although the defendants returned about $600,000 to investors, the CFTC says, they either lost or misappropriated the rest. All told, the CFTC estimates, more than $2 million worth of investor funds remain unaccounted for at this time. The CFTC has therefore secured a court order freezing the defendants’ assets while it moves forward with its case. The agency is seeking financial penalties, as well as trading bans, against both Jackson and his firm.

Supreme Court Weakens Law That Led to Big Convictions

6/25/2010 6:17:18 AM

In a unanimous decision, The New York Times reported, the U.S. Supreme Court voted this week to dramatically narrow the so-called “honest services” law that helped convict some high-profile executives – including former Enron CEO Jeffrey Skilling – of securities fraud. Up to now, the Times said, the law made it a crime “to deprive another of the intangible right of honest services.” But the Supreme Court has now declared that law too vague, the Times said, and will limit its use to specific offenses such as bribes or kickbacks. When issuing its decision, the Times said, the Court sent Skilling’s case back to the lower courts for review of his conviction. Although Skilling’s attorney believes the ruling should nullify his client’s entire conviction, the Times said, at least one Supreme Court justice suggested that the issue remains “an open question” at this time.

SEC Cracks Down on Suspected Long-Time Penny Stock Scam

6/24/2010 6:16:28 AM

The U.S. Securities and Exchange Commission this week filed a civil enforcement action against Advanced Technologies Group (OTC: AVGG.OB) and two of its officers, Alexander Stelmak and Abelis Raskas, for a suspected scam that dates back more than a decade. Between 1997 and 2006, the SEC says, the defendants raised almost $15 million through a series of illegal offerings involving shares of ATG and its two predecessor companies. By doing so, the SEC says, the defendants violated laws against securities fraud. The SEC is seeking financial sanctions against all of the defendants and a permanent penny-stock bar against Stelmak. Meanwhile, the SEC plans to secure a court order that will freeze the defendants’ assets and ban the defendants from destroying or altering any documents as the agency moves forward with its investigation of the case.

Former Hedge Fund Manager Punished for Insider Trading

6/24/2010 6:12:32 AM

Anjam Saeed Ahmad, a former hedge fund manager and risk trader for AKO Capital in the United Kingdom, has been sentenced to 10 months in prison after pleading guilty to conspiracy to commit insider trading, HFMWeek reported. Between May and August of 2009, the publication stated, Ahmad conspired with another party to trade in 19 different securities based upon inside information he obtained through his job at AKO. In addition to actual jail time, the publication stated, Ahmad also faces 300 hours of community service and $50,000 in fines as punishment for his crimes. “This is a significant step in our fight against market abuse,” the UK Financial Services Authority stated in the article. “The FSA has shown that we will take tough action and use all of the tools at our disposal to achieve our aim of credible deterrence in the financial markets. Insider dealers should recognize the real risk of being pursued through the criminal courts and stripped of the benefits of their crimes."

Stanford Co-Defendants to Be Tried Separately in Ponzi Case

6/24/2010 6:08:03 AM

R. Allen Stanford, a Texas financier accused of operating a $7 billion Ponzi scheme, is now scheduled to go on trial by himself, the Associated Press reported, after a federal judge agreed this week to grant separate trials for three co-defendants in the case. Stanford’s alleged co-conspirators – Laura Pendergest-Holt, Gilbert Lopez and Mark Kuhrt – had complained that Stanford’s “circus-like” behavior and revolving door of attorneys might threaten their own chances for a fair trial in court, the A.P. explained. Stanford is set to face trial on Jan. 24, the A.P. said, with his co-defendants now scheduled to go on trial sometime after that.

Galleon Founder Presses for Concessions in Court

6/24/2010 6:04:02 AM

Raj Rajaratnam, founder of the fallen Galleon Group hedge fund, has asked the court for help ahead of his Oct. 25 trial on insider trading charges, Reuters reported. For starters, Reuters said, Rajaratnam wants his own trial – separate from that of fellow key defendant Danielle Chiesi – when his lawyers present his case in court. Meanwhile, Reuters said, Rajaratnam wants to secure more details about new stock trades he is accused of executing or to see those extra charges dropped altogether. “It’s been heralded as the biggest hedge fund insider-trading case in history,” Rajaratnam’s attorney stated in the article, “and yet we don’t have the trades.” During a hearing this week, Reuters said, the presiding judge reserved his ruling on Rajaratnam’s requests.

Groundstar Resources Executive Settles Insider Trading Charges

6/23/2010 8:04:44 AM

Kenneth Lyle Chobotuk, the vice president of exploration at Groundstar Resources (OTC: GRDSF.PK), has agreed to pay $32,000 to settle charges that he traded the company’s stock based on inside information, StockWatch reported. In a deal inked this week with the Alberta Securities Commission, StockWatch said, Chobotuk admitted that he possessed material nonpublic information about a significant contract between Groundstar and Vast Exploration (OTC: VSTFF.PK) when he purchased 45,000 Groundstar shares two years ago. Chobotuk realized $14,000 in illicit gains from his stock transactions, StockWatch noted, and must now pay more than twice that amount to settle the charges filed against him as a result.

Former Budget Director Pleads Guilty to Securities Fraud

6/23/2010 8:00:42 AM

Ted Hults, the former budget director for East Hampton in New York, has pleaded guilty to securities fraud for misrepresenting the town’s financial condition to potential bond investors several years ago, the Long Island Press reported. Hults also pleaded guilty to official misconduct, the newspaper said, admitting that he illegally transferred $8 million from the town’s preservation fund to accounts used for day-to-day operational expenses. Because Hults has no criminal record and realized no personal gains from the scheme, the newspaper said, he secured a “conditional discharge” of the case in exchange for his guilty pleas.

Another Penny Stock Halted for Suspicious Oil Spill Claims

6/23/2010 7:56:44 AM

For the second time in a month, USA Today reported, the U.S. Securities and Exchange Commission has halted trading in an obscure penny-stock company making suspicious claims about business deals related to the Gulf Coast oil spill. Green Energy Resources (OTC: GRGR.PK) became the latest target of regulators on Tuesday, the newspaper said, when the SEC suspended trading in its shares due to questions about the company’s announcement that it would be providing 100,000 tons of “very buoyant and very absorbent” woodchips for use in the cleanup efforts. The SEC had previously halted trading in another company called ACT Clean Technologies (OTC: ACLH.PK), the newspaper said, over claims that it had landed business in the Gulf Coast as well. Both stocks normally trade on the loosely regulated Pink Sheets, the newspaper noted, which is bracing itself for a slew of potential oil-cleanup scams. “We haven’t seen a strong trend yet,” Tim Ryan, managing director of the Pink Sheets, told the newspaper. “But I think we will.”

Regulators Issue Record Fines over Suspected Ponzi Scheme

6/23/2010 7:49:59 AM

The Alberta Securities Commission levied a record $4.1 million worth of fines against Gold Quest International insiders suspected of operating a $29 million Ponzi scheme, the Calgary Herald reported. The ASC ordered David Michael Greene and John Jenkins, two major players in the suspected scam, to pay $2 million in administrative penalties apiece, the newspaper said. The agency has also permanently banned both men from future involvement in the Alberta capital markets, the newspaper said. The ASC ordered Gold Quest President Delroy Atwood – who played a smaller role in the alleged scheme – to pay a $100,000 fine, the newspaper said, while temporarily banning him from the Alberta capital markets as well.

SEC Files Charges over Suspicious Private Placement Offering

6/23/2010 7:44:01 AM

Federal regulators have filed a complaint against Anthony T. Banas, the co-founder and former chief technology officer of privately held Canopy Financial, for allegedly defrauding investors who participated in a $75 million private placement deal. According to the SEC, Banas violated securities laws with the following actions: 1) supplying investors with forged bank statements that misrepresented Canopy’s true financial condition; 2) arranging for a Canopy employee to pose as a client during a conference call with an investor during the due diligence process; and 3) failing to disclose that Canopy was not generating profits before the offering. Without admitting or denying any wrongdoing, Banas has agreed to pay more than $1 million in restitution and penalties to settle the agency’s charges. The SEC is moving forward with its investigation of the case in the meantime.

Florida Investment Firm Accused of Big Ponzi Scheme

6/23/2010 7:39:01 AM

The U.S. Securities and Exchange Commission has filed charges against Florida-based Trade-LLC and its managers, Philip W. Milton and William Center, for allegedly defrauding investors through a multimillion-dollar Ponzi scheme. Between 2007 and 2009, the SEC says, the defendants raised almost $28 million from three investment clubs by promising their members generous returns on securities trades but then used their money for Ponzi-like payments and other purposes instead. Although Trade-LLC issued bogus reports showing huge investment returns, the SEC says, the firm was actually suffering massive losses on its trading activities. Nevertheless, the SEC says, Milton and Center were paying themselves seven-figure salaries for their investment services. The SEC now plans to freeze Trade-LLC’s assets and place a receiver in charge of the firm’s remaining funds. The agency has ordered Milton, who directed the firm’s trades, to pay almost $2.5 million in restitution and penalties in the meantime.

Authorities Seek Control of Assets Owned by Top Madoff Aides

6/23/2010 7:24:02 AM

Federal authorities this week filed court papers seeking to freeze the assets of two women who spent decades working for Bernard Madoff’s fraudulent investment firm, The Wall Street Journal reported. Prosecutors plan to seize millions of dollars worth of assets – including cash, two luxury vehicles and a fancy home – owned by Annette Bongiorno, the Journal said, who served 30 years as the supervisor of Madoff’s back-office staff. Prosecutors are also seeking control of a $2.2 million home owned by JoAnn “Jodi” Crupi, the Journal said, who spent 25 years managing the receipt of client funds. Former Madoff aide Frank DiPascali has already agreed to forfeit his own home in the meantime, the Journal added, and finally secured a temporary release from jail after posting $10 million bail this week. DiPascali pleaded guilty to 10 criminal charges – including conspiracy, securities fraud and international money laundering – last August, the Journal noted, and had remained behind bars since that time.

SilverLeaf CEO Escapes Jail by Repaying Investors in Full

6/22/2010 7:48:40 AM

Dwight Shane Baldwin, the CEO of Salt Lake City-based SilverLeaf Financial, has inked a deal that will allow him to escape jail time – and clear his permanent record – after fully repaying investors who claim they were swindled by his firm, The Salt Lake Tribune reported. Originally charged with felony fraud and theft, the newspaper said, Baldwin negotiated a “guilty plea in abeyance” to two reduced counts of attempted theft for allegedly deceiving investors with bogus claims about a toy company that he controlled. Baldwin has already returned the funds lost by investors in his alleged scam, the newspaper said, and will remain free on probation as long as he commits no additional crimes. “I’m very happy that the investors have gotten their money back because that is not the typical outcome,” Ken Woodwell, director of the securities division for the Utah Attorney General, stated in the article. “Most often, investors are lucky to get back 5 to 10 cents on the dollar … Our interest is that promoters who are selling securities tell the truth when they are soliciting money from investors.” Following his plea, the newspaper noted, Baldwin will spend the next 18 months on “good-conduct probation” as punishment for his alleged crimes.

CFTC Accuses Texas Firm of Operating Ponzi Scheme

6/22/2010 7:42:23 AM

The Commodity Futures Trading Commission this week filed a complaint against Texas-based Micind Capital Management and its owner, Richard Theye, for allegedly operating a multimillion-dollar Ponzi scheme, Dow Jones reported. According to the CFTC, Dow Jones said, Theye convinced investors to move their funds from legitimate retirement plans – including 401(k)s, IRAs and pension funds – into two commodity pools operated by his firm and then used the cash to cover Ponzi-like payments and his own trading losses. The agency is seeking to freeze the remaining assets held by Micind and its owner, Dow Jones said, while pursuing fines and sanctions against the defendants. Prosecutors have already taken aim at Theye in the meantime, Dow Jones noted, indicting him on multiple felony charges – including embezzlement, securities fraud and money laundering – earlier this month in response to the alleged scam.

ICP Asset Management Accused of Engaging in Mortgage Fraud

6/22/2010 7:37:39 AM

The U.S. Securities and Exchange Commission has filed charges against New York-based ICP Asset Management and one of the company’s principals, Thomas Priore, for allegedly fleecing investors through fraudulent mortgage deals as the housing market collapsed, The New York Times reported. According to the SEC, the Times said, ICP treated the risky mortgage deals (known as collateralized debt obligations or CDOs) “like a piggy bank” that enriched ICP while hurting the investors the firm was hired to protect. ICP began marketing the so-called “Triaxx” CDO deals in 2006, the Times said, and continued to do so even when American International Group (NYSE: AIG) – which was supposedly hired to insure the transactions – skated toward the brink some two years later. At the direction of Priore, the Times said, ICP allegedly sold hundreds of millions of dollars worth of overpriced bonds to the Triaxx CDOs in the meantime. “Priore knew that the prices of sales from Triaxx Funding were substantially above prevailing market values, yet instructed ICP employees to proceed with the sales,” the SEC stated in the article. “After several sales were executed, ICP’s portfolio manager – who felt uncomfortable following Priore’s instructions – directed ICP employees to name Priore as the trader in ICP’s books.” For his part, the Times noted, Priore claims that neither he nor his firm engaged in any wrongdoing.

New York Financial Adviser Indicted on Fraud Charges

6/22/2010 7:32:31 AM

Matthew J. Ryan, a New York financial adviser suspected of operating a multimillion-dollar Ponzi scheme, was indicted this week on felony charges of securities and mail fraud, the Times Union newspaper reported. According to court records, the newspaper said, Ryan allegedly promised his clients guaranteed returns on investment “contracts” but then used their money to make Ponzi-like payments and finance a doomed real estate empire instead. A court-appointed receiver hired to oversee Ryan’s assets has uncovered 30 properties owned by the suspected con artist so far, the newspaper said, with many of those in foreclosure or various states of disrepair. Ryan has previously denied civil fraud charges filed against him by federal regulators, the newspaper said, and claims that he has personally been the victim of mortgage fraud.

Ex-Slaughterhouse Manager Faces 27-Year Sentence for Fraud

6/22/2010 7:27:23 AM

Sholom Rubashkin, the former manager of a kosher slaughterhouse in Iowa, faces 27 years in prison and $27 million in fines after being convicted last fall on dozens of counts of financial fraud, the Associated Press reported. While serving as a vice president at Agriprocessor, the A.P. said, Rubashkin allegedly deceived the company’s lenders by supplying them with fake invoices that overstated the financial health of the meat plant that he managed. The plant filed for bankruptcy about two years ago, the A.P. noted, and has since been sold to a new owner. Prosecutors had sought a 25-year sentence for Rubashkin, the A.P. said, but a federal judge indicated this week that he will likely receive an even harsher sentence of 27 years instead. Calling the sentence “unfair and excessive,” the A.P. said, Rubashkin’s attorney has already announced plans to appeal.

Madoff Reportedly Stashed Billions Away before Arrest

6/22/2010 7:23:01 AM

Bernard Madoff has told his fellow prison inmates that he stashed away $9 billion before confessing to his massive Ponzi scheme 18 months ago, the New York Post reported. According to a fellow prisoner, the Post said, Madoff sent the funds to three unnamed people ahead of his arrest. Longtime Madoff aide Frank DiPascali reportedly knows who received that money, the Post said, and could use the information to secure a lighter sentence for his own role in the historic scam. Madoff is currently serving the equivalent of a life sentence for orchestrating the multibillion-dollar scheme, the Post noted, but DiPascali is hoping to receive a shorter term by cooperating with government authorities who continue to investigate the case.

Pair Sentenced for Selling Stock in 'Boiler Room' Operation

6/21/2010 6:17:49 AM

Stanley and Easter Johnson, a California couple charged with illegally selling securities through a so-called “boiler room,” have been sentenced to prison and probation for their role in the alleged investment scam. According to government authorities, the couple sold securities in Advanced Body Imaging through a private offering and then used the proceeds from those transactions for their own personal expenses. Stanley Johnson pleaded guilty to securities fraud and was ordered to serve 10 years in prison, half of it on probation, as punishment for his crimes. Easter Johnson pleaded guilty to conspiracy and must now serve two years on probation for her own role in the alleged scam.

Regulators Crack Down on Suspected Oil and Gas Scam

6/21/2010 6:13:36 AM

The U.S. Securities and Exchange Commission has filed charges against Justin Solomon and three companies he controls – Seisma Oil Research, Seisma Energy Research and Permian Asset Management – for allegedly defrauding investors through a multimillion-dollar oil and gas scam. Since 2007, the SEC says, the defendants have raised at least $25 million from more than 400 foreign investors for energy projects while using only a fraction of that money for actual oil and gas deals. Moreover, the SEC says, the defendants misled investors about the profitability and prospects of the two energy ventures that they did pursue. The agency last week blocked the defendants from recruiting additional investors and ordered them to return any remaining funds generated from the alleged scheme. It is seeking full restitution, plus “other relief,” from the defendants as well.

Bogus Hedge Fund Operators Sentenced to Prison for Fraud

6/21/2010 6:09:44 AM

Alan Fishmen, a former livery cab driver who ran a now-defunct hedge fund known as A.R. Capital Group, has been sentenced to 37 months in prison for operating an investment scam that cost its victims $20 million, Dow Jones reported. According to federal prosecutors, Dow Jones said, Fishmen and several co-conspirators tricked dozens of investors into sinking their funds into bogus real estate and energy ventures and then used their cash for other purposes instead. Daniel Levden, a former furniture store manager who handled day-to-day operations at Fishmen’s firm, received an even longer prison sentence – totaling 57 months – for his prominent role in the alleged scam, Dow Jones said. A third defendant has pleaded guilty to conspiracy and is currently awaiting sentencing for his crimes, Dow Jones added, while a fourth faces charges but has so far eluded authorities who are pursuing the case.

Ex-Qualcomm Marketing Director Settles Insider Trading Charges

6/18/2010 9:40:43 AM

Andres Leyva, a former director of strategic marketing analysis for California-based Qualcomm (Nasdaq: QCOM), has inked a deal to settle charges filed against her for allegedly trading the company’s stock based on inside information. According to the U.S. Securities and Exchange Commission, Leyva learned that Qualcomm had secured a favorable legal settlement from Nokia (NYSE: NOK) and purchased “call” options on Qualcomm’s stock that jumped in value upon public release of the news. Without admitting or denying any wrongdoing, Leyva has agreed to disgorge the $35,000 in gains she realized from that transaction – and pay an equal amount in penalties – in order to settle the SEC’s charges.

Canadians Sanctioned over Suspicious Penny Stock Trades

6/18/2010 9:35:12 AM

John Anastasious Collias and Karen Marie Young, two Vancouver-based investment professionals, have been sanctioned for failing to properly police suspicious trades in various penny stocks. According to the Investment Industry Regulatory Organization of Canada, the pair fell short in their roles as “gatekeepers to the capital markets” when they allowed sales of stocks with price and volume charts that were “consistent with a ‘pump-and-dump’ scheme or improper market-related activity.” Both Collias and Young must pay $25,000 in fines and penalties, while honoring an eight-month professional ban, as a result of their alleged shortcomings.

Wealth Resources Accused of Operating Investment Scam

6/18/2010 9:31:43 AM

The U.S. Securities and Exchange Commission has cracked down on Michigan-based Wealth Resources and its owner, Martin Wegener, for allegedly operating a multimillion-dollar investment scam. Between 2007 and March of 2010, the SEC claims, Wealth Resources raised $6.5 million from at least 20 investors by promising to spend their money on stocks, mutual funds and other securities. However, the SEC says, the firm used the funds for other purposes – such as personal business expenses – instead. The SEC has agreed to settle its charges and is now seeking a court order requiring the defendants to disgorge their ill-gotten gains and pay financial penalties (to be determined at a later date) as a result of their alleged misconduct.

Former Money Manager Seeks to Withdraw Previous Guilty Plea

6/18/2010 9:27:19 AM

John Lawton, a former Minnesota money manager, has filed a court motion seeking to withdraw his guilty plea to federal charges that accused him of misleading and defrauding clients who lost more than $10 million invested with his firm, the Star-Tribune newspaper reported. Lawton now says he panicked after regulators shut down his operation last year, the newspaper said, and has since hired a forensic accountant who blamed the losses on “a perfect storm” of negative market developments instead. “My own family and I lost significant money,” Lawton stated in the article, adding that “the words ‘scheme,’ ‘theft’ and/or ‘swindle’” never surfaced during the discussions that led to his guilty plea.

SEC Targets California Firms Suspected of Ponzi Scheme

6/18/2010 9:20:00 AM

The U.S. Securities and Exchange Commission this week secured an emergency court order freezing the assets of four California firms and their owner, Matthew Jennings, suspected of orchestrating a $53 million Ponzi-like scheme. Under the leadership of Jennings, the SEC says, the firms – all operating under the “Westmoore” brand name – courted investors by promising them “exorbitant” returns on their money and then used the funds to pay off earlier investors and cover personal expenses instead. The SEC has now halted the suspected scam and will seek full restitution, plus penalties and interest, from the defendants going forward.

Prosecutors Announce Charges in Suspected Home Mortgage Scam

6/18/2010 9:16:14 AM

State prosecutors announced this week that they have filed charges against Genilza Nunes for her alleged role in a massive scam involving fraudulent real estate mortgages. According to the New Jersey Attorney General, Nunes used false identities and counterfeit documents to secure loans for so-called “straw buyers” of foreclosed homes that were quickly “flipped” at a profit based upon inflated appraisal values. Nunes allegedly worked with a slew of co-conspirators – including real estate agents, mortgage loan brokers, property appraisers, notaries and lawyers – who assisted with the sophisticated multimillion-dollar scam. She was actually arrested and thrown in jail months ago, but state officials waited until this week to announce the charges because of its ongoing investigation of others connected to the scheme. She has been charged with four different felonies – conspiracy, money laundering, securities fraud and theft by deception – with the most serious carrying a maximum penalty of 20 years in jail. Government officials expect to file charges against others involved in the alleged scam as well.

Former Skylynx Chairman Sentenced to Five Years

6/18/2010 9:10:11 AM

Gary L. Brown, the former chairman of Skylynx Communications (OTC: SKYC.PK), has been sentenced to five years in prison for carrying out a multimillion-dollar stock manipulation scheme, the Associated Press reported. Brown pleaded guilty to multiple felonies – including conspiracy to commit securities fraud, wire fraud and money laundering – in January, the A.P. noted, admitting that he and others conspired to artificially inflate Skylynx shares and then pocketed millions by selling their own stock to the unsuspecting public. He has been ordered to forfeit more than $650,000 in illicit gains, the A.P. said, and must serve three years of supervised release after completing his five-year jail term.

Repeat Offender Sentenced to 20 Years for Securities Fraud

6/18/2010 9:04:26 AM

Kenneth Gerald Berry, a repeat offender convicted in the past of several financial-related crimes, has been sentenced to 20 years in prison for his latest scam. This time, government authorities say, Berry raised $10,000 from investors and then used the money for his own personal expenses. Both Berry and his wife, Anne Wakeford Berry, pleaded guilty to securities fraud charges earlier this year. Mrs. Wakeford was sentenced to five years of probation, including one year of work release, for her role in the crime.

State Authorities Crack Down on Two Men Suspected of Fraud

6/17/2010 9:22:41 AM

Delaware authorities have filed charges against two men suspected of carrying out separate investment scams, The News Journal of Wilmington reported. In the first case, the newspaper said, Thomas Dolby faces three felony charges – securities fraud, theft and racketeering – for allegedly taking more than $400,000 from investors for a bogus real estate deal in Turkey. In the second, the newspaper said, Robert Smithfield has been charged with securities fraud and theft for allegedly scamming investors who sank $60,000 into a company he started. In that case, the newspaper noted, Smithfield supposedly used money from early investors to make interest payments to others in a Ponzi-like scheme.

Charges Filed over Possible Scam Targeting Haitian-Americans

6/17/2010 9:16:37 AM

Federal prosecutors this week filed charges against four men suspected of scamming Haitian-American investors through a multimillion-dollar Ponzi scheme. Through two businesses known as Focus Development Center and Focus Financial Group, government authorities say, the defendants sold $8 million worth of bogus promissory notes that would supposedly deliver generous returns by investing in businesses benefitting the Haitian-American community. However, authorities say, the defendants used most of that money for Ponzi payments to later investors and their own personal expenses instead. The following defendants now face charges for their alleged involvement in the scam: Maxo Francois, Jean Fritz Montinard, Alby Pierre-Louis and Maguy Nereus. They have been accused of conspiracy to commit mail fraud and conspiracy to commit money laundering.

Conviction of Former Evergreen Bookkeeper Reversed on Appeal

6/17/2010 9:12:35 AM

A federal appeals court this week reversed the conviction of former Evergreen bookkeeper Mandle Pugh, the Akron Beacon Journal reported, who was found guilty last year of money laundering for allegedly assisting former Evergreen President David Willan with a corrupt financial scheme. Pugh was previously acquitted on more serious charges, the newspaper said, but was convicted on a money laundering charge that supposedly required proof of her involvement in the broader corruption scam. “The state’s theory of Pugh’s case, both in the trial court and on appeal, seems to be that because Pugh repeatedly transferred funds for Willan, she committed money laundering,” an appellate judge stated in the article. But “there is no evidence in the record that connects Pugh’s repeated transactions … with a corrupt activity.” Willan himself was found guilty last year of corruption and 68 additional felonies, the newspaper added, and is currently appealing his convictions as well.

Prosecutors File Charges over Suspected Real Estate Scam

6/17/2010 9:08:36 AM

Federal prosecutors this week filed fraud charges against Antoinette Hodgson, Dow Jones reported, a New Jersey woman suspected of selling bogus real estate investments through a $45 million Ponzi scheme. According to government authorities, Dow Jones said, Hodgson courted investors by portraying herself as “an expert at purchasing foreclosed residential properties in New Jersey” that could deliver generous returns. However, Dow Jones said, Hodgson allegedly spent only a fraction of the money she raised on real estate and used the rest for Ponzi payments and personal expenses – including casino gambling – instead. Now charged with wire fraud, Dow Jones noted, Hodgson faces up to 20 years in prison if convicted of her alleged crimes.

Financial Adviser Sentenced to Seven Years in Prison for Fraud

6/17/2010 9:04:45 AM

Gregg Rennie, a former financial adviser and radio talk show host, was sentenced this week to seven years in prison after pleading guilty in January to wire and securities fraud, The Patriot Ledger reported. According to federal prosecutors, the newspaper said, Rennie raised millions of dollars by selling phony “federally-insured” housing certificates for a real estate project that later failed when the housing bubble burst. In court papers, the newspaper said, Rennie’s attorney portrayed his client as a naïve investor who believed in the project until it ultimately collapsed. “He clung to the Pollyannaish view that, with ‘just a little more capital,’ the real estate project would be completed, sold and the funds returned to everyone,” Rennie’s lawyer stated in the article. But “after the first lie, (he) was trapped, and his eventual downfall was inevitable.” Prosecutors had recommended an eight-year sentence for Rennie, the newspaper noted, arguing that he had stolen money from “the most vulnerable members of society” when carrying out his scam.

Former Wachovia VP Pleads Guilty in Embezzlement Case

6/17/2010 9:00:50 AM

Scott Welch, the former vice president of a Wachovia (NYSE: WB) distribution center in North Carolina, has pleaded guilty to felony charges stemming from his embezzlement of more than $11 million in bank funds, the Associated Press reported. According to federal prosecutors, the A.P. said, Welch spent years scamming the bank by submitting bogus invoices for goods and services that it never received. He pleaded guilty to mail fraud and tax evasion on Wednesday, the A.P. said, and now faces a recommended sentence of 10 to 12 years in prison for his crimes. He will remain free on bail until his formal sentencing date, the A.P. added, but has already agreed to forfeit his $1.2 million home in the meantime.

UBS Cleared to Release Data on Suspected U.S. Tax Dodgers

6/17/2010 8:55:21 AM

UBS (NYSE: UBS) can finally comply with a U.S. order to release account information on thousands of American clients suspected of tax evasion, The New York Times reported, now that Swiss lawmakers have blessed the move and decided against a proposal that would have allowed voters to weigh in on the measure. With both Houses of the Swiss Parliament rejecting a voter referendum on the matter, the Times said, UBS looks poised to meet an August deadline for supplying the information to U.S. authorities. UBS agreed to turn over data on 4,450 suspected tax cheats under a settlement with the U.S. government last year, the Times explained, but needed Swiss lawmakers to pass a measure that would make the action legal first. In a statement issued this week, the Times said, UBS portrayed the Parliament’s recent decision as “an important step to support the resolution at the governmental level” and said that it is “confident” that it will soon meet its obligations to U.S. officials.

Former Mortgage Executive Charged with Massive Fraud

6/17/2010 8:50:52 AM

Lee Farkas, the former leader of Taylor, Bean & Whitaker Mortgage Corp., has been charged with defrauding the giant mortgage lender and then illegally seeking federal bailout funds in an effort to replenish the firm’s resources, Reuters reported. According to government prosecutors, Reuters said, Farkas illegally attempted to obtain more than $550 million in bailout funds for TBW – which once ranked among the largest private mortgage lenders in the country -- but ultimately failed when his application raised the suspicions of authorities instead. Saddled with huge debt loads racked up through years of suspected fraud, Reuters said, TBW wound up filing for bankruptcy protection in August of last year. Farkas has now been charged with bank and securities fraud for his alleged misconduct, Reuters said, and could face life in prison if he’s convicted of the crimes.

Strategic Equity Inks Settlement in Shift Networks Trading Case

6/16/2010 7:54:46 AM

The Alberta Securities Commission has agreed to settle charges against Calgary-based Strategic Equity and David Bulloch, a former company manager, for selling shares of Shift Networks based upon material nonpublic information. According to the ASC, the defendants sold 2 million shares of Shift Networks – escaping approximately $130,000 in losses – after learning about the company’s distressed financial condition. Meanwhile, the ASC said, the defendants placed numerous buy orders for Shift Network’s stock in an effort to create the impression of legitimate demand for the company’s shares. Under the terms of the settlement agreement, the defendants must now pay $280,00 in fines and cease trading in securities for the next two to three years.

Canadian Could Land in Prison for Alleged Securities Fraud

6/16/2010 7:48:01 AM

Howard Rash, a Canadian accused of violating securities laws through his trades in an outfit known as Global Energy Group, could wind up in prison if he’s found guilty of the charges, StockWatch reported. The Ontario Securities Commission this week confirmed that it has filed charges against Rash, StockWatch said, including one count of securities fraud and two counts of breaching cease-trading orders levied against him several years ago. If convicted, StockWatch noted, Rash faces up to five years in prison and $5 million in fines as punishment for his alleged crimes.

Bogus Mine Developer Set to Plead Guilty to Fraud Charges

6/16/2010 7:43:34 AM

Alberto DoCouto, a Canadian developer accused of stealing more than $26 million from investors for bogus mining projects, has agreed to plead guilty to securities fraud, Bloomberg News reported. DoCouto has already spent almost three years in a Las Vegas jail awaiting trial, Bloomberg said, and could face another 63 to 150 months behind bars when he is formally sentenced for his crimes. According to his plea agreement, Bloomberg said, U.S. prosecutors plan to recommend a sentence at the high end of that range. DoCouto has faced fraud charges in his home country of Canada as well, Bloomberg noted, but he secured an acquittal and relocated to the U.S. after that time.

Stock Halted for Company Liquidating Stanford Assets

6/16/2010 7:39:31 AM

Vantis (LSE: VTS.L), a British accounting firm hired to liquidate the assets of the Antigua bank founded by suspected Ponzi scheme operator Allen Stanford, this week suspended trading in its shares due to funding woes that could threaten its survival, the Guardian newspaper reported. The firm has struggled to receive timely liquidation fees from Stanford’s bank, the newspaper said, which is suspected of operating a multibillion-dollar Ponzi scheme. Meanwhile, the newspaper noted, an Antigua court ruled last week that two Vantis liquidators should be replaced amidst ongoing disputes with a U.S. receiver over control of the bank’s assets. One of those liquidators – along with Vantis CEO Paul Jackson – resigned from the company’s board this week, the newspaper said, although both men will continue to serve in executive capacities. Shares of Ventis have lost more than 90% of their value over the course of the past year.

Auction Slated for Items Owned by Adviser Who Faked Death

6/15/2010 11:19:20 AM

An auction house in Indianapolis has arranged to sell hundreds of assets owned by Marcus Schrenker, the Associated Press reported, a suspected Ponzi scheme operator who made headlines last year after trying to fake his own death in an airplane crash. Schrenker’s possessions – including the motorcycle he rode when fleeing from police – will be auctioned off to help raise money to repay investors, the A.P. said, who lost more than $1 million as a result of the alleged financial scam. Schrenker has already been sentenced to four years in prison over the plane crash, the A.P. noted, and is scheduled to go on trial in October to face securities fraud charges stemming from the alleged Ponzi scheme.

Former Racecar Driver Could See Bail Revoked in Ponzi Case

6/15/2010 10:53:13 AM

Government prosecutors have asked a judge to revoke bail for Henri Zogaib – a former racecar driver accused of operating a multimillion-dollar Ponzi scheme – for allegedly using illicit proceeds from the scam to post the funds necessary to get out of jail, the Daytona Beach News Journal reported. Zogaib was supposed to rely on his father to bail him out, the newspaper said, but he allegedly convinced his mother to sell an Audi vehicle – which he purchased on her behalf – to provide bail money instead. Zogaib was arrested in February for allegedly bilking fellow racecar drivers and other investors through a $5.1 million Ponzi scheme, the newspaper said, but was released from jail in May after posting $100,000 bail. Accused of felony fraud, the newspaper noted, Zogaib has pleaded not guilty to the government’s charges.

Regulators File Charges in Case Involving Suspicious Bond Sales

6/15/2010 10:12:32 AM

The U.S. Securities and Exchange Commission has filed charges against California-based United American Ventures and its two principals, Philip Thomas and Eric Hollowell, for allegedly fleecing 100 investors by selling them $10 million worth of fraudulent bonds. According to the SEC, the defendants promised investors generous returns on bonds issued to medical-related ventures and then used the money for other purposes – including “exorbitant salaries” for themselves -- instead. Moreover, the SEC claims, the defendants misrepresented Thomas’s professional experience and failed to disclose that he had been barred from participating in any securities offerings in the past. The SEC also filed charges against the following parties for allegedly assisting with the scheme: Integra Investment Group, Matthew Dies and Anthony Oliva. Without admitting or denying wrongdoing, the defendants have agreed to settle the charges and will face financial penalties to be determined by the court at a later date.

Convicted Ponzi Scheme Operator Receives Harsh Prison Sentence

6/15/2010 9:48:46 AM

Terry Brinley, a Tennessee community leader convicted of running a $3.4 million Ponzi scheme, must serve nine years in prison – more than the six-and-a-half-year maximum recommended under federal sentencing guidelines – as punishment for his crimes, The Commercial Appeal has reported. When ordering the stiff penalty last week, the newspaper said, a federal judge ruled that traditional guidelines did not properly reflect the impact suffered by victims who lost their life savings in the scam. “You have many people who have had their lives destroyed,” the judge stated in the article. “I don’t believe I’ve ever seen a more serious white-collar crime than this one.” Formerly a pillar of his local community, the newspaper noted, Brinley served as a church deacon and a Rotary Club member – winning over friends and neighbors who entrusted him with their funds – before the scheme came unraveled and led to his arrest.

Swiss Parliament Votes to Allow Release of UBS Bank Records

6/15/2010 9:21:46 AM

Both houses of the Swiss Parliament have now approved a measure that would allow UBS (NYSE: UBS) to release information on thousands of U.S. clients suspected of using secret accounts to dodge tax payments, The New York Times reported. UBS must supply the records in order to avoid criminal charges by U.S. authorities, the Times explained, but the Swiss government has to bless the agreement – which was ruled illegal by the country’s highest court – before that can happen. Although the lower house of the Swiss Parliament originally rejected the deal, the Times said, it reversed course and joined the upper house in passing the measure this week. However, the Times noted, the lower house approved a proposed popular vote on the measure that could still prevent UBS from meeting its August deadline for complying with the U.S. settlement deal.

Aide to Former NY Comptroller Targeted in 'Pay-to-Play' Scam

6/15/2010 6:48:50 AM

Henry “Hank” Morris, a top aide to former New York Comptroller Alan Hevesi, has been accused of pocketing millions of dollars from a “pay-to-play” scam involving the state’s largest pension fund, Reuters reported. According to New York Attorney General Andrew Cuomo, Reuters said, Morris and his co-conspirators used political ties to secure business from the pension fund and then collected more than $35 million in professional fees for their services. Cuomo has accused Morris of using “lies, deceit and self-dealing” to land that business, Reuters said, while arguing that “everybody does it” is no defense against the charges. “The fact that fraud and corruption may be rampant,” Cuomo stated in the article, “does not cloak wrongdoers with impunity.” So far, Reuters noted, six defendants have pleaded guilty to criminal charges stemming from the case. In addition, Reuters added, more than a dozen private equity firms – including the Quadrangle Group and the Carlyle Group – have paid big fines to settle charges linking them to the same scam.

Vancouver Stock Promoter Pleads Guilty to Tax Charges

6/14/2010 9:16:13 AM

Michael James Savage, a Vancouver stock promoter banned from trading securities in British Columbia, pleaded guilty last week to dodging tax payments on income he allegedly generated through an alleged securities scam, the Vancouver Sun reported. While serving as president of Savage Tele.com, the newspaper said, Savage allegedly used company funds for personal expenses and then failed to report that income to tax authorities. He has been ordered to pay $85,000 in taxes and penalties to settle the case, the newspaper said, and still owes another $100,000 in regulatory fines levied against him for allegedly defrauding victims who invested in his company. He was barred from trading stocks in B.C. two years ago, the newspaper noted, and will remain under that ban for the next eight years.

SEC Cracks Down on NY Firm Suspected of Bridge Loan Scam

6/14/2010 9:12:15 AM

The U.S. Securities and Exchange Commission has taken emergency action to halt a suspected investment scam operated by New York-based Chimay Capital Management and its chairman, Guy Albert de Chimay. According to the SEC, the defendants raised at least $6 million from investors by promising to pool their money with funds from the Chimay royal family of Belgium to provide short-term loans that guaranteed generous returns and protection of their original investment. However, the SEC says, the defendants never invested in the short-term loans and spent the money on personal expenses – including $600,000 for divorce attorneys – instead. The SEC is currently seeking to freeze the defendants’ remaining assets while it moves forward with its investigation of the case.

Suspected Ponzi Operator Ordered to Repay Millions

6/14/2010 9:08:24 AM

Richard Elkinson, a suspected con artist accused of operating a multimillion-dollar Ponzi scheme, has been ordered to pay $29 million in restitution in fines under a settlement inked last week with the U.S. Securities and Exchange Commission, The Boston Globe reported. According to government authorities, the newspaper said, Elkinson raised millions for a bogus uniform-financing business and then used the money for gambling and other purposes instead. Elkinson was arrested at a Mississippi casino in January, the newspaper said, and is currently awaiting trial on felony charges in a parallel criminal case.

Ex-Detroit School Administrator Implicated in Suspected Scam

6/14/2010 9:04:52 AM

April Royster, the former deputy CFO for Detroit Public Schools, is suspected of helping her husband run an alleged $1.9 million Ponzi scheme that was shut down last week by state officials, The Detroit News reported. Together with her husband Martin (who operates a firm known as Royster, Carberry, Goldman & Associates) and three other defendants, the newspaper said, the former school official is accused of promising extraordinary returns on legitimate investments and then using client funds for other purposes instead. The defendants allegedly used some of the money to pay off early investors, the newspaper said, while using the rest to finance their luxurious lifestyle. Michigan regulators have shared their findings with state prosecutors, the newspaper said, who could now pursue criminal charges – punishable by up to 10 years in prison – in the case.

Casey's Sues Unwanted Suitor for Alleged Stock Manipulation

6/14/2010 9:00:43 AM

In a lawsuit filed Friday, The Globe and Mail reported, Casey’s General Stores (Nasdaq: CASY) accused Canada-based Couche-Tard (ATD-B.TO) – one of the world’s largest convenience store chains – of manipulating its stock in an effort to buy the company out on the cheap. According to the complaint, the newspaper said, Couche-Tard announced plans to buy Casey’s and then sold almost 2 million shares of Casey’s stock in order to depress the company’s share price and make the offer look more fair. Casey’s is now seeking a court injunction, the newspaper said, which would prevent Couche-Tard from moving forward with its buyout plans through a tender offer. “By announcing its intent to acquire Casey’s in a hostile takeover and then immediately selling nearly 2 million shares of Casey’s stock on the open market,” court documents cited by the newspaper stated, “Couche-Tard simultaneous: (1) reaped millions of dollars of profit in a classic ‘pump-and-dump’ scheme; and (2) artificially depressed the run-up in Casey’s stock that otherwise would have followed the announcement of Couche-Tard’s takeover bid, thereby making Couche-Tard’s lowball tender offer appear more viable than it actually was. (Thus), Couche-Tard should be enjoined from capitalizing any further on its misdeeds.” For its part, the newspaper said, Couche-Tard has portrayed the lawsuit as “entirely without merit” and pledged to vigorously defend itself against the “baseless” claims.

Another Law Firm Seeks to Withdraw from Stanford Case

6/14/2010 8:56:00 AM

R. Allen Stanford, a former billionaire suspected of operating a massive Ponzi scheme, could soon lose yet another law firm hired to represent him in the case, the Associated Press reported. Patton Boggs, one of three firms defending Stanford against civil fraud charges, has asked to withdraw from the case because of “irreconcilable differences” with the legal strategy being employed by one of the suspected con artist’s leading criminal attorneys, the A.P. said. “There is lots of overlap between the (civil) action and the criminal action,” Patton Boggs stated in the article. “There has to be coordination between the two groups in order to best serve Mr. Stanford – and that is just not happening.” Stanford has already dismissed several lawyers assigned to his criminal case, the A.P. noted, including one who remains involved under court orders by a judge who’s expressed frustration with the ongoing changes.

Celebrity Money Manager Pleads Not Guilty to Securities Fraud

6/14/2010 8:48:37 AM

Kenneth Starr, a New York financial adviser who managed money for several A-list celebrities, pleaded not guilty last week to numerous charges of securities and wire fraud, Dow Jones reported. According to a 23-count indictment, Dow Jones said, Starr raised almost $60 million from his former clients – including Annie Leibovitz, Martin Scorsese and Wesley Snipes – and then used much of that money to finance his luxurious lifestyle. Jailed since his May 27 arrest, Dow Jones noted, Starr no longer has access to his firm’s accounts and is currently relying on a public defender for legal assistance until he can hire his own attorney.

Rothstein Aide Pleads Guilty to Conspiracy in Ponzi Case

6/14/2010 8:44:36 AM

Debra Villegas, the former chief operations officer at the law firm run by convicted Ponzi schemer Scott Rothstein, has pleaded guilty to money laundering conspiracy for her role in the massive investment scam, the Associated Press reported. Widely considered Rothstein’s “right-hand woman,” the A.P. said, Villegas confessed in court that she knowingly forged bogus legal settlements used to perpetuate the Ponzi scheme. She also admitted that she accepted generous gifts from Rothstein – including a $407,000 home and a $130,000 Maserati – as a reward for her services, the A.P. added. “To say that she was involved (in the scheme) would be an understatement,” a judge stated in the article. “She was intimately involved.” The only defendant besides Rothstein charged in the case so far, the A.P. noted, Villegas could face up to 10 years in prison when she is sentenced this August for her crimes. Meanwhile, the A.P. added, Rothstein himself was sentenced last week to 50 years in prison for orchestrating the elaborate scam.

SEC Cracks Down on Suspected $300 Million Ponzi Scheme

6/11/2010 7:23:50 AM

The U.S. Securities and Exchange Commission has filed charges against two Canadians, Milowe Allen Brost and Gary Allen Sorenson, suspected of using the lure of gold to trap thousands of investors from around the world in a $300 million Ponzi scheme. According to the SEC, Brost and his sales team funneled investor funds into a series of shell companies through a “structuring” process that culminated with the money being transferred from Syndicated Gold Depository – an outfit that Brost and Sorenson controlled – to Merendon Mining, a company that supposedly owned successful gold mines. As the leader of Merendon, the SEC said, Sorenson would then take potential investors on tours of the company’s Honduran refinery and even demonstrate “the pouring of gold bars while making false claims about the profitability of his company.” In reality, the SEC says, the men sent investor funds to secret accounts in more than a dozen countries and then used the money to make Ponzi-like payments and purchase expensive assets – including extravagant homes and a luxury fishing resort in South America – for themselves. The SEC has also filed charges against the following as suspected co-conspirators in the case: Syndicated Gold Depository, Merendon Mining, the Institute for Financial Learning, Larry Lee Adair, Ward K. Capstick, Bradley Dean Regier and Martin M. Werner. The SEC has named Sorenson’s wife and daughter as relief defendants as well.

Ex-CIT Leaders Must Defend Themselves against Charges

6/11/2010 7:19:15 AM

A federal judge this week ordered past CIT Group (NYSE: CIT) leaders – including former CEO Jeffrey Peek – to defend themselves against a class-action shareholder lawsuit that accuses them of misleading investors in the years leading up to the company’s 2009 bankruptcy, Reuters reported. In an official court ruling, Reuters said, the judge wrote that the plaintiffs had adequately pleaded that former CIT leaders approved lowered lending standards while at the same time touting “conservative” and “disciplined” subprime lending practices that should lead to “minimal” losses for the company. Instead, Reuters noted, CIT lost so much money on subprime mortgages that it needed a $2.3 billion bailout from the government and still wound up filing for bankruptcy last November anyway. CIT emerged from bankruptcy the following month, Reuters said, and now trades on the New York Stock Exchange once again.

UBS Could Face Criminal Charges in Luxembourg Probe

6/11/2010 7:12:41 AM

UBS (NYSE: UBS) has come under scrutiny by Luxembourg authorities, Reuters reported, who are investigating the Swiss bank’s oversight of two funds that lost billions of dollars in Bernard Madoff’s massive Ponzi scheme. Specifically, Reuters said, Luxembourg police are examining documents linked to two UBS funds – known as LuxAlpha and LuxInvest – for signs of possible forgery. If the police uncover damaging evidence, Reuters said, they could file criminal charges against the bank. For its part, Reuters said, UBS claimed that it created the funds at the request of wealthy clients who wished to invest with Madoff and denied any explicit obligation to oversee those funds. “The fund documentation made it clear that UBS (Luxembourg) SA was not expected to be responsible for the safekeeping of the assets,” UBS stated in the article. “(It) contained an explicit waiver to that effect.”

Defendant Wants Separate Trial in Wild Stanford Ponzi Case

6/11/2010 7:06:06 AM

Laura Holt, one of five alleged co-conspirators in R. Allen Stanford’s suspected $7 billion Ponzi scheme, is seeking a separate trial in an effort to distance herself from the “circus-like” behavior of her former boss in court, the Houston Chronicle reported. This week, the newspaper said, Holt told a judge that she cannot receive a fair trial if tried together with her former boss because of his damaging courtroom antics. Specifically, the newspaper said, Holt has complained that Stanford and his lawyers have “set up potentially unethical entities to practice in Texas, have been accused of committing insurance fraud and bankruptcy fraud and have faked health issues in court.” The former chief investment officer of Stanford Financial Group, the newspaper noted, Holt is charged along with Stanford and four other defendants – Gil Lopez, Mark Kuhrt, Leroy King and James Davis – with helping Stanford carry out his suspected scam. All of the defendants have pleaded not guilty except for Davis, the newspaper said, who was charged separately and is expected to testify against his alleged co-conspirators in the high-profile case.

Rothstein Aide Expected to Plead Guilty in Notorious Ponzi Case

6/11/2010 6:59:35 AM

Debra Villegas, the former COO for the once-mighty law firm built by convicted Ponzi schemer Scott Rothstein, is expected to plead guilty this week to aiding the disgraced attorney with his $1.2 billion scam, the Associated Press reported. According to government prosecutors, the A.P. said, Villegas helped Rothstein fabricate legal settlements that drew investors into the massive Ponzi scheme. She originally pleaded not guilty to money laundering conspiracy, the A.P. said, but recently signaled in court documents that she will reverse that plea. If convicted, the A.P. said, Villegas could face up to 10 years in prison for her alleged crimes. Meanwhile, the A.P. noted, Rothstein himself was sentenced to 50 years in prison earlier this week for orchestrating the elaborate scam.

Celebrity Money Manager Now Suspected of Wider Fraud

6/11/2010 6:54:35 AM

Kenneth Starr, a New York investment adviser who managed money for several A-list Hollywood celebrities, is suspected of stealing more cash from more clients than authorities originally thought, The New York Times reported. In a new indictment unveiled this week, the Times said, Starr stands accused of taking at least $59 million from almost a dozen different victims. Under Starr’s original indictment late last month, the Times noted, those numbers came to about half that size. “In less than two weeks since Kenneth Starr’s arrest, this investigation has maintained its velocity,” a federal prosecutor stated in the article. “The scope of the alleged fraud has doubled and is now up to $59 million and counting.” Now charged with 20 counts of wire fraud and several other felonies, the Times said, Starr could face up to two decades in prison if convicted of his alleged crimes.

Geology Consultant Settles Insider Trading Charges

6/10/2010 8:50:44 AM

Robert George Bain, a geology consultant for a business partner of Vast Exploration (OTC: VSTFF.PK), has agreed to pay almost $20,000 to settle charges that he traded in Vast’s stock based on inside information. According to the Alberta Securities Commission, Bain purchased 20,000 shares of Vast after learning about a significant – but undisclosed – energy contract inked by the company and then scored $6,400 in gains when the news was released. He must now pay almost three times that amount in order to settle the agency’s charges and refrain from trading in any securities for the next 15 months as well.

Former Advanced Materials CFO Charged with Securities Fraud

6/10/2010 8:37:25 AM

William G. Mortensen, the former CFO of Texas-based Advanced Materials Group (OTC: ADMGQ.PK), faces civil fraud charges for allegedly cooking the company’s books and misusing company funds to cover his own personal expenses. Between March 2008 and February 2009, the U.S. Securities and Exchange Commission says, Mortensen directed alleged co-conspirator Feng “Eric” Zheng to falsify sales to two of AMG’s largest customers and then used the inflated receivables to obtain loans that financed his personal activities. Specifically, the SEC says, Mortensen spent the illicit funds on the following: country club fees, home remodeling projects, property taxes and family vacations to Florida and abroad. The SEC is seeking financial penalties – plus a permanent officer-and-director bar – against Mortensen for his alleged misconduct. Meanwhile, the agency has ordered Zheng to pay a $25,000 penalty for his alleged involvement in the scam.

Former Lucent Executives Settle Accounting Fraud Charges

6/10/2010 8:18:15 AM

The U.S. Securities and Exchange Commission has fined two former Lucent Technologies (NYSE: LU) executives, Alice Leslie Dorn and Jay William Carter, for allegedly engaging in accounting fraud while working for the company a decade ago. As Lucent’s vice president of indirect sales for North America, the SEC says, Dorn inked side deals with distributors that led the company to improperly recognize revenue and materially overstate earnings back in fiscal year 2000. Similarly, as president of Lucent’s AT&T (NYSE: T) customer business unit, Carter allegedly authorized side agreements with AT&T that allowed the company to overstate its financial results during that same year as well. The SEC has ordered Dorn to pay $40,000 and Carter to pay $25,000 in order to settle the agency’s charges.

DJ Harriett Owner Pleads Guilty to Operating Ponzi Scheme

6/10/2010 7:49:36 AM

David Harriett, the owner of Ohio-based DJ Harriett, pleaded guilty this week to one count of mail fraud stemming from his operation of a multimillion-dollar Ponzi scheme. Between August 1996 and January 2010, prosecutors estimate, Harriett stole $7 million from 200 investors by promising them generous returns on bogus loans for McDonalds (NYSE: MCD) and Pioneer Chicken franchises. Harriett never had any construction contracts with either franchise, prosecutors say, and used the money to pay off earlier investors and cover his own personal expenses instead. Under federal sentencing guidelines, prosecutors note, Harriett could face up to 78 months in prison as punishment for his crimes.

SEC Seeks Millions More from Vancouver Stock Promoter

6/10/2010 7:35:35 AM

The U.S. Securities and Exchange Commission has filed a lawsuit against Vancouver stock promoter Brent Pierce, The Province newspaper reported, seeking $8 million that he allegedly collected from illegal stock trades and then hid from regulators in secret offshore accounts. According to the SEC, the newspaper said, Pierce sold overhyped stock in Lexington Resources – a now-defunct energy company – and then funneled much of the proceeds into two secret accounts that he concealed from the SEC when it originally inked a $2 million settlement with him in the past. The SEC now wants Pierce to disgorge the additional funds, the newspaper said, bringing his potential payout to $10 million in the case.

Goldman Hit with New Complaint over Controversial CDO Sales

6/10/2010 7:17:39 AM

Basis Capital, an Australian hedge fund, has filed a lawsuit against Goldman Sachs (NYSE: GS) for selling its Basis Yield Alpha Fund a toxic collateralized debt obligation (CDO) that caused the fund’s collapse, Bloomberg reported. According to the complaint, Bloomberg said, Goldman privately referred to the CDO as “one shi**y deal” but knowingly sold the investment to the doomed fund anyway. The fund sank $78 million into the so-called “Timberwolf” CDO, Bloomberg said, and wound up insolvent due to the massive losses that resulted. Goldman created a similar CDO known as “Abacus,” Bloomberg noted, which has since triggered a high-profile investigation by the U.S. Securities and Exchange Commission. Goldman has denied any culpability in the latest case, Bloomberg said, dismissing the lawsuit as a “misguided attempt by Basis – a hedge fund that was one of the world’s most experienced CDO investors – to shift its investment losses” to Goldman itself instead.

FBI Raids 'Boiler Room' with Suspected Ties to the Mob

6/10/2010 6:35:51 AM

Federal authorities filed fraud charges against 13 people this week, The Wall Street Journal reported, after raiding a Manhattan “boiler room” with suspected ties to the Mafia. According to court documents, the Journal said, Anthony Guarino – a purported soldier for the Bonnano crime family – led the operation, which allegedly sold investors more than $12 million worth of stock based on false information. Guarino now faces felony charges, the Journal said, as do the CEOs of two companies involved in the suspected scam. Notably, the Journal, said, one of those company leaders – Realcast CEO Steven Kimmel – has identified himself as a past employee of the U.S. Securities and Exchange Commission in company documents. Ten other defendants face fraud charges as well, the newspaper added.

Disgraced Attorney Sentenced to 50 Years for Ponzi Scheme

6/10/2010 6:09:01 AM

Scott Rothstein, a once-powerful attorney who led a prestigious law firm in Florida, has been sentenced to 50 years in prison for operating a $1.2 billion Ponzi scheme, the Associated Press reported. Between 2005 and October of 2009, the A.P. said, Rothstein bilked investors by promising them generous returns on confidential legal settlements that did not actually exist. Instead, the A.P. said, Rothstein used money from new investors to pay off earlier investors until the scam ultimately collapsed. Rothstein soon confessed and began cooperating with government authorities after that, the A.P. said, even helping undercover agents nab a suspected Mobster in an unrelated case. He could have faced up to 100 years in prison under federal sentencing guidelines, the A.P. said, but a federal judge ordered him to serve 50 years – 10 years longer than prosecutors had requested – instead. “These actions constitute the most egregious wrongs a licensed attorney can commit,” the judge explained in the article. “It was all about image, wealth, power and influence.”

'Chinese Warren Buffett' Now Trolling for Defense Funds

6/9/2010 8:21:50 AM

Weizhen Tang, the self-proclaimed “Chinese Warren Buffett,” is hosting a barbeque – after already holding a garage sale – in an effort to raise money so that he can defend himself against charges that he bilked investors through a multimillion-dollar Ponzi scheme, the National Post reported. Canadian authorities have accused Tang of tricking his victims by promising them weekly returns of 1% on securities investments, the newspaper said, and then using their funds for other purposes – including payments to earlier clients – instead. For his part, the newspaper said, Tang has maintained his innocence and claims that he is facing “an unjust lawsuit, or even possible imprisonment, due to a series of misunderstandings that all started from the ungrounded accusations of certain investment partners and the wrongful judgment of the authorities.” With his assets currently frozen, the newspaper said, Tang recently held a garage sale and will now follow up with a barbeque fundraiser this weekend in an effort to generate money for his defense. All told, the newspaper said, Tang could face up to 60 years in prison and $60 million in fines if convicted of his alleged crimes.

SEC Seeks to Halt Suspected Scam Targeting Christian Investors

6/9/2010 8:17:13 AM

The U.S. Securities and Exchange Commission has taken emergency action to halt a suspected investment scam targeting Christians with promises of extraordinary returns on bogus energy projects in Nigeria. According to the SEC, Petrogas Overseas Trading and its owner Samuel O. LeMaire – a Texas-based Nigerian who portrays himself as a minister and a “man of God” – has raised at least $2.3 million by appealing to Christians interested in helping needy children, while also making money, on energy investments in his home country. LeMaire allegedly promised investors returns of up to 1,000% on the energy projects but then used the money to finance his luxury lifestyle instead. The SEC has asked the court to freeze the assets held by Petrogas and LeMaire and will seek full restitution, plus penalties and interest, from both defendants.

Failed Luxury Home Builder Suspected of Securities Fraud

6/9/2010 8:12:01 AM

New Mexico officials have obtained a search warrant that could help them determine whether luxury home builder William “Kal” Kalinowski engaged in securities fraud before his company collapsed two years ago, The Santa Fe New Mexican reported. The state’s Construction Industry Division began investigating Kalinowski after receiving a complaint from local realtor Michael D’Alfonso, the newspaper said, who sank money into the doomed business and convinced others to do the same. All told, the newspaper said, D’Alfonso estimates that he helped raise almost $2 million for Kalinowski’s real estate projects. According to paperwork filed for the search warrant, the newspaper said, state investigators suspect that Kalinowski may have used investor funds to cover personal expenses instead of payments to construction workers. “We are trying to understand where a lot of that money went,” D’Alfonso told the newspaper.

CRW Management Leader Pleads Guilty to Fraud in Ponzi Case

6/9/2010 8:07:04 AM

Ray White, the head of Texas-based CRW Management, pleaded guilty this week to one count of commodities fraud stemming from his operation of a multimillion-dollar Ponzi scheme. Between July 2008 and January 2009, federal prosecutors say, White raised $10.9 million from investors for currency trades and then used almost all of that money to make Ponzi-like payments to earlier clients and cover unrelated business expenses. For example, prosecutors say, White spent some of the money on his son’s car-racing career and used additional funds to purchase a motor-sports company for himself. All told, prosecutors estimate, White misused $10.8 million of the funds that he received. He now faces up to 10 years in prison and $1 million in fines as punishment for his crimes.

Leader of California Company Nailed for Penny Stock Scam

6/9/2010 8:03:42 AM

Mark Ellis, the former head of California-based Winsted Holdings, has been sentenced to 18 months in federal custody for evading taxes on $2 million he pocketed by selling worthless penny stock, The Orange County Register reported. Between 2003 and 2007, the newspaper said, Ellis illegally sold billions of shares of stock in Winsted – a company that never made any money – and then failed to report that income on his taxes. Government authorities confronted Ellis about his bogus tax returns in 2008, the newspaper said, at which time he began cooperating with federal prosecutors investigating the penny-stock case. Three co-conspirators have since been convicted, the newspaper said, and two others are currently awaiting trial. Meanwhile, the newspaper said, Ellis has been ordered to serve six months in prison, six months in a halfway house and another six months in home confinement.

Whistleblower Attorney Seeks to Withdraw from Cohen Case

6/9/2010 7:59:27 AM

Gaytri Kachroo, the attorney best known for representing whistleblower Harry Markopolos in his crusade against Bernard Madoff, no longer wishes to handle a controversial lawsuit against SAC Capital Advisors founder Steven Cohen, The Wall Street Journal reported. Cohen’s ex-wife, Patricia Cohen, hired Kachroo to replace another attorney who originally represented her in a lawsuit filed against the hedge fund manager in December, the Journal explained, which made headlines by claiming that Mr. Cohen had concealed income derived from illegal insider trading during the couple’s divorce proceedings. Kachroo has now asked to withdraw from the case, the Journal said, because Ms. Cohen “has been unable to meet her financial obligations” to the law firm. Meanwhile, the Journal noted, Mr. Cohen has described the lawsuit as a “blatant extortion attempt” by his ex-wife and asked the court to dismiss the case.

Former Duane Reade Leaders Convicted on Fraud Charges

6/9/2010 7:53:18 AM

Two former top executives of the Duane Reade drugstore chain were convicted this week on fraud charges for artificially inflating the company’s financial results ahead of its 2004 sale to a private equity firm, Bloomberg News reported. Former CEO Anthony Cuti, who pocketed an estimated $25 million from the buyout, was found guilty of conspiracy and securities fraud for orchestrating the scheme, Bloomberg said. Former CFO William Tennant was convicted of securities fraud for carrying out the financial scam, Bloomberg added. “This is a case about sham transactions designed to make it look like Duane Reade sales were higher than they actually were,” a federal prosecutor stated in the article. “This is a case about fraud.” Duane Reade has since changed hands once again, Bloomberg noted, following its $618 million sale to Walgreen (NYSE: WAG) earlier this year.

Farmington Investment Charged with Alleged Securities Fraud

6/8/2010 9:41:19 AM

Missouri-based Farmington Investment Corporation (FIC) and the company’s former owner, Thomas Terry, have been charged with securities fraud for allegedly selling unregistered investments and misusing client funds. With Terry serving as its leader, state officials claim, FIC raised money from investors and then secretly used those funds to finance high-interest (and high-risk) loans to consumers. According to a cease-and-desist order against the defendants, investors lost more than $1 million in the suspected scam. Meanwhile, in an official statement, Terry reportedly told government authorities that “there’s never been a point in the history of (FIC) that (it) had the money to pay the total amount it owed.” 

Former White-Collar Agent Punished for Past Abuses

6/8/2010 9:15:45 AM

Peter Norrell, a former FBI official who once led the agency’s white-collar crime unit in Santa Ana, Calif., was sentenced this week to a year of probation – including three months of home confinement – for abusing his powers in an effort to help a friend collect on an unpaid debt, the Associated Press reported. According to court records, the A.P. said, Norman illegally accessed a government computer on three separate occasions when seeking information about his unnamed target. He also allegedly tried to bully an associate of pro golfer Greg Norman, the A.P. said, by warning him against interfering with the athlete’s divorce proceedings. Norrell spent 14 years working for the FBI, the A.P. noted, and participated in the government’s failed case against former Broadcom (Nasdaq: BRCM) executives for alleged securities fraud.

Celebrity Investors Lose Access to Funds Used in Suspected Scam

6/8/2010 8:45:39 AM

A federal judge this week officially blocked withdrawals from accounts managed by Kenneth Starr, the New York Daily News reported, a prominent accountant who is suspected of bilking celebrity investors through a $30 million Ponzi scheme. Judge Sidney Stein ruled that “clients can’t get their money,” the newspaper explained, because he cannot yet determine how much money is available and how much those clients are actually owed. Celebrities have been rushing to recover the funds they invested with Starr, the newspaper said, who is accused of looting their accounts and treating their holdings “like a personal piggy bank.”

Madoff Reportedly Becomes Unapologetic Prison Celebrity

6/8/2010 8:25:08 AM

Bernard Madoff is now a prison celebrity with no remorse for the victims of his $65 billion Ponzi scheme, according to a new magazine article summarized this week by the Guardian newspaper. In a story recently published by New York magazine, the Guardian said, fellow inmates say that Madoff is “past apologizing” for his actions and now scorns investors who lost money in his massive scam. “Fuck my victims,” Madoff reportedly stated. “I carried them for 20 years, and now I’m doing 150 years … I wish they had caught me six (or) eight years ago.”

Attorney Seeks Leniency for Cooperating in Big Ponzi Case

6/8/2010 8:02:07 AM

Scott Rothstein, a disbarred Florida attorney who admitted to operating a $1.2 billion Ponzi scheme, has asked for a reduced sentence in recognition of his extensive cooperation with government authorities, the Associated Press reported. Rothstein voluntarily returned from Morocco (a country with no U.S. extradition treaty) after his Ponzi scheme collapsed, the A.P. noted, and later helped the FBI catch a suspected Mobster – by secretly wearing a wire – in an unrelated case. Although federal prosecutors have portrayed Rothstein’s crimes as “reprehensible,” the A.P. said, they have also described his cooperation as “extraordinary” and voiced support for a reduced sentence in his case. They have recommended a 40-year prison term, the A.P. said, longer than the 30-year sentence that Rothstein requested but still far shorter than the 100-year maximum he could face under federal sentencing guidelines. After cooperating with authorities for months, the A.P. noted, Rothstein is finally scheduled to be sentenced this week for his crimes.

Swiss Lawmakers Vote against UBS Tax Settlement with U.S.

6/8/2010 7:31:58 AM

UBS (NYSE: UBS) hit a roadblock this week, The New York Times reported, when the lower house of the Swiss Parliament voted against a settlement with the U.S. that would require the bank to release documents on thousands of American clients suspected of using secret bank accounts to dodge tax payments. The lower house voted 104-76 (with 16 abstentions) to block the proposal, the Times noted, one week after the upper house approved the same settlement. The two houses will now try to reach an agreement on the deal, the Times said, which UBS inked in order to end a damaging criminal investigation of its business practices.

Goldman Sachs Subpoenaed by Panel Investigating Crisis

6/8/2010 7:08:53 AM

Goldman Sachs (NYSE: GS) has fielded a subpoena from the Financial Crisis Inquiry Commission (FCIC), the Associated Press reported, which claims that the giant Wall Street bank has stonewalled its investigation into the financial meltdown. The commission has accused Goldman of failing to respond to some of its questions, the A.P. said, while flooding its staff with billions of pages worth of documents – far more than staff members can possibly review -- in response to others. “We did not ask them to pull a dump truck to our offices and dump a bunch of rubbish,” FCIC Co-Chairman Bill Thomas told the A.P. “This has been a very deliberate effort over time to run out the clock.” The panel must deliver a full report on its findings by Dec. 15, the A.P. noted, and has already secured relevant documents – without incident – from at least six other investment banks targeted in the probe. For its part, the A.P. said, Goldman claims that it has been cooperating with the investigation and will comply with the subpoena’s requests for interviews with the company’s top executives.

Former Lehman Executives Seek to Dismiss Shareholder Lawsuit

6/7/2010 9:19:34 AM

Former insiders at Lehman Brothers have asked a federal judge to dismiss a shareholder lawsuit that accuses them of secretly using a controversial accounting technique – known as “Repo 105” – to mislead investors about true levels of assets and liabilities at the company, Reuters reported. The defendants acknowledged that a court-appointed bankruptcy examiner had determined that Lehman could make “colorable claims” against them for undisclosed use of the accounting trick, Reuters said, but they are now arguing that the report fell short of concluding that such claims exist under securities laws. “Repo 105 transactions are appropriately reported as sales under (Generally Accepted Accounting Principles),” the defendants wrote in court papers cited by Reuters. “So there was nothing misstated about Lehman’s net leverage ratios.” According to court records, Reuters noted, the lawsuit has targeted the following defendants: former Lehman CEO Richard Fuld; former Lehman executives Christopher O’Meara, Joe Gregory, Erin Callan and Ian Lowitt; former Lehman directors; and former Lehman auditor Ernst & Young.

Securities Agent Sentenced to Four Years in Prison for Fraud

6/7/2010 8:55:21 AM

James Schlueter, a Missouri-based securities agent, has been sentenced to four years in prison for stealing more than $300,000 from his clients, the Associated Press reported. Schlueter pleaded guilty to multiple felonies – including securities fraud, mail fraud and wire fraud – ahead of his sentencing date, the A.P. explained, after admitting that he sold bogus investment contracts that he never actually purchased for his victims. He has been ordered to repay his former clients, the A.P. said, and spend three years under supervised release after serving his prison time.  

Former Boeing Insider Pleads Guilty to Running Ponzi Scheme

6/7/2010 8:41:25 AM

Lorenzo Molina, a former Boeing (NYSE: BA) employee, pleaded guilty last week to bilking investors through a multimillion-dollar Ponzi scheme. According to federal prosecutors, Molina raised almost $4 million from investors to allegedly purchase used aircraft equipment that could be refurbished and sold at a profit. However, prosecutors say, Molina used much of that money to make Ponzi-like payments to earlier investors while spending the rest on expensive items – including four homes and a Steinway piano – for himself. He pleaded guilty on Friday to mail fraud and making false statements to government officials, felonies that carry maximum prison terms of 20 years and five years respectively. He is scheduled to be sentenced this October for his crimes.

Rogue Trader Goes on Trial in Historic Bank Fraud Case

6/7/2010 7:33:51 AM

Jerome Kerviel, a rogue French trader blamed for multbillion-dollar trading losses at the Societe General bank, will go on trial this week to defend himself against felony charges of forgery, breach of trust and unauthorized computer use, The Irish Examiner reported. Kerviel’s case once ranked as the largest suspected trading fraud in history, the newspaper explained, although it was soon eclipsed by the collapse of Lehman Brothers and Bernard Madoff’s massive Ponzi scheme. Kerviel’s alleged misconduct destabilized Societe General just ahead of the 2008 financial crisis, the newspaper said, and has since triggered calls for tougher regulations. For his part, the newspaper said, Kerviel has portrayed himself as the victim of an “out-of-control” financial system and the scapegoat for a bank seeking to divert attention away from its own massive losses on subprime mortgages. Now considered an “anti-hero” in France, the newspaper noted, Kerviel recently laid out his version of the story in a new book that likens his former job to prostitution and the environment in which he worked to a “great banking orgy.” 

Tennessee Investment Adviser Charged with Securities Fraud

6/4/2010 9:09:20 AM

The U.S. Securities and Exchange Commission has filed civil fraud charges against Aaron Donald Vallett, a Tennessee financial adviser, and his firm A.D. Vallet & Co. for allegedly bilking investors through a suspected $5.5 million scam. Between September 2008 and April 2010, the SEC claims, Vallett raised millions of dollars from his clients for investments in securities and real estate but then used their money for other purposes instead. This week, the SEC secured a court order that will temporarily freeze Vallett’s assets and prohibit him from destroying relevant documents while it moves forward with its investigation of the case.

Ex-Cop Accused of Swindling Fellow Officers through Scam

6/4/2010 8:49:55 AM

Raymond Thomas, a former Ohio police officer, has been charged with mail fraud for allegedly bilking 25 investors – including fellow cops and firefighters – through an $889,000 Ponzi scheme. Between 1997 and 2006, prosecutors say, Thomas tricked investors into believing that he operated three legitimate firms: Strictly Stocks Investment Company, a securities trading operation; JR Ventures, a trucking business that offered car and limousine services; and Adams Title Agency, a real estate management firm. Thomas then convinced investors to sink money into the three firms, prosecutors say, but used their funds to pay off earlier clients and cover his own personal expenses instead. “It is particularly troubling to discover that a former law enforcement officer has committed a crime, especially given that law enforcement officers take an oath to uphold the law,” U.S. Attorney Steven Dettelbach stated when reporting the case. “These charges allege that Thomas did more than just violate the laws he had sworn to uphold. They charge that he actually targeted the law enforcement community to sustain his Ponzi scheme.” Thomas has been charged with tax violations for allegedly underreporting his income as well.

California Financial Advisers Face Trial for Alleged Scam

6/4/2010 8:27:07 AM

Two Northern California financial advisers, Gary Armitage and James Koenig, have been ordered to stand trial on charges that they stole $200 million from investors by operating an elaborate Ponzi scheme, the Associated Press reported. According to government prosecutors, the A.P. said, the men oversaw 55 different businesses that sold real estate investments before collapsing and wiping out more than 2,000 victims who lost their life savings in the alleged scam. They must now defend themselves at trial against dozens of felony charges, the A.P. said, while a third defendant recently accepted a plea bargain instead.

Purported Financial Adviser Suspected of Ponzi Scheme

6/4/2010 8:05:01 AM

Richard Donald Theye, a former Austin businessman who once ran several investment firms, was indicted this week for allegedly operating an $11.9 million Ponzi scheme, the Austin American-Statesman reported. According to court records, the newspaper said, Theye established four different companies – Micind Capital Management, First RYCO Group, RYCO Group and Private Investors Credit Union (later renamed Harmony Capital) – that swindled up to 140 investors over the course of the 10-year scam. Theye allegedly used much of his clients’ funds to pay off earlier investors, the newspaper said, but also kept some of that money for himself. He has now been indicted on multiple felony charges, the newspaper noted, and could face up to 25 years in prison if convicted of his alleged crimes.

Former Sequenom Research Chief Pleads Guilty to Conspiracy

6/4/2010 7:44:20 AM

Elizabeth Dragon, the former head of research and development for San Diego-based Sequenom (Nasdaq: SQNM), has pleaded guilty to one count of conspiracy to commit securities fraud for lying to investors about the company’s screening test for Down syndrome, The San Diego Union-Tribune reported. In court papers, the newspaper said, Dragon admitted that she and other Sequenom insiders distributed false information claiming that “blind” studies had proven that the test could accurately detect Down syndrome in unborn babies. Sequenom’s stock more than tripled to reach $25 a share on the glowing reports, the newspaper said, but later plunged to less than $4 when the news turned out to be untrue. “Elizabeth Dragon knew the truth about Sequenom’s Down syndrome test,” a federal securities regulator stated in the article. “Yet she told the public that it was a near-perfect success. Her actions misled investors with exaggerated information about a significant new product that never materialized.” Dragon could face up to 25 years in prison when she is sentenced in August, the newspaper said, but will likely receive a lighter punishment because of her cooperation in the case. Although federal prosecutors have yet to identify other targets of its probe, the newspaper noted, Sequenom fired six other company insiders – including former CEO Harry Stylli and former CFO Paul Hawren – after learning about the alleged scheme last year.

Ex-Goldman Analyst Hit with Big Fine after Violating Parole

6/4/2010 7:07:31 AM

David Pajcin, a former Goldman Sachs (NYSE: GS) analyst who disappeared after being sentenced to three years of probation for insider trading, has been ordered to pay $27.8 million in civil penalties as a result of his misconduct, Reuters reported. According to government prosecutors, Reuters said, Pajcin secured inside tips from multiple sources – including an analyst for Merrill Lynch, a printer for BusinessWeek and a grand jury member reviewing a probe of Bristol-Myers Squibb (NYSE: BMY) – and then traded stocks based upon that nonpublic information. Pajcin pleaded guilty to securities fraud in 2006, Reuters said, and received a light sentence – of time served plus probation – for cooperating with government authorities investigating the case. However, Reuters said, Pajcin soon violated the terms of his probation by disappearing after his January 2008 sentencing date and has been missing ever since. The U.S. Securities and Exchange Commission continued to move forward with its civil case against Pajcin in the meantime, Reuters noted, securing the multimillion-dollar judgment against him this week.

JP Morgan Chase Fined Millions for Exposing Its Clients to Risks

6/3/2010 7:58:05 AM

British regulators this week fined JP Morgan Chase (NYSE: JPM) $49 million for exposing its clients to risks by comingling their funds with the firm’s own, The New York Times reported. According to Britain’s Financial Services Authority, the Times said, JP Morgan failed to separate up to $23 billion worth of client funds that could have been lost if the company wound up insolvent. “JP Morgan Securities committed a serious breach of our client rules by failing to segregate billions of dollars of its clients’ money for nearly seven years,” a top FSA official stated in the article. “The penalty reflects the amount of client money involved in this breach” and should “send out a strong message to firms of all sizes that they must ensure client money is segregated.” When announcing the fine, the Times noted, the FSA indicated that it was pursuing similar cases against additional firms.

Trio Indicted for Allegedly Operating Investment Scam

6/3/2010 7:20:44 AM

Colorado Attorney General John Suthers this week announced the indictment of three men – Phillip Trujillo, David Piatt and Timothy Burk – suspected of operating a $5.7 million investment scam. The defendants allegedly swindled dozens of victims by promising them generous returns on risk-free investments, but then used their money for unsecured promissory notes and the legal fees that resulted when those notes wound up in default. When announcing the indictment, Suthers warned investors away from similar opportunities that seem too good to be true. “Since the collapse of the financial markets, consumers have been looking for quick ways to rebuild their retirement funds and investment portfolios,” Suthers stated. “Scammers prey on those consumers’ wishes to be made whole again. (However), when consumers are presented with ‘investment opportunities’ promising little or no risk and big rewards, they should be aware that there are so sure things in the investment world.”

Suspected Con Artist Faces Criminal, Civil Charges

6/3/2010 7:16:59 AM

Federal authorities this week filed both criminal and civil charges against Luis Felipe Perez, a businessman from Miami, for allegedly operating a multimillion-dollar Ponzi scheme. According to the U.S. Securities and Exchange Commission, Perez raised $40 million from investors (most of them Hispanic) by promising them lucrative stakes in jewelry stores and pawn shops. However, the SEC claims, Perez used most of that money to pay off earlier investors while spending at least $6 million on luxury items – including a $3.2 million home and $1 million worth of jewelry – for himself.  “Perez created an aura of success around him to lure old and new acquaintances into investing substantial sums of money,” the SEC stated. But “behind the luster of diamonds and jewelry, Perez told outright lies and made promises that he couldn’t possibly keep.” The SEC is seeking financial penalties against Perez, while the Department of Justice is pursuing criminal charges in the case.

SEC Files Charges against Diebold and Former Executives

6/3/2010 7:00:08 AM

The U.S. Securities and Exchange Commission this week filed charges against Diebold (NYSE: DBD) and three of the company’s former finance executives – Gregory Geswein, Kevin Krakora and Sandra Miller – for allegedly engaging in accounting fraud. From 2002 to 2007, the SEC claims, the defendants fraudulently manipulated Diebold’s financial results in order to meet company forecasts. Diebold has agreed to pay $25 million to settle the SEC’s charges, while the former executives have contested the agency’s actions. Meanwhile, former Diebold CEO Walden O’Dell – who has not been accused of fraud – has promised to reimburse the company for bonuses he received during the time that the alleged scam took place.

Banking Commissioner Faces Possible Ouster over Scam

6/3/2010 6:56:33 AM

The New Hampshire Executive Council this week launched efforts to force the resignation of the state’s banking commissioner, Peter Hildreth, for allegedly failing to police a failed mortgage firm suspected of stealing millions of dollars from investors, the Associated Press reported. The now-defunct company (known as Financial Resources Mortgage) suddenly closed its doors in November, the A.P. explained, and Hildreth has since come under fire for his oversight of the firm. The state’s securities chief recently resigned from his own post, the A.P. noted, although he did so voluntarily after announcing plans to become a public whistleblower in the case.

Ex-ClearOne Communications Chief Sentenced to Four Years

6/3/2010 6:52:53 AM

Frances Flood, the former CEO of ClearOne Communications (Nasdaq: CLRO), was sentenced to four years in prison this week for cooking the company’s books, the Associated Press reported. According to government prosecutors, the A.P. said, Flood inflated ClearOne’s financial results by shipping millions of dollars worth of conferencing equipment to distributors without payment and then reporting those transactions as legitimate sales. Last year, the A.P. noted, Flood was found guilty of nine felonies – including conspiracy, securities fraud and perjury – and then spent the next 14 months unsuccessfully fighting those convictions.

Regulators Seek Ban against Prominent Wall Street Player

6/3/2010 6:49:28 AM

The U.S. Securities and Exchange Commission is reportedly seeking a three-year industry bar against Steven Rattner – a prominent financial adviser with powerful political connections – while it investigates his alleged role in a massive kickback scheme involving the New York pension system, The New York Times reported. The agency has already fined Rattner’s former firm $12 million for its alleged involvement in the scam, the Times explained, but reportedly excluded Rattner himself from the settlement because he refused to accept the proposed industry ban. Although several investment firms have inked similar settlements, the Times noted, none of their executives wound up barred from the financial industry. If banned, the Times observed, Rattner could see his professional plans – including oversight of a big foundation for New York City Mayor Michael Bloomberg – threatened and his professional reputation harmed. “Even being barred temporarily,” the Times said, “would be a blow to Mr. Rattner’s career and could endanger several of his pursuits.”

Former Monster Controller Fined in Stock Option Backdating Case

6/2/2010 8:37:46 AM

Anthony Bonica, a certified public accountant who previously served as the controller at Monster Worldwide (NYSE: MWW), has agreed to pay more than $200,000 in disgorgement and penalties for his alleged role in a scheme involving illegally backdated company stock options. For years, the U.S. Securities and Exchange Commission claims, Monster improperly issued “in-the-money” stock options to company insiders but treated those options as if they had been issued at actual market prices instead. As a result, the SEC says, Monster wound up understating its compensation expense – and overstating its net income – by almost $340 million during that period, triggering significant revisions to the company’s past financial statements. According to the SEC, Bonica both assisted with and profited from the scheme. The agency has therefore fined Bonica and taken steps to ban him from serving as an accountant for any publicly traded companies for the next three years.

B.C. Regulator Fights Internet Fraudsters on Their Own Turf

6/2/2010 8:33:44 AM

The British Columbia Securities Commission has begun fighting back against Internet-based fraudsters by launching online campaigns of its own, The Globe and Mail reported. The Canadian agency initiated its first counterattack in February, the newspaper said, when it began using popular Internet tools – such as “blogging” and “tweeting” – to warn the public about a suspected Ponzi scheme, known as the Genius Funds, that was promising investors impossible returns. After successfully raising millions from investors, the newspaper noted, Genius shut down about a month after the BCSC began its online campaign. “We were confronted by a scam that was exploiting all the leverage through the Internet that they could,” a top BCSC official told the newspaper. “So what we did was take the same tools that the scammers were using and turned it to our advantage. We basically met them on the same playing field that they were engaged in. So where they were trying to solicit investors, we were trying to get our message out so people knew it was a scam.”

More Galleon Defendants Challenge Use of Wiretaps

6/2/2010 8:28:20 AM

Seven defendants accused of participating in a massive insider-trading scheme led by Galleon Group founder Raj Rajaratnam have joined Rajaratnam himself in challenging the government’s use of wiretaps in building its case against them, Reuters reported. In new court papers filed last week, Reuters said, lawyers for the defendants claim that almost all of the trades cited in their indictments predated the period covered by the court-approved wiretaps. In addition, Reuters said, lawyers also argue that federal authorities turned to wiretaps – which had previously never been used in insider-trading probes – before exhausting more conventional investigation techniques. Those challenging the wiretaps have pleaded not guilty to the government’s charges, Reuters said, and are scheduled to go on trial next year. Specifically, Reuters noted, the defendants include the following: Zvi Goffer, Emmanuel Goffer, Michael Kimelman, David Plate, Craig Drimal, Arthur Cutillo and Jason Goldfarb.

BP Faces Criminal Investigation over Massive Offshore Disaster

6/2/2010 8:20:41 AM

The Department of Justice has launched a criminal investigation of BP (NYSE:BP), The New York Times reported, following six weeks of failed attempts to contain a massive oil spill caused by one of the company’s offshore drilling projects. President Obama announced the new probe on Tuesday, the Times explained, when BP formally abandoned efforts to plug the gushing well and focus its efforts on siphoning the leaking fuel from Gulf Coast waters instead. BP shares plummeted 15% Tuesday on news of the company’s latest setback, the Times noted, with other energy stocks suffering losses as well. Besides BP itself, the Times signaled, the following energy players could face scrutiny under the government’s new probe: Transocean (NYSE: RIG), which leased BP the drilling rig that exploded and sank back in April; Cameron (NYSE: CAM), which manufactured the “blowout preventer” that malfunctioned after the explosion; and Halliburton (NYSE: HAL), which provided drilling services for the doomed BP project.

Fallen Taiwanese Tycoon Begins Serving Two-Year Jail Term

6/1/2010 9:13:03 AM

Oung Ta-ming, a Taiwanese tycoon who once ranked among the country’s most prominent businessmen, entered prison this week to begin serving a two-year jail term for stock manipulation, the Taiwan News reported. Government authorities first began pursuing Oung in 1994, the newspaper said, shortly after two brokerage houses collapsed following a series of questionable stock transactions. The brokerage firms defaulted on checks issued for stock-purchase orders, the newspaper explained, with investors ultimately losing $222 million as a result of the alleged scam. Together with his secretary Lee Hsiu-fen, the newspaper noted, Oung was formally implicated in the case and sentenced to prison as punishment for his crimes.

Swindler Proposes Novel Plan to Reduce Prison Sentence

6/1/2010 8:28:58 AM

Dennis Bolze, a former fugitive convicted of operating a $21.5 million Ponzi scheme, has offered to repay his victims – and help identify similar investment frauds – in exchange for a lighter prison term, the Knoxville News Sentinel reported. According to the proposal, the newspaper said, Bolze would use royalties from his brand-new computer-assisted trading software to pay investors who lost $12.8 million in his financial scam. In return, the newspaper said, Bolze hopes to secure a shorter prison sentence than the 27-year minimum currently recommended as punishment for his crimes.

Regulators Warn Investors about Potential Oil Cleanup Scams

6/1/2010 8:24:33 AM

Financial regulators have issued a warning to investors about companies looking to profit from the recent BP (NYSE:BP) oil spill with fraudulent claims about oil cleanup technologies, The Wall Street Journal reported. Regulators said the public should be particularly wary of penny-stock companies, the Journal said, because of their reputation for capitalizing on headline news with bogus claims about related services. The U.S. Securities and Exchange Commission already took aim at one suspicious penny stock, the Journal stated, when it temporarily suspended trading in ACT Clean Technologies (OTC: ACLH.PK) after the company’s shares jumped on touts about its so-called oil-fluidizer technology. Previously trading for less than a penny, the Journal noted, the stock soared past 6 cents a share during the weeks that followed the massive oil spill.

Deamweaver Founders Indicted for Suspected Investment Fraud

6/1/2010 8:20:45 AM

Richard Novaria and Jeremy Hart, owners of the Colorado-based Dreamweaver Foundation, have been indicted for allegedly operating a multimillion-dollar Ponzi scheme, the Associated Press reported. Between 2006 and 2008, the A.P. said, the two men allegedly raised $3.5 million from investors by promising them generous returns but then used their money for other purposes instead. Indicted by a grand jury on Friday, the A.P. said, both men have now been charged with one count of theft and 29 counts of securities fraud.

Convicted Fugitive Suspected of Operating Worldwide Scam

6/1/2010 8:17:09 AM

Government authorities are hunting for a convicted felon who is suspected of operating an international web-based Ponzi scheme, the Associated Press reported. Nicholas Smirnow, a Canadian who may now live in the Philippines, faces multiple felony charges for allegedly running a $70 million Ponzi scheme that bilked investors from around the world, the A.P. said. After warning investors about opportunities that look too good to be true, the A.P. said, Smirnow himself allegedly promised outrageous returns – of up to 17,000% -- that attracted 4,000 victims from six different continents. Jailed in the past for bank robbery, the A.P. noted, Smirnow faces up to 20 years in prison if convicted of his latest alleged crimes.

CPA Hit with Maximum Jail Sentence over Ponzi Scheme

6/1/2010 8:11:30 AM

William Murray, a California-based certified public accountant, has been sentenced to almost 20 years in prison for bilking inventors through a $13.3 million Ponzi scheme, the Sacramento Bee reported. Murray pocketed checks from dozens of clients to cover tax services, the newspaper said, but then used the funds to make Ponzi-like payments and finance his luxurious lifestyle instead. He even redirected mail to his own address, the newspaper said, so that his victims would not see government notices informing them that their taxes had not been paid. After hearing painful testimony from those victims, the newspaper said, the judge ordered Murray to serve the maximum prison sentence possible for his crimes.

Brothers Ink Settlements in 'Pump-and-Dump' Case

5/28/2010 6:01:25 AM

John and Michael Coutris, two brothers accused of manipulating penny stocks, have agreed to settle charges stemming from an alleged “pump-and-dump” scheme, StockWatch reported. According to the U.S. Securities and Exchange Commission, StockWatch said, the brothers participated in a scam involving two penny stocks – Xpention Genetics and HS3 Technologies – along with six other defendants. Without admitting or denying any wrongdoing, StockWatch said, the pair has agreed to an SEC order permanently banning them from any future penny-stock offerings. Meanwhile, StockWatch noted, the SEC continues to move forward with actions against four remaining defendants who have yet to ink settlements in the ongoing case. 

Florida Attorneys Disbarred for Involvement in Finance Scams

5/28/2010 5:56:32 AM

Florida recently disbarred two attorneys, Lewis B. Freeman and Deborah K. Rice, for their alleged involvement in separate fraud cases, the Palm Beach Daily Business Review reported. Once a favored court-appointed receiver, the newspaper said, Freeman agreed to surrender his license after pleading guilty to charges that he misappropriated millions of dollars intended for victims of fraud. In a similar action, the newspaper said, Rice wound up disbarred after being indicted for her alleged role in a $41 million scam involving looted funds from restitution accounts set up for defrauded investors. In addition, the newspaper said, two other Florida attorneys – Eduardo Exposito and Bruce Edgar Barr – lost their license to practice law for alleged financial misconduct as well.

Ex-Florida Official Charged with Running Alleged Ponzi Scheme

5/28/2010 5:50:34 AM

Charlotte Gilmore Durante, a former Florida official who made history as one of Delray Beach’s first black female city commissioners, has been arrested for allegedly operating a $1.8 million Ponzi scheme, the Associated Press reported. Now a Florida realtor, the A.P. said, Durante has been accused of fleecing investors by promising them generous returns on real estate loans and then using some of their funds for other purposes – including a new building for her daughter’s fashion museum – instead. Arrested on Wednesday, the A.P. noted, Durante has been charged with grand theft, money laundering and other felonies.

Broker-Dealers Indicted for Alleged Penny Stock Scam

5/28/2010 5:46:26 AM

Blake Williams and Derek Lopez, two broker-dealers suspected of manipulating multiple penny stocks, were indicted this week on seven counts of securities fraud. According to federal prosecutors, the defendants allegedly conspired with others to coordinate trades in the stocks in order to create the illusion of genuine investor interest in the companies. After that, prosecutors say, those involved in the alleged scam then dumped their own stock at artificially inflated prices. Arrested on Thursday, the defendants could face up to 20 years in prison – on each count of securities fraud – if they are ultimately convicted of their alleged crimes.

NY Financial Adviser Sentenced to Eight Years in Jail for Fraud

5/28/2010 5:41:03 AM

Matthew Weltzman, founder of New York-based AFW Wealth Advisors, has been sentenced to eight years in prison after pleading guilty last November to multiple fraud charges, Reuters reported. From 2002 to March of 2009, Reuters said, Weltzman allegedly raised more than $7 million from his clients and then used their funds to purchase an expensive home and other luxury items. Weltzman could have faced up to 20 years in prison, Reuters noted, but received a shorter sentence after pleading guilty to his crimes.

Pequot Capital Management Settles Insider Trading Case

5/28/2010 5:37:09 AM

Pequot Capital Management, a now-defunct hedge fund that once boasted $15 billion in assets, and its founder Art Samberg have agreed to settle an insider trading case that has been dragging on for years, DealBreaker reported. The U.S. Securities and Exchange Commission originally dropped its investigation of Pequot and Samberg in late 2006, DealBreaker noted, but decided to reopen its probe two years later after learning that the hedge fund had promised David Zilkha – the suspected tipster in the case – more than $2 million after the inquiry came to an end. Samberg wound up shutting down his hedge fund last May, DealBreaker said, as a result of the long-running probe. Together with his former firm, DealBreaker said, Samberg this week agreed to pay $28 million to settle the SEC’s charges.

Celebrity Money Manager Slapped with Criminal Fraud Charges

5/28/2010 5:26:20 AM

Kenneth Starr, a New York investment adviser who counts famous celebrities among his clients, was arrested this week for allegedly running a $30 million Ponzi scheme, Reuters has reported. As the head of Starr Investment Advisers and Starr & Co., Reuters said, Starr allegedly raised millions of dollars from big-name clients – including Martin Scorcese, Uma Thurman and Annie Leibowitz – and then used much of that money to pay off earlier investors and finance his own lavish lifestyle. According to government officials, Reuters said, Starr spent $7.5 million on a luxury Manhattan apartment alone. He has now been charged with fraud and money laundering, Reuters said, while his wife and son have also been implicated (but not charged) in the case.

Former Refco Executives to Pay $135 Million in Restitution

5/27/2010 10:32:31 AM

Former Refco insiders – including past CEO Phillip Bennett – must shell out $135 million to investors who lost money when the giant company collapsed, Reuters has reported. The Refco executives allegedly hid $430 million in company debt from investors, Reuters said, and only disclosed the liabilities after raising $583 million through a public offering. Counting a previous payout secured from an Australian bank, Reuters noted, Refco shareholders now stand to recover $572 million worth of the losses that they suffered when the company went bankrupt. Meanwhile, Reuters added, Bennett has already pleaded guilty to securities fraud and been sentenced to 16 years in prison for his crimes. 

NY Investment Firm Accused of Operating Ponzi Scheme

5/27/2010 10:28:28 AM

Federal regulators have filed charges against GTF Enterprises, a New York-based investment firm, and its leader Gedrey Thompson for allegedly running a Ponzi scheme that targeted victims in the African-American and Caribbean communities of Brooklyn, Dow Jones reported. Through GTF, Dow Jones said, Thompson allegedly raised more than $800,000 from his clients by promising generous returns on safe investments but then pocketed much of that money himself. In addition to Thompson, Dow Jones noted, two other GTF insiders – assistant treasurer Sezzie Goodluck and account manager Dean Lewis – face civil charges for their role in the alleged scam as well.

Piper Jaffray Set to Pay Another Fine for Deleting Emails Again

5/27/2010 10:21:01 AM

Piper Jaffray (NYSE: PJC), a Minneapolis investment bank, has been sanctioned – a second time – for failing to retain internal emails as required under national securities laws, the Star-Tribune newspaper reported. Previously fined $1.65 million for the same issue, the newspaper noted, Piper Jaffray has been ordered to pay another $700,000 for its latest transgression. Piper Jaffray tried to blame the problem on a technical glitch, the newspaper said, but industry watchdogs noted that 15.8% of the missing 4.3 million emails belonged to a former insider under investigation for possible misconduct. Nevertheless, the newspaper observed, Piper Jaffray tried to downplay the incident by issuing a statement saying that the company had “retained approximately 98% of emails rather than 100% as we were required to do.”

Prominent California Accountant Sentenced to Prison for Fraud

5/27/2010 10:17:12 AM

Maynard Weldon Moreland, a California accountant who previously served as an elected city official, was sentenced this week to 17 years in prison for fleecing investors – many of them elderly – through a $2.66 million Ponzi scheme, the Contra Costa Times reported. A Navy veteran who went on to become a prominent civic leader, the newspaper said, Moreland allegedly won over elderly clients who knew him as a boy and then stole their nest eggs while carrying out his long-running scam. Moreland ran out of new funds to finance his elaborate scheme in April of 2009, the newspaper said, and pleaded no contest to multiple felony charges earlier this year. “I did not enter the field of accounting with the intent to hurt people or to become a criminal,” Moreland said in a statement cited by the newspaper. “I had no business acting as an investment person. (And) I take full responsibility for all my actions.”

Insider Trading Charges Filed in Case Involving Disney Stock

5/27/2010 10:13:33 AM

The FBI has arrested Bonnie Hoxie, an assistant to a high-ranking executive at Disney (NYSE: DIS), and her boyfriend Yonni Sebbag for allegedly attempting to sell inside information about the company to more than 30 different hedge funds, Reuters has reported. As an aide to Disney’s head of corporate communications, Reuters said, Hoxie secured nonpublic information about the company’s financial results and a planned sale to ABC – which proved to be untrue – and her boyfriend then offered to sell that information to hedge funds in both the United States and Europe. Now charged with conspiracy and wire fraud for alleged insider trading, Reuters said, Hoxie and Sebbag face up to 20 years in prison if convicted of the crimes.

Big Yale Donor Charged with Manipulating Company Stock

5/26/2010 10:02:16 AM

John Mazzuto, a former shortstop for Yale University who donated large sums to the Ivy League school, faces fraud charges for allegedly manipulating the stock that financed his generosity and supported his lavish lifestyle, The New York Times reported. According to government prosecutors, the Times said, Mazzuto tricked investors into buying pumped-up shares of Industrial Enterprises of America (OTC: IEAM.PK) – where he served as CEO – and then used some of the proceeds for donations to Yale and expensive homes for himself. Yale rewarded Mazzuto by naming its baseball practice facility after him, the Times said, and including his family name in its baseball coach’s title. Blamed for $60 million worth of investor losses, the Times said, Mazzuto and co-defendant James Marguilies – an attorney who later replaced Mazzuto as Industrial Enterprises CEO – have pled not guilty to the government’s charges.

Denver-Area Con Artist Sentenced to 15 Years for Ponzi Scheme

5/26/2010 9:53:09 AM

Mark Jackson, a Denver-area businessman who operated a long-running Ponzi scheme, was sentenced to 15 years in prison this week as punishment for his crimes, the Associated Press reported. According to government prosecutors, the A.P. said, Jackson raised $32 million from investors by promising them generous double-digit returns and then used their money to pay off earlier investors and cover his own expenses instead. Finally caught after operating the scam for more than a decade, the A.P. noted, Jackson pleaded guilty to felony racketeering earlier this year.

Canada to Introduce Plan for National Securities Regulator

5/26/2010 9:49:01 AM

Canadian Finance Minister Jim Flaherty is preparing to introduce controversial legislation that would create a national securities regulator with the power to oversee stock trades – and crack down on potential fraud – for the entire country, The Canadian Press reported. With its individual provinces currently in charge of regulating securities, the publication stated, Canada stands out as the only country with an advanced economy that lacks a national oversight system. With other major countries urging Canada to adopt a new system, the publication said, Flaherty has embraced national securities regulation as a top priority since taking office four years ago. “Ordinary Canadians need protection in Canada, and they need better protection than is provided by 13 separate regulators with 13 separate sets of rules,” Flaherty stated in the article. “That is one of the reasons why we are proposing a Canadian securities regulator.”

State Prosecutor Takes Aim at Suspected Ponzi Scheme

5/26/2010 8:19:01 AM

South Carolina Attorney General Henry McMaster has issued a cease-and-desist order against PPE-Life and its leaders, Rick Crocker and John Barter, for allegedly operating a Ponzi scheme, the Associated Press reported. According to government prosecutors, the A.P. said, the two men posed as representatives of a legitimate international bank and then bilked investors by recruiting them into a suspected scam. The defendants allegedly promised their recruits that they could earn up to $440,000 annually the A.P. said, by recruiting others to join the program as well. If those charges prove true, the A.P. noted, the defendants could be forced to pay a $10,000 fine for each of the estimated 800 members they recruited worldwide.

SEC Cracks Down on Alleged Forest Resources Stock Scam

5/26/2010 8:10:08 AM

Government regulators have taken aim at three businessmen – Pinchus Gold, Chaim Justman and attorney William Reilly – for allegedly participating in a stock-manipulation scheme involving Forest Resources Management (OTC: FTRM.PK). According to the U.S. Securities and Exchange Commission, the defendants illegally obtained restricted shares of Forest Resources and then sold them as free-trading shares to unsuspecting investors on the open market. The SEC has ordered the men to pay a combined $1.5 million in restitution and penalties, while also banning them from future penny stock sales in the future. The agency has barred Justman and Reilly from serving as officers or directors of any publicly traded companies as well.

Regulators File Charges in Case Involving Possible Ponzi Scheme

5/26/2010 8:05:32 AM

The U.S. Securities and Exchange Commission has filed civil fraud charges against Christopher W. Bass, a New York businessman connected to the Swiss Capital funds in Europe, for his alleged involvement in a multimillion-dollar Ponzi scheme. From 2007 to 2009, the SEC claims, Bass raised $5.9 million from more than 400 clients by promising to invest their funds with European money managers who had previously generated substantial returns. However, the SEC says, Bass actually used that money to pay off earlier investors and cover his own personal expenses instead. The SEC is seeking repayment of ill-gotten gains, plus penalties and interest, from the defendant.

SEC Freezes Assets Linked to Suspected Legisi Holdings Scam

5/26/2010 7:59:03 AM

Regulators have frozen the assets of Matthew J. Gagnon, founder of the www.mazu.com website, for allegedly assisting with a massive Ponzi scheme and then later selling unregistered securities on his own. Between 2006 and 2007, the U.S. Securities and Exchange Commission claims, Gagnon solicited investments for Legisi Holdings – a suspected Ponzi scheme led by Gregory McKnight – by promising them generous returns without telling them that he would personally receive 50% of the proceeds. After that, the SEC says, Gagnon launched his own scam by touting foreign exchange and real estate investments with impossibly high returns. By then, the SEC estimates, more than 3,000 investors had poured $72.6 million into the first suspected scam alone. The agency is now seeking full disgorgement, plus civil penalties, from Gagnon as a result of his alleged misconduct.

Insurer Balks at Paying More Legal Bills in Big Ponzi Case

5/26/2010 7:55:08 AM

Lloyd’s of London, the giant insurance company covering legal fees for suspected Ponzi scheme operator R. Allen Stanford, is now refusing to pay more money for Stanford’s expensive legal defense, the Associated Press reported. Since his June indictment, the A.P. explained, Stanford has gone through four different legal teams and racked up $6 million worth of fees in the process. Lloyd’s recently argued that Stanford’s policy excludes coverage for money laundering charges, the A.P. said, so a special hearing has been scheduled to determine whether Stanford did in fact engage in that particular crime. If so, the A.P. said, Stanford’s policy could be ruled invalid. For his part, the A.P. said, Stanford insists that his past attorneys have taken advantage of him while charging “an obscene amount of money … on what has been produced.” A court is scheduled to hear arguments on the insurance dispute in August, the A.P. added.

L.A. Investment Firm Accused of Multimillion-Dollar Fraud

5/25/2010 7:49:00 AM

The U.S. Commodity Futures Trading Commission (CFTC) has filed fraud charges against Jose Naranjo and Ruben Gonzalez, owners of the New Gold Investment Group in Los Angeles, for allegedly operating a $3.65 million Ponzi scheme. The defendants duped more than 165 victims by promising to double their money through investments in commodities, the CFTC claims, and then used that cash for other purposes instead. They transferred big sums to their personal banking accounts, the CFTC says, spending the money on (among other things) the following: a Mercedes-Benz, airline tickets and house payments. The CFTC has already frozen the assets of New Gold Investments and is now seeking restitution and penalties from both owners of the firm.

Authorities Crack Down on Suspected Investment Scam

5/25/2010 7:44:55 AM

Missouri officials have issued a cease-and-desist order against Ronald Shepard in an effort to halt a suspected investment scam that may have already cost its victims more than $3.5 million in losses. Beginning in 2006, government authorities claim, Shepard solicited investors by promising them generous returns on real estate projects and a new trailer hitch that he supposedly planned to patent. However, authorities say, Shepard used most of those funds for personal items – such as furs, jewelry and automobiles – instead. A repeat offender convicted of criminal charges in the past, Shepard now faces new fraud charges for allegedly operating yet another scam.

Texas Con Artist Pleads Guilty to Fraud for Investment Scheme

5/25/2010 7:40:45 AM

Verlin Swartzendruber, a Texas businessman accused of bilking investors through a bogus trading scheme, has pleaded guilty to fraud charges, Investment News reported. Swartzendruber allegedly raised between $14 million and $16 million from more than 500 investors, the publication stated, by promising them high returns from an exclusive international trading program that did not actually exist. Originally faced with 11 felony counts, Investment News noted, Swartzendruber saw most of those charges dropped when he agreed last week to plead guilty to wire fraud. Swartzendruber could have faced up to 115 years in prison if convicted of all the original charges, the publication stated, but he can now expect a much lighter sentence – including no more than five years in prison – as punishment for his crimes. “The fact that he’s looking at five years right now is largely because he stepped up and took responsibility and pled guilty,” a federal prosecutor stated in the article. “Those other guys didn’t.” One of those defendants is currently serving a 12-year jail term, the publication stated, while another could face up to 35 years in prison when he is formally sentenced next month for his role in the scam.

Real Estate Promoter Sentenced to Prison for Investment Fraud

5/25/2010 7:35:55 AM

Robert Capehart, a Virginia real estate promoter, has been sentenced to five years in prison for defrauding investors through a multimillion-dollar Ponzi scheme, the Richmond Times-Dispatch reported. According to government authorities, the newspaper said, Capehart fleeced 22 investors by promising them generous returns on real estate projects financed in part by fraudulent loans that bilked several banks – including Wachovia (NYSE: WB), JP Morgan Chase (NYSE: JPM) and SunTrust (NYSE: STI) – as well. The president of Retirement Investment Group and BYB Investments, the newspaper noted, Capehart later admitted that he falsified mortgage applications, kited checks and defrauded investors by operating a Ponzi scheme. In addition to his jail sentence, the newspaper stated, Capehart fielded an order to pay almost $2 million in restitution as punishment for his crimes.

Foreign Investors Recoup Losses from Madoff Ponzi Scheme

5/25/2010 7:30:46 AM

Foreign investors swindled by convicted Ponzi scheme operator Bernard Madoff are set to receive $15.5 billion in restitution under a settlement inked with their respective banks, The New York Times reported. For the 720,000 investors, the Times said, the total would cover all of the money clients actually sank into Madoff’s fraudulent fund but would not compensate them for paper gains falsely reported by the con artist. Although the settlement covers approximately 80% of Madoff’s overseas investors, the newspaper said, lawyers hope to secure similar recoveries for the remaining investors as well. American investors face a tougher fight in reclaiming their losses, the Times explained, since most of them invested directly with Madoff or his so-called “feeder funds” instead of with deep-pocketed banks that appear more inclined to negotiate settlement deals. Madoff bilked an estimated 3 million investors around the world through his $64.8 billion Ponzi scheme, the Times noted, and is currently serving a 150-year prison sentence as punishment for his crimes.

Regulators Nail Lydia Capital for Bilking Life Settlement Investors

5/24/2010 8:24:54 AM

The U.S. Securities and Exchange Commission last week entered a final judgment against Boston-based Lydia Capital and two of its principals, Glenn Manterfield and Evan Anderson, for allegedly defrauding investors by using funds raised to purchase life settlement policies for other purposes instead. All told, regulators say, the defendants raised an estimated $34 million while operating their alleged scam. According to the SEC, the defendants also misled investors in the following ways: overstating and/or fabricating the company’s performance; exaggerating its number of investors, offices and business partners in an effort to appear legitimate; and concealing Manterfield’s criminal past.  Lydia has since been placed under the control of a court-appointed receiver, while Manterfield has been ordered to pay $2.9 million in restitution and fines.

Leaders of A&O Investments Hit with Civil Fraud Charges

5/24/2010 8:19:45 AM

Edward A. Allen and David L. Olsen, owners of Florida-based A&O Investments, face civil fraud charges for allegedly operating a multimillion-dollar Ponzi scheme. From 2005 to 2008, the U.S. Securities and Exchange Commission says, Allen and Olsen raised $14.8 million from more than 100 investors by promising them generous returns – of up to 20% annually – on various real estate projects. But the defendants invested only $5.1 million of those funds, the SEC says, using the rest to pay off earlier clients and cover their own personal expenses instead. The SEC is seeking full disgorgement, plus penalties and interest, from the defendants.

Businessman Indicted for Alleged Investment Scam

5/24/2010 8:13:55 AM

Ruben Juan-Gonzalez, a southern California businessman, was indicted last week on conspiracy and fraud charges for allegedly bilking 160 investors out of $3.6 million, the Associated Press reported.  Juan-Gonzalez allegedly marketed investments connected to the 2009 federal economic stimulus program, the A.P. said, wooing his victims by promising returns of 60% or more. But he allegedly invested very little of that money, the A.P. said, using most of the funds to cover personal expenses instead.

Trio Capital Victims Weather Another Devastating Blow

5/24/2010 8:06:02 AM

Investors who sank money into Australia-based Trio Capital fielded more bad news last week, The Age newspaper reported, when liquidator PPB deemed assets in Trio’s ARP Growth fund essentially worthless. ARP clients invested about $53 million in the fund, the newspaper said, but now face total losses after PPB calculated a “no-cents-on the-dollar” valuation for the fund’s investments. Counting those losses, the newspaper said, Trio Capital clients have now seen more than $180 million worth of their investments disappear as victims of a suspected financial scam.

Ex-Wachovia Vice President Set to Plead Guilty to Fraud Charges

5/24/2010 8:01:04 AM

Terry Scott Welch, a former vice president for Wachovia, last week signaled that he plans to plead guilty to charges that he defrauded the bank by securing millions of dollars in payments for fabricated bills, the Charlotte Observer reported. From 2000 to 2009, the newspaper said, Welch allegedly hired four North Carolina businessmen for his own personal use and then billed Wachovia at exorbitant rates for the services. After collecting payments from Wachovia, the newspaper said, the four men allegedly split their proceeds – which totaled $11.2 million – with Welch, who supposedly raked in millions of dollars worth of luxury goods and services under the deal as well. If convicted, the newspaper noted, Welch could face up to 35 years in prison and millions of dollars in restitution as punishment for his crimes.

Feds Drop Criminal Probe of Former Executives at AIG

5/24/2010 7:51:47 AM

Executives at American International Group (NYSE: AIG) were cleared of criminal wrongdoing last week, Reuters reported, when Justice officials decided they lacked the evidence necessary to prosecute the AIG insiders for knowingly misleading investors ahead of the company’s financial collapse. As leaders of the AIG Financial Products division, Reuters noted, Joseph Cassano and Andrew Forster attracted government scrutiny for downplaying the losses that AIG suffered by insuring risky mortgage-backed securities that plummeted in value when the housing market collapsed. AIG weathered write-downs totaling more than $40 billion in 2008, Reuters said, with the federal government ultimately stepping forward with a $182 billion bailout to save the company. “In the end,” an attorney for one of the defendants told Reuters, “the facts were stronger than the emotions surrounding AIG’s problems.”

First Prison Sentence Handed Down in Big Galleon Case

5/24/2010 7:44:35 AM

Mark Kurland, a former senior managing director at New Castle Funds, last week became the first executive to be sentenced in the colossal insider trading case that toppled the Galleon Group hedge fund, Reuters reported. Four months after pleading guilty to securities fraud, Reuters reported, Kurland was ordered to serve 27 months in prison for his role in the alleged scam. Rejecting Kurland’s plea for leniency, Reuters noted, the presiding judge blasted Kurland by saying that his actions “compromised the financial market’s integrity at a time of financial crises and widespread concern about corruption, rampant recklessness and arrogant greed at the highest levels of the industry.” Kurland admitted that he traded on inside information obtained by fellow New Castle colleague Danielle Chiesi, Reuters said, who — along with Galleon founder Raj Rajaratnam — has pleaded not guilty to the government’s charges. Both Chiesi and Rajaratnam are scheduled to go on trial in October.

Former Stockbroker Charged with Theft, Securities Fraud

5/21/2010 8:46:25 AM

Ross Haugen, a North Dakota stockbroker who lost his license six years ago, has been accused of violating securities laws once again, the Associated Press reported. This time, the A.P. said, Haugen faces multiple felony charges – for alleged theft, securities fraud and acting as an unregistered agent – stemming from a suspected scam that cost investors almost $3.5 million. Haugen first became a target of regulators in 2004, the A.P. noted, when he withdrew his registration as a securities agent just as government officials prepared to revoke it.

Prominent Newsletter Publisher Sued over Paid Endorsements

5/21/2010 8:42:39 AM

Donald Rowe, former publisher of The Wall Street Digest newsletter, has been sued by subscribers who lost millions by investing in hedge funds – including a massive Ponzi scheme – that he was secretly paid to recommend, the Sarasota Herald-Tribune reported. Rowe allegedly pocketed generous sums for referring his followers to hedge funds operated by Arthur Nadel, the newspaper explained, who pleaded guilty in June to operating a multimillion-dollar Ponzi scheme. According to a court-appointed receiver in the government’s civil case against Nadel, the newspaper said, Rowe ranked as “the primary salesman” for Nadel’s fraudulent hedge fund. Touting his publication as “the world’s most widely read investment newsletter,” the newspaper said, Rowe allegedly collected secret payments for promoting other doomed hedge funds as well.

Duo Sentenced to Prison in Lifeline Imaging Systems Case

5/21/2010 8:38:37 AM

Randy Morton and Candice Lynn Lewis, a California duo charged with serving as unregistered sales agents for Lifeline Imaging Systems, have been sentenced to prison – but will serve most of their time on probation – for engaging in securities fraud. Together with fellow defendant Daniel Caterino, state regulators say, Morton and Lewis helped raise $15 million to fund Lifeline’s operations and then used some of the funds for unrelated expenses. Morton has been sentenced to 10 years in prison for his role in the scam, starting with 12 months behind bars followed by five years of probation, while Lewis will spend her entire five-year sentence on probation instead. Caterino was previously sentenced to 15 years in prison, although he will serve only 30 months in jail and spend the remaining time on probation as well.

FINRA Accuses Shuttered Brokerage Firm of Fraud

5/21/2010 8:34:49 AM

The Financial Industry Regulatory Authority (FINRA) lodged a fraud complaint against Virginia-based MICG Investment Management this month, InvestmentNews reported, just two days after the brokerage firm shut down because it could no longer meet net capital requirements. According to FINRA, InvestmentNews said, MICG and its CEO Jeffrey Martinov – who has also been hit with fraud charges – inflated the values of two non-public securities held by its hedge fund in order to boost the firm’s management and performance fees. Once a brokerage firm that boasted 40 independent representatives and advisers, InvestmentNews said, MICG has previously denied FINRA’s charges.

Former Smart Online Chief Headed with Brother to Jail

5/21/2010 8:30:47 AM

Former Smart Online (OTC: SOLN.OB) CEO Dennis Nouri and his brother, Reza Nouri, have been sentenced to prison for engaging in a scheme to drive up the company’s stock price, Dow Jones reported. According to federal prosecutors, Dow Jones said, the brothers manipulated Smart Online’s stock several years ago by paying secret kickbacks to customers that agreed to buy the company’s shares. Last July, Dow Jones noted, both men were convicted on charges of conspiracy, wire fraud, securities fraud and commercial bribery. Dennis Nouri has been ordered to serve eight years in prison for his crimes, Dow Jones said, while his brother will spend 18 months behind bars for his role in the scam.

Onetime Fugitive to Spend Almost 16 Years behind Bars for Scam

5/21/2010 8:25:17 AM

Patricia Morgan, arrested last June after eluding authorities for months, has been sentenced to 15 years and eight months in prison for operating a multimillion-dollar Ponzi scheme. As the head of Chicago Development and Planning, prosecutors said, Morgan fleeced more than 400 investors by promising them generous returns on real estate projects and then using their money to pay off earlier investors and cover her own expenses instead. Morgan fled to Mexico after her November 2008 indictment, prosecutors said, and continued to avoid law enforcement officials -- even cutting off contact with members of her own family – upon her return to the United States. She was finally apprehended in Chicago last summer, prosecutors said, while threatening to leap from the top of a multi-story building. She pleaded guilty to fraud charges in December, prosecutors noted, although her son Shalom Gibson – charged with destroying documents related to the scam – remains on the run. “Patricia Morgan intentionally preyed on unsuspecting victims in order to obtain money she wasn’t entitled to,” U.S. Attorney Joseph Russoniello stated when announcing her punishment. “This sentence demonstrates the legal consequences perpetrators of these schemes will face when they are caught – and they will be caught.”

Head of British Brokerage Firm Hit with Record-Breaking Fine

5/21/2010 8:18:51 AM

Simon Eagle, head of the SP Bell brokerage firm in Britain, has been ordered to pay a record $4 million fine for allegedly defrauding his clients by selling them overpriced stock in a company that he himself controlled, Reuters reported. According to the Financial Services Authority (FSA) in London, Reuters said, Eagle used his brokerage firm to sell shares of Fundamental-E Investments – where he controlled 85% of the stock – to clients who suffered massive losses when the manipulated stock later crashed. FSA responded this week by slapping Eagle with its largest-ever fine against an individual, Reuters said, while also banning him from any future work in the financial services industry.

SEC Enforcement Division Investigating Market Crash

5/21/2010 8:14:45 AM

The enforcement division of the U.S. Securities and Exchange Commission has launched an investigation into the sudden crash of the stock market on May 6, The New York Times reported, with plans to identify any wrongdoing and punish those responsible. SEC Chairwoman Mary Shapiro said the agency launched its probe after fielding complaints from investors “who used stop-loss orders to protect them from rapidly declining markets,” the Times explained, some of whom saw their stocks sold at cheap prices before rebounding dramatically after the crash. “We will examine such things as whether market professionals fully met their obligations -- including, where applicable, their best execution obligations -- and whether the decision to bust trades was made and applied fairly and consistently among investors,” Shapiro stated in Senate testimony cited by the newspaper. “If we identify any activity that violates the securities laws, we will take appropriate action.” In the meantime, the Times noted, the SEC plans to test so-called “circuit breakers” on stocks in the Standard & Poor’s 500 that could be used to prevent similar crashes in the future.

New Task Force Established to Combat Securities Fraud

5/21/2010 8:10:27 AM

The federal government is establishing a new organization, known as the Virginia Financial and Securities Fraud Task Force, charged with investigating and prosecuting industry scams, USA Today has reported. To government officials, the newspaper said, Virginia looks like an attractive venue for a number of reasons: it can legally handle most fraud cases because it hosts the EDGAR computer system used by publicly traded companies for their regulatory filings; it boasts a so-called “rocket docket” that can move cases from indictment to trial in as little as 90 days; and it often attracts “pro-government” juries due to its close proximity to Washington, D.C. According to the U.S. Securities and Exchange Commission, the newspaper said, the new organization – featuring representatives from numerous government agencies – should lead to “more prosecutions and faster prosecutions” of securities fraud cases down the road.

Senate Passes Sweeping Measure to Reform Financial Industry

5/21/2010 8:05:31 AM

The U.S. Senate this week approved a landmark measure designed to broadly expand government oversight of the financial industry, The New York Times reported, paving the way for the most sweeping regulatory reforms since those adopted in the wake of the Great Depression. This time, the Times said, Congress hopes to prevent future financial disasters with a powerful law that calls for (among other things) the following: regulatory authority to seize failing companies, no matter how large they might be, instead of bailing them out with government funds; strict rules on the trading of derivatives, risky instruments that helped fuel the financial meltdown, which could force Wall Street banks to spin off one of their most lucrative businesses; a powerful new Bureau of Consumer Protection charged with curbing abusive lending practices; and a “financial stability oversight council,” composed of representatives from multiple government agencies, designed to identify potential risks to the nation’s financial system. With help from four Republicans, the Times noted, the Senate managed to pass the sweeping measure despite intense lobbying by the financial industry. “It’s a choice between learning from the mistakes of the past or letting it happen again,” Sen. Majority Leader Harry Reid stated in the article. “For those who wanted to protect Wall Street, it didn’t work.”   

Convicted Ponzi Schemer Seeking Lighter Jail Sentence for Scam

5/20/2010 9:01:35 AM

Dennis Bolze, a Tennessee mad who pleaded guilty in November to operating a $21.5 million Ponzi scheme, is seeking a lighter sentence than the long prison term – of 27 years to 33 years and nine months in jail – recommended by prosecutors as punishment for his crimes, The Knoxville News-Sentinel reported. Although most of his victims reside in Europe, the newspaper noted, Bolze had hoped to exclude losses suffered by those foreign investors from calculations used to determine his sentence. But Bolze has since backed away from that strategy, the newspaper said, after reviewing the evidence that prosecutors have gathered against him. “Bolze personally traveled to Europe to pitch his Ponzi scheme,” prosecutors stated in court documents cited by the newspaper. “(His) scheme to defraud had no substantive difference between foreign and domestic investors.” Bolze continues to seek a lighter punishment based on other arguments, the newspaper added, with his fate set to be decided at a formal sentencing hearing that has been delayed until next month.

CFTC Charges Staten Island Firm with Operating Ponzi Scheme

5/20/2010 8:42:14 AM

The U.S. Commodity Futures Trading Commission has filed charges against Jeffrey Shalhoub and his Staten Island firm, Jeff Shalhoub Investments, for running a suspected Ponzi scheme. According to the CFTC, Shalhoub raised $300,000 from at least a dozen friends and relatives of his ex-wife – claiming he would invest their funds in commodities futures – and then used some of the money to pay off earlier investors while pocketing at least half of the funds himself. The CFTC now aims to punish Shalhoub with financial penalties, including disgorgement of ill-gotten gains and restitution to defrauded customers, as well as an industry ban that would prevent him from trading commodities in the future.

Miami Banker Banned from Industry for Alleged Violations

5/20/2010 8:12:16 AM

Antonio Garcia-Adanez, a former banker at the Miami branch of London-based Standard Chartered Bank International, has been banned from the industry for allegedly engaging in “unsound” practices that harmed both SCBI and its clients, the Miami Daily Business Review reported. According to a ruling by the Federal Reserve, the newspaper said, Garcia-Adanez manipulated the account statements of SCBI clients – allegedly misrepresenting their investments, obligations and authorizations – and can no longer work for any federally insured bank, without prior approval from the Federal Reserve, as a result. Although the Federal Reserve cited no specific examples of Garcia-Adanez’s alleged misconduct, the newspaper noted, the Miami banker has been named as a co-defendant in a lawsuit filed against SCBI by a client who lost money in Bernard Madoff’s multibillion-dollar Ponzi scheme. The investor identifies Garcia-Adanez as the “designated relationship manager” in charge of his SCBI account, the newspaper said, and claims that both defendants performed “little, if any, due diligence of the fraudulent investments, ignored many red flags and failed to meet their fiduciary duty to their investors” when sinking money into Madoff’s massive scam.

Broker Pleads Guilty to Aiding IHub Operator with Scam

5/20/2010 7:42:14 AM

Marc Riviello, a California broker charged with participating in pump-and-dump schemes carried out through the Investors Hub website, pleaded guilty to unlawfully transporting money received by IHub operator Matthew Brown and other defendants in the stock manipulation case, StockWatch reported. According to Delaware prosecutors, StockWatch said, Riviello supplied proceeds from sales of two manipulated penny stocks – GH3 International and Asia Global Holdings – to fellow defendant Joseph Mangiapane, who paid a driver to deliver the money to Brown and others implicated in the case. Like Brown himself, StockWatch noted, Riviello has now reached a plea agreement with prosecutors pursuing those involved in the alleged fraud. Riviello could face up to 10 years in prison and $250,000 in fines, StockWatch added, when he is formally sentenced for his crimes.

Former Prosecutor Linked to Suspected Ponzi Scheme

5/20/2010 7:15:04 AM

Jay Fialkow, a former assistant attorney general from Massachusetts, faces a purported class-action lawsuit filed by investors who claim that he improperly funneled their money into a multimillion-dollar Ponzi scheme, the National Law Journal reported. According to the lawsuit, the Journal said, Fialkow and fellow defendant Jeffrey Ross – leaders of the RossFialkow Capital Partners brokerage firm in Massachusetts – sank investor funds into a $29 million Ponzi scheme operated by suspected con artist Richard Elkinson. Arrested for mail fraud in January, the Journal noted, Elkinson is accused of fleecing 130 investors who lost money in the alleged scam.

Guardian Knight Security Leader Convicted of Fraud

5/19/2010 9:35:10 AM

Michael Betzel, the head of Kansas-based Guardian Knight Security, pleaded no contest this week to securities fraud for operating a Ponzi-like scheme. According to the Kansas Securities Commission, Betzel sold investors promissory notes that were supposed to finance the installation of securities systems. However, the commission claims, Betzel used the funds to pay off earlier investors and cover his personal expenses instead. He is scheduled to be formally sentenced next month for his crimes.

'Savagely Beaten' Stanford Renews Pleas for Freedom

5/19/2010 8:53:00 AM

In new courtroom documents filed this week, Reuters reported, attorneys for Allen Stanford – a Texas financier jailed since June for allegedly operating a $7 billion Ponzi scheme – claim their client has been “savagely beaten” while serving time and renewed their calls for Stanford to be freed while he prepares for his criminal trial. “When Mr. Stanford surrendered to authorities, he was a healthy 59-year-old man,” his lawyers stated in a legal brief cited by Reuters. Since then, “he has been so savagely beaten that he has lost all feeling in the right side of his face and has lost near-field vision in his right eye … (His) pretrial incarceration has reduced him to a wreck of a man.” Previously, Reuters noted, the federal appeals court has twice rejected Stanford’s requests for freedom over fears that the suspected con artist – who operated his alleged scam from his bank on the island of Antigua – could pose a flight risk.

David Lerner Associates Accused of Defrauding Bond Investors

5/19/2010 8:23:25 AM

David Lerner Associates and its head trader, William Mason, have been accused of charging “excessive” prices for municipal bonds and other high-grade securities, the New York Post reported. According to the Financial Industry Regulatory Authority (FINRA), the Post said, DLA marked up the prices on thousands of safe securities – by as much as 12.8% in some cases – that generated substantially lower returns for customers who wound up with the investments. “Because bond prices and yields move inversely of each other,” the Post explained, “the higher prices that DLA charged resulted in its customers being paid a lower yield by the bond issuers.” Sanctioned by FINRA in the past for misleading radio ads and issues related to complex variable annuities, the Post noted, DLA has vigorously denied FINRA’s charges and insists that it will be “completely vindicated” upon conclusion of the watchdog’s new case.

Ex-Merrill Lynch Technology Analyst Nailed by Feds Again

5/19/2010 7:49:32 AM

Brion Randall, a former Merrill Lynch technology analyst sanctioned by securities regulators after the dot-com crash, pleaded guilty this week to criminal charges for allegedly bilking investors once again, The Wall Street Journal reported. This time, the Journal said, Randall allegedly told his clients that he was investing their money in an AllianceBernstein fund – which didn’t actually exist – and used their money for other purposes instead. Between 2004 and 2009, the Journal said, Randall allegedly bilked 30 investors out of $6 million through the fraudulent scheme. Before that, the Journal noted, Merrill Lynch paid at least $1.5 million to clients who claimed that Randall had improperly invested their funds in high-flying technology stocks that later crashed. Randall himself wound up temporarily suspended from the industry for his alleged misconduct, the Journal added, and paid a $10,000 fine – without admitting or denying any wrongdoing – to settle those charges.

FINRA Accuses Thomas Weisel of Engaging in Securities Fraud

5/19/2010 7:18:26 AM

Thomas Weisel Partners and one of its former executives, Stephen Brinck, face civil fraud charges for allegedly “stuffing” client accounts with risky auction-rate securities in order to secure generous bonuses for company leaders, the Financial Times reported. According to the Financial Industry Regulatory Authority (FINRA), the Times said, Brinck purchased $15.7 million worth of the illiquid securities for three corporate clients – seeking, but failing, to secure their approval only after the transactions – so that his firm could meet sales quotas established for executive bonuses. Once the market for auction-rate securities froze in early 2008, the Times said, those corporate clients were left unable to access their funds for the next 17 months. Now owned by Stifel Financial (NYSE: SF), the Times noted, Thomas Weisel and Brinck – the former head of Thomas Weisel’s fixed income desk – face a May 26 deadline for responding to FINRA’s complaint. Thomas Weisel has declined to comment on the matter in the meantime, the Times added, while Brinck’s attorney has denied that his client engaged in any wrongdoing.

DJ Harriett Owner Charged with $7 Million Ponzi Scheme

5/18/2010 8:57:16 AM

David J. Harriett, the owner of Ohio-based DJ Harriett, has been charged with mail fraud for allegedly bilking 200 investors – who thought they were sinking money into fast-food franchises – through a $7 million Ponzi scheme. According to the FBI, Harriett raised money to construct new McDonalds and Pioneer Chicken restaurants but never had any contracts to build those fast-food outlets. Rather, the FBI claims, Harriett collected the funds to pay off earlier investors in the scam and cover his own personal expenses instead. “Fraud in the marketplace is a significant problem that negatively affects consumer confidence and, ultimately, economic recovery,” U.S. Attorney Steven Dettelbach stated when announcing the charges. “For these reasons, we will continue to vigorously prosecute Ponzi schemes.”

Ex-President of Harmony Homes Sentenced to Prison for Fraud

5/18/2010 8:38:21 AM

Stephan John Meylan, the former president of Colorado-based Harmony Homes, has been sentenced to six-and-a-half years in prison for stealing more than $5.3 million from lenders using bogus deeds of trust, The Gazette newspaper reported. According to government prosecutors, the newspaper said, Meylan created the fake deeds by photocopying genuine deeds and then using them as collateral for homebuilding projects. A court clerk uncovered the scam two years ago in Texas, the newspaper said, but Meylan quickly fled the state and hid out in Arizona until his capture there last May. He has now been ordered to repay his victims, the newspaper said, in addition to serving his jail time. “Mr. Meylan’s conduct affected a lot of people, and in a lot of ways that harm will continue for the rest of their lives,” one prosecutor stated in the article. So “I believe this defendant has earned every day behind bars.”

Billionaire Chinese Businessman Jailed for Financial Fraud

5/18/2010 8:10:31 AM

Huang Guangyu, the founder of China’s Gome Electronics appliance retailer and once the richest businessman in the entire country, was sentenced this week to 14 years in prison for insider trading and other financial crimes, the Associated Press reported. According to Chinese authorities, the A.P. said, Guangyu pocketed $204 million by trading Gome shares based on inside information and paid out $675,000 in bribes to secure Gome’s listing on the stock exchange in Hong Kong. The latest in a string of Chinese tycoons imprisoned for financial crimes, the A.P. noted, Guangyu boasted an estimated net worth of $6.3 billion when he was listed as China’s wealthiest businessman in 2008. Although his net worth has since fallen by almost half, the A.P. added, Guangyu still ranked as China’s 17^th richest businessman on an updated list last year.

Goldman Whistleblower Urges Australia to Follow SEC's Lead

5/18/2010 7:42:48 AM

David Mapley, an Australian finance professional who has surfaced as an informant in the U.S. Securities and Exchange Commission’s landmark fraud case against Goldman Sachs (NYSE: GS), is now urging Australian regulators to crack down on the giant Wall Street bank as well, The Australian newspaper reported. Specifically, the newspaper explained, Mapley wants the Australian Securities & Investments Commission to examine a risky mortgage-backed investment product marketed by the Goldman Sachs JBWere division in Australia that was privately described as “one shitty deal” by one of Goldman’s own executives. “Goldman Sachs JBWere was a part of the selling process, and there were a lot of Australian investors who were caught,” Mapley told the newspaper. So “ASIC should be encouraged to look into this trade.” Mapley previously served as a non-executive director for the Basis Yield Alpha Fund in Australia, the newspaper noted, which invested about $100 million in the risky deal and wound up liquidating itself after the value of that security collapsed.

Galleon Defendant to Pay Millions under SEC Deal

5/18/2010 7:08:22 AM

Anil Kumar, a one-time director and star executive at the McKinsey & Co. consulting firm, has agreed to pay $2.8 million to settle civil fraud charges stemming from his involvement in the massive insider-trading case that toppled the Galleon Group hedge fund, The New York Times reported. Prior to inking this week’s deal with the U.S. Securities and Exchange Commission, the Times noted, Kumar pleaded guilty in January to criminal charges for allegedly supplying Galleon founder Raj Rajaratnam with inside tips on Advanced Micro Devices (NYSE: AMD) and receiving generous cash payments in exchange for his favors. Kumar left his post at McKinsey in November, the Times explained, following his arrest – along with 20 other defendants – in the sweeping fraud case. While more than a dozen Galleon defendants have pleaded guilty to fraud charges, the Times added, Kumar has emerged as one of the most cooperative witnesses since government authorities first announced their probe more than six months ago.

Convicted Credit Suisse Broker Remains Free on Bail for Now

5/16/2010 12:45:48 PM

Eric Butler, a former Credit Suisse (NYSE: CS) broker convicted of securities fraud last August, remains free on bail ahead of a June 25 hearing that will determine whether his bail should be revoked while he appeals his five-year prison sentence, Dow Jones has reported. According to federal prosecutors, Dow Jones explained, Butler and fellow broker Julian Tzolov defrauded their clients by selling them risky auction-rate securities – which generated hefty commissions – instead of the safer securities, backed by student loans, that they had requested. Tzolov pleaded guilty to fraud charges last July, Dow Jones noted, and Butler wound up convicted on similar charges the following month. Butler hopes to remain free on bail while he appeals his conviction, Dow Jones said, although a federal judge has strongly indicated that he will refuse that request.

Suspected Con Artists Ask Their Victims for Additional Funds

5/16/2010 12:41:00 PM

Frederick and Derek Elliott, a father-and-son team accused of operating a $170 million Ponzi scheme, have asked investors to finance their legal bills if they hope to recover their lost funds, The Hamilton Spectator reported. The Elliotts own two companies that have been sued for alleged securities fraud stemming from doomed investments in resort properties, the newspaper explained, which fell into foreclosure and wound up being sold at auction last fall. The elder Elliott requested additional funds during a shareholder meeting last week, the newspaper said, which attracted hundreds of angry investors from across North America. “Can you believe he’s in there trying to raise more money to try and go back and salvage the properties?” an investor asked the newspaper. “One guy told them he wouldn’t give them 5 cents.”  

Ponzi Scheme Triggers Calls for National Regulator in Canada

5/16/2010 12:36:43 PM

Jim Flaherty, the Federal Finance Minister in Canada, has apparently pointed to a Ponzi scheme in Quebec as evidence that the country needs a national securities regulator, the Montreal Gazette reported. The operator of that $50 million Ponzi scheme, Earl Jones, pleaded guilty to felony charges in February, the Gazette noted, and has been sentenced to 11 years in prison for his crimes. Because Jones was never required to register as a financial adviser with any securities regulators, the newspaper explained, Flaherty is now claiming that current agencies were unable to detect the massive scam. He has therefore stepped up his calls for a national securities regulator, the newspaper said, with investors in the big Ponzi scheme coming forward to back that proposal. “We definitely support (Flaherty’s) initiative,” one victim told the newspaper. “I have more faith in the federal government” than in the current provincial system.

Ex-Lazard Banker Headed to Prison for Insider Trading

5/16/2010 12:30:21 PM

Adnan Zaman, a former investment banker for Lazard, has been sentenced to 26 months in prison for violating laws against insider trading several years ago. Between September 2006 and May 2007, federal prosecutors say, Zaman supplied inside tips about Lazard clients to others who traded on that information and paid him kickbacks from the profits they received. Zaman pleaded guilty to securities fraud in January and has remained free on bail since that time. He must now serve more than two years in prison, followed by three years of supervised release, and pay $78,456 in penalties as punishment for his crime.

Investment Adviser Sentenced to 20 Years for Longtime Scam

5/16/2010 12:25:22 PM

Roberto Heckscher, the owner and operator of San Francisco-based Irving Bookkeeping and Taxes, has been sentenced to 20 years in prison for bilking investors through a multimillion-dollar Ponzi scheme that began operations three decades ago. Between 1979 and 2009, federal prosecutors say, Heckscher stole up to $100 million from investors – including business clients, friends and members of his own family – by tricking them with claims that he would use their money to finance short-term commercial loans that would provide them with regular interest payments. However, prosecutors say, Heckscher used much of that money to cover his personal expenses (some of its for casino gambling) and to pay off earlier investors instead. Heckscher pleaded guilty to mail fraud last October and has been held in custody, while awaiting his formal sentence, ever since. “For nearly three decades, Roberto Heckscher made his livelihood by stealing the hopes and dreams of the people he knew,” U.S. Attorney Joseph Russoniello stated when announcing Heckscher’s punishment. “Today’s sentence should send a strong message to everyone – preying on the trust of hardworking people for personal gain will land you in prison. My office will continue to seek out the individuals committing these crimes and prosecute them to the fullest extent of the law.”

Transparency Could Reshape Secretive Swiss Bank Industry

5/16/2010 12:21:06 PM

With Swiss officials eager to resolve America’s high-profile tax complaint against UBS (NYSE: UBS), The New York Times reported, Switzerland could soon see an end to the “absolute banking secrecy” that has made the country such a powerful player in the international world of finance. The Swiss Parliament looks poised to approve new transparency rules for the country’s banking industry next month, the Times said, which would pave the way for UBS to legally supply information about thousands of suspected tax dodgers here in the U.S. Last summer, the Times explained, UBS agreed to disclose that information – and pay a $780 million fine – to settle criminal charges filed by U.S. authorities against the company. Meanwhile, the Times added, UBS has inked deals with other countries aimed at blocking potential tax dodgers from hiding their assets in Swiss bank accounts as well. As a result, the Times said, some experts are already predicting an end to the secret Swiss accounts that have allowed foreign investors to hide their assets from tax collectors for years. “In my view, it’s over,” a law professor from the University of Geneva told the newspaper. “And it’s not a bad thing.”

Waddell & Reed Sales Blamed for Huge Plunge in Stock Market

5/16/2010 12:15:33 PM

Waddell & Reed Financial (NYSE: WDR), manager of the $22.1 billion Ivy Asset Strategy fund in Kansas, has been identified as the huge seller of so-called “e-mini” futures contracts that triggered a massive plunge in the stock market earlier this month, Reuters reported. According to documents from Chicago Mercantile Exchange parent CME Group, Reuters said, Waddell sold 75,000 e-mini contracts – or 9% of the total volume in such securities – during a 20-minute span on May 6 that temporarily erased almost $1 billion from the value of the broader market. Although Waddell has been accused of no wrongdoing, Reuters noted, the firm has attracted scrutiny because of the vast size of its unusual trades and their impact on the stock market. “To get rid of 75,000 contracts, that’s a lot of trading even if the market is healthy,” one trader told Reuters. “But when suddenly the market changes and there’s not as many bids there to trade with, 75,000 is going to cause quite a shock.”

New Orleans Landlord Charged with Multimillion-Dollar Scam

5/14/2010 8:42:13 AM

Michael Smuck, a New Orleans businessman who once ranked among the largest landlords in the country, has been charged with mail fraud for allegedly operating a multimillion-dollar real estate scam, The Times-Picayune newspaper reported. According to federal prosecutors, the newspaper said, Smuck stole $3.5 million from investors in an apartment complex that he secretly sold so that he could keep the proceeds for himself. Smuck’s real estate firm has since filed for bankruptcy, the newspaper said, marking the second time that Smuck has established a real estate company only to later see it fail. Previously, the newspaper noted, Smuck built a portfolio of 60 apartment complexes – worth an estimated $1 billion – that went on to fell apart under national tax reforms.

Mayfair Capital Chief Sentenced to Prison for Securities Fraud

5/14/2010 8:38:25 AM

Stephen Green, the former chairman and CEO of New York-based Mayfair Capital Group, has been sentenced to 41 months in prison for an investment scam that left his victims with more than $5.75 million in losses, Dow Jones reported. Between 2005 and 2009, prosecutors claim, Green raised millions of dollars for bogus investments in the hospitality industry and an Indian firm – which supposedly planned to go public – and then used the proceeds to cover his own personal expenses instead. He pleaded guilty in December to two counts of securities fraud and has now been ordered to repay his victims in addition to serving his time in jail.

Ponzi Schemer Hit with Long Sentence for Bogus PIPE Deals

5/14/2010 8:34:35 AM

James Halstead, a California man convicted of mail and wire fraud, has been sentenced to 121 months in prison for engaging in a multimillion-dollar Ponzi scheme involving fraudulent PIPE (private investment in public equity) deals. According to federal prosecutors, Halstead helped raise $61 million from investors who lost more than $20 million when the Ponzi scheme ultimately collapsed. When courting those investors, prosecutors say, Halstead made false claims about co-conspirator Jeanne Rowzee – portraying her as a former attorney for the U.S. Securities and Exchange Commission – while promising swift and sizable returns on the fictitious PIPE deals. Rowzee has already pleaded guilty to fraud charges and could face up to 15 years in prison when she is formally sentenced this December for her crimes.

Galleon Founder Makes New Request to Limit Fraud Case

5/14/2010 8:30:56 AM

In court papers filed this week, Dow Jones reported, Galleon Group founder Raj Rajaratnam has again asked a federal judge to exclude new allegations --- focused on trades in dozens of stocks never mentioned in the government’s original charges – that prosecutors are now pursuing against him in a massive insider-trading case that continues to rock Wall Street. In recent months, Dow Jones explained, prosecutors have raised suspicions about Galleon’s trades in 21 stocks – including Goldman Sachs (NYSE: GS), AT&T (NYSE: T) and Cisco (Nasdaq: CSCO) – that never appeared in their original complaint against the once-mighty hedge fund manager. Of those stocks, Dow Jones said, 13 apparently remain unidentified in wiretap applications and other government records. “In reality, there was no way that Mr. Rajaratnam should or could have guessed, based on the wiretap applications, that the government intended to offer evidence regarding stocks or transactions other than the stocks and transactions actually identified in the charging documents,” Rajaratnam’s attorney stated in the article. So “Mr. Rajaratnam cannot be required to anticipate which of those conversations an overzealous prosecutor might consider incriminating, much less to accuse himself of wrongdoing that he denies ever occurred.” The main defendant in the sweeping insider trading case, Dow Jones noted, Rajaratnam is scheduled to go on trial for criminal fraud charges in October.

Wall Street Banks Could Seek Global Settlement of Probes

5/14/2010 8:25:53 AM

With Wall Street banks under scrutiny by multiple government agencies, The New York Times reported, the industry is beginning to weigh a possible global settlement similar to – but larger than – the deal they inked over stock research eight years ago. Back in 2002, the Times noted, 10 banks paid $1.4 billion in fines and agreed to distance stock analysts and investment bankers in a move designed to prevent conflicts of interests. Today, the Times said, Wall Street firms are looking for a similar solution to resolve government concerns that they have engaged in new conflicts by creating and selling investment vehicles that they are simultaneously betting against. “This case is a huge deal,” one legal expert told the newspaper. “It has the potential to be the mother of all Wall Street investigations.” Federal regulators have already filed charges against Goldman Sachs (NYSE: GS) for allegedly defrauding investors with its bets against the subprime mortgage industry, the Times noted, with government officials now scrutinizing other giant Wall Street firms for signs of similar misconduct. 

Subprime Lawsuit against E*Trade Can Move Forward

5/13/2010 8:23:08 AM

E*Trade (Nasdaq: ETFC) shareholders won a courtroom victory this week, Reuters reported, when a federal judge refused to dismiss a class-action lawsuit accusing the company of recklessly exposing investors to massive losses in the subprime mortgage market. According to court documents, Reuters said, E*Trade exposed the company to $450 million worth of mortgage-related losses and saw its stock plummet – by almost 60% in one day – when it finally disclosed those risks. Although E*Trade tried to blame its losses on the “worldwide economic catastrophe,” Reuters said, U.S. District Judge Robert Sweet refused to buy that argument. “Plaintiffs have sufficiently pled that defendants had present knowledge of the risk, and have not merely pled fraud-by-hindsight,” Sweet stated in a ruling cited by Reuters. “Because plaintiffs allege that defendants intentionally misled the public, rather than simply making bad business decisions, plaintiffs have pled more than mere mismanagement.” E*Trade’s stock has taken a massive hit since the mortgage crisis first surfaced, tumbling from $20 a share in 2007 to just $1.60 a share today.

Former SEC Attorney Appeals Sentence for Penny Stock Scam

5/13/2010 8:18:27 AM

Phillip Offill, a former attorney for the U.S Securities and Exchange Commission, has filed court papers signaling that he will appeal his eight-year prison sentence for assisting with pump-and-dump schemes involving multiple penny stocks, StockWatch has reported. Previously, StockWatch noted, Offill had argued that he deserved a lighter sentence – of one to three years – because he collected only $125,700 in legal fees from those linked to the scam and did not know about, or actively participate in, the pump-and-dump schemes himself. However, StockWatch said, a federal judge claimed that Offill had repeatedly lied during his trial and sided with prosecutors who insisted that he deserved a harsh punishment for his crucial role in the scams. Of the 10 defendants sentenced so far in the case, StockWatch noted, only Michael Saquella – a stock promoter who pocketed $9.5 million from the schemes – received a longer sentence than did Offill himself. In the other cases, StockWatch added, the defendants secured lighter jail terms ranging from three months to six years instead.

U.S. Senate Cracks down on Derivatives in Reform Bill

5/13/2010 8:12:02 AM

In a blow to Wall Street banks, The New York Times reported, the U.S. Senate voted this week to include strict new rules on derivates trading in its financial reform bill. Despite concerns by Republicans and even some Democrats, the Times said, the Senate embraced new measures – which require derivates to be traded on a public exchange and be processed by a third party – that could essentially force giant banks to shed their lucrative derivatives trading units. Derivates can be legitimately used to hedge investment risks, the Times explained, but they also played a major role in the 2008 financial meltdown. Sen. Blanche Lincoln, an Arkansas Democrat who sponsored the tough new measures, portrayed the radical change as a necessary move to protect the public from another financial disaster. “It is a stark reminder that if we do not act boldly in the face of the near collapse of our economy, tragic Wall Street abuses and abysmal regulatory failures,” Lincoln stated in the article, “we will all suffer the consequences.” Currently, the Times noted, the following five banks dominate trading in derivates: Bank of America (NYSE: BAC), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC).

Eight Banks under Investigation for Influence over Ratings Firms

5/13/2010 8:07:02 AM

New York Attorney General Andrew Cuomo has launched an investigation of eight major banks – including heavily scrutinized Goldman Sachs (NYSE: GS) – to determine whether they duped ratings agencies into overestimating the safety of mortgage-backed securities, The New York Times reported. According to sources familiar with the probe, the Times said, Cuomo suspects that the banks may have improperly influenced the ratings agencies by supplying them with misleading information and even hiring their analysts to create mortgage deals that could secure higher ratings than they actually deserved. For example, the Times noted, Goldman hired a Fitch insider who helped package a mortgage deal (known as Abacus 2007-AC1) that has now become the primary focus of regulators who are investigating the giant Wall Street firm. Besides Goldman, the Times said, Cuomo has targeted the following banks in his current probe: Morgan Stanley (NYSE: MS), UBS (NYSE: UBS), Credit Suisse (NYSE: CS), Deutsche Bank (NYSE: DB), Credit Agricole and the Merrill Lynch division now owned by Bank of America (NYSE: BAC).

Boca Raton Investors Charged with Abusive Short Selling

5/12/2010 9:43:49 AM

The U.S. Securities and Exchange Commission has sanctioned two Boca Raton investors – Peter Grabler and Leonard Adams – for allegedly breaking the law through abusive short-selling activities, the South Florida Business Journal reported. According to the SEC, the newspaper said, the defendants violated rules against shorting stocks and then buying the same stocks through public offerings carried out within the following five days. In its first case against short sellers outside the professional securities industry, the newspaper said, the SEC has ordered Grabler to pay $988,000 and Adams to pay $514,000 in order to settle its complaint.

Stockbroker Arrested for Suspected Ponzi Scheme

5/12/2010 9:31:56 AM

Scott Pionk, a former stockbroker at Michigan Securities, was arrested this week for allegedly operating a $2 million Ponzi scheme involving bogus investments. According to Michigan Attorney General Mike Cox, Pionk courted his victims by marketing safe government-backed investments but never used their funds to purchase any legitimate securities. Rather, Cox says, Pionk pocketed the money by writing out checks to himself and withdrawing cash from casinos instead. “During these difficult economic times, there are individuals who are preying on their fellow citizens and trying to make a fast buck at the expense of others,” Cox stated. “Financial scams are devastating to the honest, hardworking victims, and my office will not tolerate it.” Pionk has been charged with 27 felonies, which carry maximum prison terms of 10 years apiece.

Former Merrill Banker Fined over Fraudulent Enron Deals

5/12/2010 9:13:25 AM

Robert Furst, formerly a senior investment banker at Merrill Lynch, must pay $300,000 to settle civil fraud charges accusing him of arranging bogus transactions that allowed Enron to boost its results before it later collapsed. According to the U.S. Securities and Exchange Commission, Furst participated in fraudulent deals that called for Merrill to hold or purchase Enron assets so that the doomed energy trader could meet its Wall Street targets and reward its executives with bonuses. After Enron reported its results, the SEC says, the two parties then unwound those fictitious deals. Now owned by Bank of America (NYSE: BAC), Merrill itself has already paid $80 million to settle similar charges.

Morgan Stanley under Scrutiny for Subprime Mortgage Deals

5/12/2010 8:29:10 AM

Like Goldman Sachs (NYSE: GS), The Wall Street Journal reported, Morgan Stanley (NYSE: MS) has reportedly attracted government scrutiny for betting against risky subprime investments that it sold to its own clients. According to sources familiar with the case, the Journal said, federal prosecutors have launched a preliminary investigation of Morgan Stanley for marketing “collateralized debt obligations” involving subprime vehicles that it expected to fail. “The developments indicate that a broader swath of Wall Street – not just Goldman Sachs Group Inc. – is being scrutinized for how it arranged and sold mortgage-related products before the financial crisis,” the Journal observed. Meanwhile, “the investigations could help shape the debate in Washington over tighter regulation of the financial market.”

Nashville Businessman Sentenced to 51 Months for Bank Fraud

5/12/2010 8:05:51 AM

Andrew Crutcher, a former automobile broker and car salesman from Nashville, has been sentenced to 51 months in prison and ordered to pay $2.7 million in restitution for operating a “hybrid” Ponzi scheme and check-kiting scam. According to federal prosecutors, Crutcher raised millions of dollars from victims by promising them profits on car sales and then used their money to replenish his checking account and pay off earlier investors instead. All told, prosecutors estimate, Crutcher left his bank and his investors with $2.78 million worth of losses when the scheme collapsed. “This is a sad case of a man living beyond his honest means and using money fraudulently obtained from others to do so,” U.S. Attorney Ed Yarbrough stated. “He misused his business and banking knowledge, and abused the trust others had in him, to fraudulently obtain funds from a federally insured bank. “This conduct – and the losses he inflicted on the bank and others – merits the sentence imposed.”

Galleon Defendant Asks Judge to Punish Him with Probation

5/12/2010 8:01:56 AM

Mark Kurland, a partner at the New Castle hedge fund, has requested probation for his role in a suspected insider-trading scam that continues to rock Wall Street, Dow Jones reported. Kurland pleaded guilty to felony charges in January for allegedly supplying inside information to Danielle Chiesi, Dow Jones noted, who has been accused of conspiring with Galleon Group founder Raj Rajaratnam to carry out a multimillion-dollar insider-trading scheme. In court documents this week, Dow Jones said, Kurland’s attorney portrayed his client as a “significantly less culpable” player than others who’ve been charged in the case. “Regardless of his sentence, Mark’s legacy is forever ruined,” the lawyer argued in court filings cited by Dow Jones. “This is Mark’s own fault, and he knows it. He asks only for a just sentence and the opportunity to make tangible amends to his loved ones, friends and society. A custodial sentence will accomplish nothing except delay his efforts to do so.” Officially on leave from his job since his arrest in October, Dow Jones noted, Kurland is expected to be formally sentenced for his crimes next week.

New York Mellon Unit Faces Charges over Madoff Losses

5/12/2010 7:57:29 AM

Ivy Asset Management, a financial advisory firm now owned by Bank of New York Mellon (NYSE: BK), faces fraud charges for allegedly allowing clients to invest funds with Bernard Madoff – and pocketing generous management fees in the process -- when the firm suspected that Madoff may be engaged in fraud, the Associated Press reported. According to a lawsuit filed by New York Attorney General Andrew Cuomo, the A.P. said, Ivy uncovered “disturbing” evidence of Madoff’s fraud years ago but failed to properly warn clients who wound up losing $227 million when the scheme collapsed. However, the A.P. said, Ivy and two former officers charged in the complaint – CEO Lawrence Simon and CIO Howard Wohl – insist that they shared their concerns with clients who chose to stick with Madoff regardless. “These fund managers rejected (Wohl’s) counsel, and their investors suffered significantly as a result,” a spokesman for Wohl stated in the article. “It is regrettable that the attorney general would turn this situation on its head by suing Mr. Wohl – who shared his Madoff concerns – while not pursuing the fund managers.” As Ivy’s current owner, the A.P. noted, Mellon had previously disclosed that it faced an investigation by Cuomo and planned to negotiate a possible settlement of the case.

'Chinese Warren Buffett' Says He Needs Money for Defense

5/11/2010 9:41:51 AM

Weizhen Tang, the self-proclaimed “Chinese Warren Buffett,” says that he needs legal aid to defend himself against charges that he operated a $30 million Ponzi scheme, The Toronto Star reported. Before a court appearance this week, the newspaper stated, Tang complained that he lacks money for lawyers because of an asset freeze and an order that prevents him from trading in securities. Tang continues to maintain his innocence in the meantime, the newspaper noted, arguing that his hedge fund lost less than 20% of its value – outperforming banks and other financial institutions – during the recent economic crisis. Currently free on bail, the newspaper said, Tang is now expected to go on trial next month following a temporary delay in the proceedings.

ABN Amro Hit with Big Fine for Concealing Secret Deals

5/11/2010 9:20:14 AM

The giant bank once known as ABN Amro (and now owned by the Royal Bank of Scotland) must pay $500 million to settle criminal charges that it violated the Bank Secrecy Act by concealing deals with countries under sanction by the U.S. government, The New York Times reported. According to federal prosecutors, the Times said, ABN Amro altered payment documents to eliminate references to those countries for more than a decade. ABN Amro actually admitted guilt in the case, the Times noted, with its new owner saying that the past misconduct “reflects a regrettable period” for the company.

Maxim Settles Backdating Case after Former CFO Found Liable

5/11/2010 8:20:03 AM

Maxim Integrated Products (Nasdaq: MXIM) agreed to settle a class-action lawsuit accusing the company of improperly backdating stock options, The Recorder law journal reported, just two weeks after its former CFO Carl Jasper was found liable of civil fraud charges for his involvement in the alleged backdating scheme. Under the terms of the proposed deal, The Recorder stated, Maxim will pay $173 million – the third-largest penalty levied in a backdating case so far – in order to settle the shareholder complaint. Although Maxim had previously won a motion to dismiss much of that lawsuit, The Recorder noted, the company insisted that the verdict against Jasper played no role in its decision and that it was simply “closing the door” on the long-running case instead.

Goldman Sachs Fraud Case Sparks Push for New Rules

5/11/2010 7:45:57 AM

With Goldman Sachs (NYSE: GS) under fire for betting against its own clients, The Times of London reported, the U.S. Senate is considering a new law designed to eliminate such conflicts in the future. The proposal would ban banks from holding proprietary short positions in securities they underwrite, the Times explained, and could potentially include similar bans against market makers – which match buyers and sellers of various products – as well. By enacting such measures, the Times stated, lawmakers aim to prevent controversial deals like the one that allowed Goldman to profit on doomed subprime mortgage securities that it sold to its own clients. “Maybe we can’t stop the extreme greed that lies behind these conflicts,” Sen. Carl Levine, a Michigan Democrat who is co-sponsoring the bill, stated in the article. “But we can act to end the conflicts which have allowed big payoffs.” Last month, the Times noted, the U.S. Securities and