Ft. Lauderdale Boiler Room Brings SEC Scalping Charge

2/1/2012 7:27:55 AM

A Fort Lauderdale boiler room operation that allegedly touted two thinly-traded penny stocks, all the while selling the same securities without telling customers, has resulted in federal charges. The Securities and Exchange Commission said operations by First Resource Group LLC and principal David H. Stern included cold-calling potential investors and repeatedly lying about TrinityCare Senior Living Inc. and Cytta Corporation. Salespeople hired by Stern read from prepared scripts and claimed that TrinityCare stock was expected to trade at $40 per share within five years, investigators said. Meanwhile, the SEC added, First Resource and Stern were “scalping” by selling the stocks to investors and allegedly simultaneously dumping their own shares. The SEC did not divulge trading volumes or dollar amounts involved in the case.

 

Alleged Scam Artist Loses A Bid For Release On Bond

2/1/2012 7:24:27 AM

A Michigan judge has ruled that a money manager who was jailed last May will remain there, WHMI Radio News reported. No trial has yet been scheduled on allegations that the former manager, John Bravada, of Brighton Township, Mich., scammed clients out of $53 million they invested for real estate-related purposes. Prosecutors charged that Bravada kept the cash for himself, using it to travel, buy jewelry, and otherwise fritter away millions. Bravada wanted a crack at freedom on bond, but that was recently denied by a Detroit federal judge. The alleged scam artist remains jailed under charges of conspiracy, securities fraud, and money laundering. His son is also charged in the case, WHMI said, while his former partner already pleaded guilty to wire fraud and will be sentenced in May.

Mets Owners To Judge: 'We Never Thought He Was Bad'

2/1/2012 7:20:57 AM

No doubt, Fred Wilpon and Saul Katz, owners of the New York Mets baseball team, must now regret every penny they ever put into Bernard Madoff's Ponzi scheme. Bloomberg said the owners are asking a federal judge to throw out remaining claims by Madoff trustee Irving Picard, saying they had no idea that Madoff - now serving 150 years in prison for running the biggest Ponzi scheme in American history - was a con man. Originally, Picard went after $1 billion the owners withdrew from accounts they had with Madoff, but most of that claim was denied by a federal judge. The Mets owners have now filed for the judge to dismiss a remaining $386 million Picard is after, with their lawyers saying they never suspected Madoff of fraud, “let alone a Ponzi scheme,” Bloomberg said. Federal Judge Jed Rakoff has already dismissed nine of 11 claims Picard sought from Wilpon and Katz. A March trial has been scheduled to decide the rest of the claims, Bloomberg said.

La Jolla Money Manager To Pay For Role In Stock Scam

2/1/2012 7:17:22 AM

Without admitting or deny guilt, a money manager who worked in the swank Southern California town of La Jolla has agreed to pay $35,000 for her part in a $2 million stock manipulation scheme. Lisa R. Hyatt formerly ran Mercury Capital Brokerage, the San Diego Union-Tribune said, which was one of four firms used in the scheme. The brokerages allowed Igors Nagaicevs, of Latvia, to hijack trading accounts and use them to manipulate stocks he owned, the newspaper said. Other firms involved in the scheme were located in San Mateo, Calif., Philadelphia, Pa., and Boise, Idaho, the Union-Tribune said. The fine against Hyatt was levied by the Securities and Exchange Commission.

Florida Nurse Cops Plea In Medicare Fraud Case

2/1/2012 7:13:54 AM

Another health care practitioner has pleaded guilty in Miami for his part in a Medicare fraud ring that ran a $25 million operation, the FBI said. Jorge Pineiro, a 42-year-old registered nurse, admitted to federal prosecutors that he committed fraud while working for ABC Home Health Care Inc. and Florida Home Health Care Providers Inc. He and other nurses and medical doctors were charged with compiling phony files and notes that described non-existent symptoms for patents, then billing Medicare for tax-paid treatments that never occurred. So far, 18 co-defendants have pleaded guilty in the sweeping case, and two others are scheduled for trial. Pineiro could get a maximum punishment of 10 years in prison for his role in the scam, the FBI said.

A Former Red Sox Catcher Scores Arbitration Homer

1/31/2012 7:33:18 AM

Former Boston Red Sox catcher Doug Mirabelli helped win two World Series, and now has won $1.2 million in an arbitration proceeding against Phil Scott, a Bank of America Merrill Lynch adviser. In 2008, InvestmentNews said, Mirabelli and his wife invested more than $880,000 with Scott in a bundle of dividend-paying growth stocks. With some loans figured in, the investment came to $1.8 million, the newspaper said. But then things went sour, and the Mirabellis liquidated their account to pay off the loans. In arbitration, they argued that Scott had put their money into unsuitably risky investments. The arbitration panel agreed, awarding the couple $1.2 million, plus costs and legal fees. Merrill disagreed, with a spokesman saying the account “was handled properly during a very difficult time when there was extreme market volatility,” InvestmentNews said.

British Regulator Issues $11 Mil Inside Trade Fine

1/31/2012 7:30:06 AM

The Financial Services Authority of Britain has fined portfolio manager David Einhorn and his Greenlight Capital hedge fund $11 million for selling off shares of a chain of pubs after receiving privileged information, The New York Times said. The regulator said Einhorn learned during a 2009 conference call that Punch Taverns may be issuing more stock - a move he decided could push down the company's share price. Greenlight then began selling shares of Punch, thus avoiding what the FSA said were several million in losses when the stock declined. In a conference call with reporters and investors after the fine was announced, Einhorn - known to be outspoken and critical of regulators - defended his move, The Times said, remarking that his action “resembles insider dealing the way that soccer resembles football.”

Merrill To Pay $1 Million For Making FINRA End Run

1/31/2012 7:27:11 AM

Without admitting or denying the charges, Merrill Lynch has agreed to pay $1 million after allegations that the company violated rules requiring it to arbitrate disputes with employees, rather than file lawsuits against them, InvestmentNews said. The dispute centered around a $2.8 billion bonus program the company began to retain high-producing brokers after a 2009 merger with Bank of America Corp., InvestmentNews said. The Financial Industry Regulatory Authority said Merrill “specifically designed” the bonus program as loans, and structured it to get around a FINRA rule requiring that companies arbitrate disputes with employees. After brokers began leaving Merrill without repaying the bonus “loans,” the company sued more than 90 of them to collect in New York state court, InvestmentNews said. In early 2010, the company dropped the practice and began holding arbitration proceedings with program participants who left without making repayments, the newspaper said.

Former UBS Trader Pleads Innocent In $2.3 Bil Loss

1/31/2012 7:20:18 AM

Kweku M. Adoboli, the former UBS trader who is alleged to have lost $2.3 billion of investors' money, is expected to stand trial for as long as eight weeks beginning Sept. 3, The New York Times reported. Adoboli, 31, has pleaded not guilty in London to a pair of counts of falsifying records and two other counts of fraud by abuse of position, the newspaper said. He was arrested last September after the Swiss-based UBS uncovered the losses, which apparently occurred through unauthorized index futures trades. Investigations in England and Switzerland are still underway, The Times added.

Mandell Pushes Series And Awaits A Scam Sentencing

1/31/2012 7:17:10 AM

Sentencing has been delayed for swagger king Ross Mandell, the Sky Capital executive who, with his partner, was convicted last July for cheating an estimated 250 victims out of at least $140 million as part of an international swindle. Mandell and Adam Harrington were scheduled to be sentenced early next month for conspiracy and for securities, mail, and wire fraud, Forbes reported. But that has been delayed until late March, and a pre-sentencing report is now being hammered out. Federal prosecutors charged that Mandell and Harrington manipulated the stocks of two Sky Capital companies while they duped investors and spent their money on strip clubs, private jets, luxury hotels, and Swiss watches. While he awaits sentencing on bail, Mandell remains bloody but unbowed: On his Web Site, he continues to push a proposed TV show on his own life and times, called “Facing Life.” It's billed as a half-hour weekly series “with no immunity.”

N.Y. Man Busted For Pet Scam That Took Investors

1/29/2012 6:01:10 PM

Investors who weren't stung by Eric Stein the first time around may have now have had a second chance, The New York Observer said. The newspaper said Stein, 53, has been arrested on federal charges in New York for selling fraudulent investments in Return-A-Pet LLC. The method: He allegedly sold franchises for the service, which purportedly kept information on registered pets, and maintained a 24-hour telephone line. The pets wore a collar with the service's telephone number. People who found lost pets could call the number and match up a return between animal and owner. Investigators said investors flocked to the service, sending franchise fees to Stein ranging from $5,000 to $50,000. But allegedly, it was all a scam, and Stein - who had a previous criminal record in Nevada - is charged with mail and wire fraud. He faces a maximum penalty of up to 40 years in prison, The Observer said.

 

Gupta Wants Trials - Not Just One Trial, But Two

1/29/2012 5:58:06 PM

Rajat Gupta isn't fooling around, and federal officials may now be thinking they stuck a hand into a hornet's nest. Although he already faces criminal insider trading charges, the 63-year-old Gupta is also demanding to stand trial in a civil case filed against him by the Securities and Exchange Commission, Bloomberg said. The SEC case accuses Gupta - a renowned Wall Street figure and former director of Goldman Sachs and Procter & Gamble - of passing privileged corporate information along to Raj Rajaratnam, the former hedge fund titan. If his demand for a civil trial is granted, that means Gupta could double his risk by going on trial twice - once in civil court, once in criminal court. Rajaratnam has already been convicted and is serving an 11-year prison term, Bloomberg said.

Farkas Asking For New Trial In TB&W, Colonial Debacle

1/29/2012 5:54:52 PM

Lee Farkas, the executive at the helm when mortgage lending giant Taylor, Bean & Whitaker went down, is asking for a new trial, the Ocala Banner reported in Florida. TB&W was a top-10 wholesale mortgage lending company that had also acquired an interest in Colonial BancGroup, then paid enormous debts to the bank from mortgages TB&W did not own. The deals led to the collapse of both entities, and in April 2011, Farkas was sentenced to 30 years in federal prison for the $2.9 billion debacle. Now, The Banner said, Farkas' attorneys have filed an appeal seeking a new trial, based in part on grounds that the original case went to trial too quickly, and that instructions to the jury were faulty. Farkas waits out his appeal from a federal cell in Williamsburg, S.C., the newspaper said.

CFTC Orders Fines, Bans Conn. Commodity Trader

1/29/2012 5:52:02 PM

Redding, Conn. resident Timothy Michael Murphy and his company, Centurion Global Capital Management LLC, have been fined by the U.S. Commodity Futures Trading Commission for fraudulently soliciting 40 or more customers to invest in a commodity pool. The CFTC said the acts occurred between May 2009 and January 2010, when a solicitation sheet was circulated to find investors. The communication contained false or misleading information about the trading performance history of one commodity advisor involved in the accounts, regulators charged. Meanwhile, Murphy received fees and commissions generated by the pool. A resulting order requires Murphy and his company to pay $360,000 in penalties and restitution, and bans Murphy from trading on a CFTC-registered entity for five years, the agency said.

 

SEC: BankAtlantic And CEO Covered Up Loan Disasters

1/29/2012 5:48:59 PM

You have to wonder if the nightmare will ever end: More fallout has been disclosed from the housing crisis that began unfolding in 2007. Federal regulators have now gone after BankAtlantic Bancorp., one of Florida's biggest banks, and its top executive, Chairman and CEO Alan Levan. In a recent filing, the Securities and Exchange Commission charged BankAtlantic and Levan with misleading investors about serious problems with the bank's loan portfolio as the crisis grew. They used “accounting gimmicks” to cover up problems with real estate-related loans that were crumbling because borrowers were no longer able to pay, the SEC said. In fact, the bank had already internally downgraded many of the loans, although Levan and BankAtlantic “publicly minimized the risks” to investors, regulators said. Now the agency is seeking undisclosed financial penalties against BankAtlantic, as well as a permanent injunction against such alleged chicanery in the future. As for Chairman Levan, the ride may be over: The SEC wants him banned form serving as an officer or director of a publicly traded company.

Prosecutor: Stanford Told Investors 'Lie After Lie'

1/27/2012 5:47:52 AM

R. Allen Stanford's federal trial finally began in Houston this week for allegedly running a $7 billion Ponzi scheme, with a prosecutor telling jurors that for more than 20 years, Stanford told “lie after lie” and “treated depositors' savings like his own piggy bank.” The Houston Chronicle said that through his Stanford International Bank in Antigua, the high-profile defendant - who lived a lavish lifestyle and once had a $2 billion net worth - peddled certificates of deposit that he promised would earn much higher returns than U.S.-based investments. But eventually, prosecutors say, his investors lost millions and the whole scheme collapsed. Meanwhile, The Chronicle quoted Stanford's court-appointed defense attorney as saying in opening arguments that his client was legitimate, and “paid every penny that was promised.” Stanford was arrested in 2009. His trial, which began after numerous delays, could run as long as six weeks.

'Borrowed' Cash Earns 18 Months In Federal Prison

1/27/2012 5:44:34 AM

Paul R. Beckwith, 39, liked to play the stock market. Nothing wrong with that. Problem was, he liked to do it with his employer's money, said the U.S. Attorney for the District of Utah. Beckwith began playing with purloined cash when he was assistant controller at TheraDoc, Inc., a hospital software services company in Salt Lake City. Federal investigators discovered he had been “borrowing” corporate funds from an operating account to make margin trades - taking money at the first of each month and replacing the cash at month's end. Finally, it caught up with Beckwith. During one month in 2010, he moved $1.3 million from the company account to cover losses and new trades. Now he has pleaded guilty to wire fraud and was sentenced to 18 months in federal prison, the government said.

Gulten-Free Investments Don't Prove Glutton-Free

1/27/2012 5:41:44 AM

Patricia A. Stewart, a 50-year-old resident of Wheaton, Ill., is going to prison for 60 months and must make more than $2 million in restitution for defrauding victims who thought they were investing in gluten-free and wheat-free bakery products, reported the Daily Herald in suburban Chicago. Prosecutors said Stewart claimed to be a licensed securities dealer when she sold stock in Whole Bakers LLC. But she did not tell investors - one of whom was an elderly woman who lost $500,000 in the deal - that she used the cash for different purposes than the bakery company, including spending money on herself, the Daily Herald added. The scam ran from December 2005 through May 2010, the newspaper said. Stewart reports to prison on March 28.

 

Scam Earns Suspended Term For Tenn. Man In Alabama

1/27/2012 5:37:50 AM

A former Alabama resident was given a suspended 10-year prison sentence in Birmingham and will be ordered to make restitution for an investment scam involving land development deals and automobile buy-sell transactions, The Birmingham News said. David Ray Pinyan, who now lives in Tennessee, was sentenced after pleading guilty to charges in a 12-count state indictment issued in 2010, the newspaper reported. A hearing will be scheduled to decide how much restitution Pinyan must pay in the case, which was brought by the Alabama Securities Commission, The News added.

 

Lawsuit Claims Citigroup Unloaded Worthless CDOs

1/27/2012 5:34:39 AM

More problems for Citigroup Inc. over the sale of collateralized debt obligations that were backed by mortgages: A lawsuit filed in New York charges the company with unloading nearly $1 billion worth of toxic securities on unwary buyers in 2006-2007, Reuters reported. The suit was filed in New York State Supreme Court in Manhattan by Loreley Financing, a group of special purpose entities that invested in collateralized debt obligations, Reuters said. The legal action accuses Citigroup of fraud for selling $965 million worth of toxic securities on its books, and with helping preferred clients short the housing market. As a result, Loreley ended up holding “fraudulent investments that are now worthless,” according to Reuters. The news service quoted a spokeswoman for Citigroup as saying the lawsuit “is without merit.”

Diamondback Pays $9 Mil; Is Off The Hook With Feds

1/26/2012 7:33:01 AM

Stamford, Conn.-based hedge fund Diamondback Capital Management is off the hook for federal insider trading criminal charges, but will pay $9 million-plus in penalties and fines after entering a non-prosecution agreement with the U.S. Attorney in Manhattan, the New York Times said. Diamondback has been under pressure since the FBI raided its offices in November 2010, and figured heavily in the picture when seven people - two of them former Diamondback employees - were recently arrested in the government's continuing insider trading crackdown. But citing the company's “prompt cooperation and voluntary adoption of remedial measures,” the government agreed not to prosecute Diamondback, The Times said. Since the FBI raid, clients have jumped off the Diamondback ship, and assets under management have plummeted by half, to $2.5 billion, The Times added. This week, the company's co-founders told investors in a letter that they are “gratified finally” to see an end to the strife. “Everybody at Diamondback is looking forward to a successful 2012,” the newspaper quoted the company's leaders as saying.

Regulators In Nova Scotia Allege Boosting Of Prices

1/26/2012 7:28:23 AM

In Nova Scotia, the Securities Commission has filed allegations that two executives of Mountain Lake Resources, Inc. tried to keep the share price of the small gold exploration company artificially high in 2008 and 2009, Stockwatch said. Regulators allege that Allen E. Sheito, the company's chairman and director, and President-CEO Gary A. Woods entered share bids that gave a fake indication of trading activity for the stock. A market panic underway at the time had driven stock in Mountain Lake, traded on the TSX Venture Exchange, as low as eights cents per share, Stockwatch said. Sheito and Woods deny the allegations and said in a statement that they will vigorously defend themselves, Stockwatch added. A pre-hearing conference is scheduled for March. This week, Mountain Lake was trading around 46 cents per share in Canadian dollars.

 

Indictments Issued Against 12 For Massive Theft Ring

1/26/2012 7:25:04 AM

The U.S. Attorney's Office for Minnesota has announced the indictments of 12 people charged with running a massive ring that stole identifies and produced fake documents, used to defraud banks and retail stores of more than $2 million over five years. The case began with the arrest of one man, Stephen Lavell Maxwell, for identity theft. But the focus later widened, and now includes expanded counts against Maxwell and charges against 11 other suspects. Prosecutors said the ring operated by stealing identity information about unwitting victims, then producing false drivers licenses, checks, and other documents used to purchase expensive retail goods. The merchandise would later be returned for cash refunds, and the profits were divided among ring members, the FBI said. The operation spread throughout the Midwest, and its alleged members now face charges ranging from identity theft to bank fraud.

 

SEC Throws Transfer Agent Out Of Trading Industry

1/26/2012 7:21:35 AM

Without admitting or denying wrongdoing, Helen Bagley, a stock transfer agent, has been permanently barred from associating with the securities industry after her role in the CMKM Diamonds, Inc. stock manipulation scheme, according to Stockwatch. The Securities and Exchange Commission said that as transfer agent, Bagley enabled the scam - which saw promoters dump nearly six billion shares of the penny stock into the market from 2002-2004 - by ignoring red flags that included incomplete or forged documents. Bagley also has other problems, Stockwatch said. She is currently appealing an SEC civil judgment of more than $448,000 issued against her for the same case, and has pleaded not guilty to criminal charges in Nevada, the market news service said.

Ex-Hospital Official Gets 3 Years And Pays $4.8 Mil

1/26/2012 7:17:45 AM

For four years, the money rolled in for David Hamedany when he was director of construction at Huntington Hospital in Pasadena, Calif. But the FBI said it was dirty money he gained through a billing and kickback scheme that ultimately cost the hospital more than $3 million. An investigation eventually revealed that Hamedany paid the money to companies that did no work for the hospital and they, in turn, funneled 90 percent of the cash back to entities he controlled. Now, Hamedany, 55, has pleaded guilty to mail fraud and was sentenced to three years in federal prison, the FBI said. Aside from an order to pay $4.8 million in restitution, Hamedany has already forfeited his home, as well as $500,000 seized by the government from his bank account.

Bharara: 'The Big Short' Was A 'Big Illegal Short'

1/25/2012 7:56:12 AM

Three former stock analysts have pleaded guilty to securities fraud charges for insider trading that netted $61.8 million in illegal profits, Forbes reported. Sandeep Goyal, Jesse Tortora, and Spyridon Adondakis all face maximum sentences of 25 years in federal prison, according to prosecutors. Goyal, once a junior analyst at investment management firm Neuberger Berman, admitted to taking bribes of $100,000 or more from the other men when he leaked insider information to them on upcoming market developments involving Dell, Inc. and NIVIDIA, a computer technology products company, Forbes said. Tortora and Adondakis worked for hedge funds that made trades based on the information, reaping millions in dirty profits. Much of the money was made through short-selling, Forbes, added, quoting Preet Bharara, U.S. Attorney for the Southern District of New York as saying: “Here, the Big Short was the Big Illegal Short.”

Colorado Adviser Guilty Of Multiple Fraud Counts

1/25/2012 7:52:51 AM

A Colorado jury has convicted a former investment adviser on six felony counts after he carried out a $5.7 million scam involving more than 70 victims, many of them retired and elderly. Sixty-two-year-old Phillip Richard Trujillo scammed dozens of people, The Coloradoan said, losing their money in high-risk schemes or using it to repay earlier investors. Each of the six counts of securities fraud and theft on which Trujillo was convicted is punishable by four to 12 years in prison, the newspaper said. And it isn't over yet: The Securities and Exchange Commission is also after a $10 million fine against Trujillo, The Coloradoan said.

Payments In 'Soft Dollars' Bring Plea Deal In Calif.

1/25/2012 7:49:30 AM

Kurt Hovan, an investment adviser in the exclusive California community of Belvedere, has pleaded guilty to mail fraud and lying to federal investigators in connection with an investment-related kickback scheme, the Marin Independent Journal reported. Hovan, 44, was accused of paying his brother's company a monthly salary with “soft dollars,” then taking kickbacks from that company to pay rent for his own firm, Hovan Capital Management. Soft dollars are brokerage firm rebates or credits paid for trades made through an investment adviser's client accounts. Advisers can only spend the dollars in very limited ways. The Independent Journal said Hovan admitted to falsifying documents certifying that his brother had performed outside research, qualifying him to receive soft dollars. Hovan also admitted to lying under oath to Securities and Exchange Commission investigators during their probe. He is scheduled for sentencing on May 15, and could get a maximum sentence of 25 years in prison, the Independent Journal added.

 

Private Placement Failures Cause $9.1 Mil FINRA Fine

1/25/2012 7:45:41 AM

An arbitration panel for the Financial Industry Regulatory Authority has ordered CapWest Securities, Inc., a defunct broker-dealer, to pay $9.1 million in damages and legal fees to investors in three private placement deals that went belly-up, InvestmentNews said. The investment vehicles were Provident Royalties LLC, Medical Capital Holdings Inc., and DBSI Inc., the newspaper said. The award is believed to be one of the largest made in connection with unsuccessful private placements, InvestmentNews added, but chances of actually collecting the money appear to be slim to none. CapWest is no longer in business, and InvestmentNews quoted a lawyer for the company as saying it has “zero assets. There's not even an obsolete telephone directory.”

Prison Time Awaits Conn. Man For Real Estate Scams

1/25/2012 7:42:16 AM

A Connecticut man faces a possible 20 years in federal prison after pleading guilty to taking $1.52 million through four real estate-related scams from 2006-2010, theFBI announced. John Voloshin, 56, of Woodbridge, Conn., pleaded in Hartford federal court to the frauds, one of which involved his representing a bidder in the auction for a hotel on Nantucket. Prosecutors said Voloshin directed the bidder to send $250,000 for the auction, but then placed the money in a bank account and wrongfully used it. Voloshin also pleaded guilty to three other real estate-related scams - one involving a property on Martha's Vineyard - that occurred in 2006, 2008, and 2010, the FBI said. Sentencing is scheduled for April 5.

$14 Mil Scam Ended With Possible 140-Year Term

1/24/2012 8:05:24 AM

In retrospect, it was a bad move by about 200 investors to put $14 million into a company called “Sarduakar Holdings.” They lost it. It probably also was a bad move for Bradley Stark, the chief of Sarduakar, to defend himself in trial against federal criminal charges. He lost, too. A jury in Dallas has convicted Stark, 37, of Riverside, Calif., on seven counts of wire fraud and one count of securities fraud for skinning investors and making numerous false claims, Courthouse News reported. They included lying about his background, licensing, and amounts of assets under management, and falsely claiming to put investors' money into futures and currency trades that could bring returns as high as 30 percent. In fact, Stark was blowing the money on travel, entertainment, luxury cars, jewelry, and a $1 million gift to his wife, prosecutors charged. On the wire fraud counts alone, he faces possible maximum prison time of 140 years and more than $1.7 million in fines, Courthouse News said. Sentencing is scheduled for April 21.

The Man Who Nailed Raj Now Given His Life Back

1/24/2012 8:02:09 AM

David Slaine, the former stock trader who helped put Raj Rajaratnam and a long list of other Wall Street crooks behind bars, has been give three years probation and fined $500,000 for securities fraud, according to The Business Standard. Slaine had worked at Galleon Group, the New York hedge fund co-founded by Rajaratnam. In 2007, he began cooperating with federal prosecutors, surreptitiously recording dozens of discussions with inside trading figures - most of whom were later convicted and sent to prison. Rajaratnam himself was convicted after a high-profile trial and is serving 11 years in prison. The Business Standard quoted Manhattan U.S. District Judge Richard Sullivan as telling the defendant at sentencing: “Mr. Slaine, you have your life back.” Slaine now works for a chain of dog-grooming stores, the Business Standard said.

63 Months, $4.56 Million In Restitution Are Ordered

1/24/2012 7:58:13 AM

An Illinois federal judge has sentenced a 67-year-old man to 63 months in prison after he pleaded guilty to fleecing investors out of $9 million, the Rockford Register Star reported. Algird M. Norkus, of Aurora, Ill., admitted taking millions from investors through his company, Financial Update, Inc., promising the money would be used to buy lists of potential customers for business deals, the newspaper said. But prosecutors said he actually commingled and misappropriated the money, making Ponzi-type payments to investors and spending much of the cash on himself. Norkus also provided phony IRS forms to investors, showing interest income had been paid. In addition to time in the slammer, a judge also ordered Norkus to make more than $4.5 million in restitution to his victims, the Register Star said.

Another Precious Metals Case Is Prosecuted In Va.

1/24/2012 7:54:31 AM

James F. Price, a resident of Midlothian, Va., has been arrested and charged with federal crimes connected to an alleged precious metals Ponzi scheme, the Progress-Index reported. Price, 61, ran a company called Madison Precious Metals, and is accused of taking in more than $6.1 million from victims who thought their money was being invested in precious metals, the newspaper said. But investigators alleged that Price used the money for personal expenses. He is being prosecuted on four counts of mail fraud in the Eastern District of Virginia, the Progress-Index added.

Trustee Files 25 Lawsuits In Fair Finance Bankruptcy

1/24/2012 7:51:10 AM

A bankruptcy trustee sorting through the ruins of Fair Finance - a company accused of ripping off more than 5,000 investors for $200 million-plus - has filed a bushel of lawsuits against businesses and individuals formerly associated with company principal Tim Durham. Named in Ohio bankruptcy court, the defendants include a criminal defense law firm, a bankruptcy lawyer, and even Durham's mother, the Indianapolis Business Journal said. Durham and two associates are under indictment for allegedly selling investment certificates and falsely promising high returns to investors, the Business Journal said. The trustee claims 25 entities received money from Durham, and owe his alleged victims more than $5.9 million. The new lawsuits include an action against Mitza Durham, claiming the defendant's mom received 58 checks or wire transfers from her son from 2006 through 2009, the Business Journal said.

Arizona Man Making Plea In A Long-Standing Ponzi

1/22/2012 5:03:29 PM

Arizona Ponzi artist Edward Purvis, who maintained his innocence for years, has changed his tune and pleaded guilty to defrauding millions from investors, the Arizona Republic said. Purvis and a partner were charged with bilking hundreds of victims from 13 states, promising they would get returns of 24 percent by investing in a ministries efforts to support Christian causes around the world, The Republic said. But instead, the men bought cars, jewelry and real estate, and financed gambling junkets to Las Vegas, officials said. Gregg Wolfe, Purvis' former partner, has already pleaded guilty and testified against Purvis, the newspaper said. Both men are expected to be sentenced in March.

Trader Denies Allegations Of Pumping By Wash Trades

1/22/2012 5:00:24 PM

A trader alleged to have pumped up the value of a penny stock by more than $9 per share within minutes by wash-trading has denied guilt and is asking for a jury trial. Stockwatch said Colin Heatherington, who was a trader for Absolute Capital between 2005 and 2007, has formally denied his involvement in a stock manipulation scheme alleged by the Securities and Exchange Commission. In a civil fraud action, the SEC said Heatherington and two co-defendants pumped up stock prices in a series of trades and then dumped $63 million worth of overpriced stock. Wash trading occurs when someone buys and sells shares of a stock at the same time, pushing up trading volume and hiking share prices. In one case, the SEC charges, Heatherington's alleged actions pushed up the price of a penny stock from $3.20 to $12.99 in two minutes. The defendants then dumped five million shares of the stock to hedge funds in aftermarket sales, the SEC alleges. In his recently-filed answer to the lawsuit, Heatherington said he relied on professional advice from accountants and compliance experts when making the trades, Stockwatch said.

Long-Delayed Ponzi Trial Is Delayed Again In Utah

1/22/2012 4:57:08 PM

Trial in Salt Lake City has been delayed for a man allegedly involved in a $180 million Ponzi scheme that defrauded 800 investors over a 17-year period, Examiner.com reported. The Web site said prosecutors asked for the delay in the securities fraud trial of 45-year-old Shawn Moore, a former associate of VesCor, the real estate development firm at the heart of the Ponzi scheme. The owner of VesCor pleaded guilty in 2008 and is now serving time, Examiner.com said. Moore's trial, previously scheduled for this week, was continued until June 5 because the state's key securities fraud witness has been fired from his prior position with the Utah Division of Securities, the Web site reported. Questions over the employee's firing from his state post could cause “credibility issues” for both sides if he were used to testify during trial, a prosecutor was quoted as saying.

SEC Charges UBS 300 Thou For 2008 Misconduct Case

1/22/2012 4:54:13 PM

The Securities and Exchange Commission has charged UBS AG $300,000 for incorrectly pricing mortgage-backed securities over two weeks in 2008, InvestmentNews said. The company misstated the value of assets held in three mutual funds by omitting amounts the funds had actually paid for the securities, InvestmentNews said. In most of the 54 transactions involved, the values quoted were 100 percent higher than actual transaction prices, regulators said. As usually happens, UBS agreed to settle the allegations without admitting or denying blame.

Calif. Nurses Admit Guilt For Medicare Ripoff Fraud

1/22/2012 4:51:11 PM

Two Southern California nurses have pleaded guilty to a $5 million Medicare scam that paid kickbacks to doctors and targeted elderly Korean Medicare recipients, the FBI said. Hee Jung Mun, who owned Greatcare Home Health, Inc., admitted in Los Angeles to orchestrating the scheme, offering home care to ineligible patients, paying for patient referrals, and creating bogus medical records when filing for Medicare reimbursement, agents said. Her business was closed by officials in March 2011. A second woman, Ji Hae Kim, also pleaded guilty, and charges are pending against two other suspects, prosecutors said. Mun and Kim face possible maximum prison sentences of 10 years, the FBI added.

Insider Crackdown Nets 7 More Arrests By The Feds

1/20/2012 6:53:55 AM

Another shoe has dropped in a continuing federal crackdown on insider trading, with seven people - including hedge fund managers and analysts - arrested on allegations that they formed a “criminal club” that hauled in illegal millions by trading on privileged information on Dell Inc., Bloomberg said. The news service said the defendants got insider information on upcoming Dell Earnings reports in 2008 and 2009, then made stock trades that pulled in $62 million. One of the defendants alone, Anthony Chiasson, of Level Global Investors LP, made an illegal $53 million on the information, Bloomberg said. The insider ring allegedly included five hedge funds and investment funds, leading U.S. Attorney Preet Bharara to describe the group as “a circle of friends who essentially formed a criminal club … it was a club where everyone scratched everyone else's back.” The seven are the latest of 63 Wall Street figures who have been arrested thus far for insider trading. More than 50 have been convicted or entered guilty pleas, Bloomberg said.

 

Netflix Lawsuit: Execs Sold Stock For Millions

1/20/2012 6:50:37 AM

Netflix, the movie-by-mail company that caused the death of many retail video rental stores, is being sued in California federal court for allegedly misleading investors while its top brass made millions by selling their own company shares, Internet Retailer reported. A class action suit contends company executives duped investors into thinking business was great, while they knew the stock was about to sink because of price increases and other problems, Internet Retailer said. Yet for nearly a year in 2010 and 2011, the company issued false information on relationships with content providers and other issues, the lawsuit claims. Meanwhile, top company officials dumped 388,661 shares of Netflix stock and made more than $90 million, the suit alleges. Defendants include the company's CEO, the chief financial officer, and three other Netflix top dogs. Chief executive Reed Hastings alone pulled in $43.2 million from his stock sales, the lawsuit alleges.

 

Pastor Promised 400%; Ripped Off $1.6 Million

1/20/2012 6:46:32 AM

A Seattle-area preacher faces up to 30 years in prison for wire fraud and money laundering after pleading guilty to running a $1.6 million Ponzi scheme, InvestmentNews reported. In a federal plea bargain, 48-year-old Anthony C. Morris admitted to scamming 24 parishioners at New Covenant Christian Center by promising investment returns as high as 400 percent, the financial newspaper said. Morris will be sentenced in April for the scheme, which he ran for as long as eight years, according to InvestmentNews and other publications.

Citigroup To Pony Up $725,000 For FINRA Fine

1/20/2012 6:43:21 AM

The Financial Industry Regulatory Authority has fined Citigroup Inc. $725,000 for failing to disclose that it managed or co-managed public offerings for some companies that were covered in its research reports distributed to investors. The Washington Post said Citigroup Global Markets did not disclose conflicts of interest in reports published between 2007 and 2010. FINRA said the oversights were caused mostly by technical errors and programming problems, and Citigroup neither admitted nor denied wrongdoing in reaching the settlement, The Post added.

SEC Claims Cash Went To Pay Ex-Wife And High Life

1/20/2012 6:40:07 AM

The Securities and Exchange Commission has sued Missouri money manager Burton Douglas Morriss and his company, Acartha Group, charging that he fraudulently used investor funds to make alimony payments and fund a lavish lifestyle, the St. Louis Post-Dispatch said. Morriss, Acartha, and three other related financial entities raised $88 million from investors between 2003 and last year, the SEC said, but Morriss allegedly used $9 million of the cash to pay for cars, lease a helicopter, and fly around in a private plane, the Post-Dispatch said. Morriss recently filed for bankruptcy, listing debts as high as $50 million and assets of about $500,000, the newspaper added.

N.M. Case Is Just Another Heartless Elderly Ripoff

1/19/2012 7:40:43 AM

Another sad tale of elderly, vulnerable investors getting ripped off: Two brothers have been charged with defrauding an elderly couple of $440,000, which consisted of their life savings and other money gained from refinancing their home, KRQE-13 reported in Santa Fe, N.M. The television station said Michael Maxwell, of Edgewood, N.M. and Steven Maxwell, of Santa Barbara, Calif, met their victims through the couple's granddaughter and allegedly conned them into investing in a California condominium complex and a tavern in Albuquerque, N.M. Neither project actually existed, officials said, and the brothers allegedly squandered most of the money. They are being held under $750,000 bonds and face possible maximum punishment of 82 years in prison for charges of fraud, forgery and money laundering, KRQE said.

Casket Bonds Backfire; Attorney, Client Are Sued

1/19/2012 7:37:13 AM

A Georgia lawyer and his client have been sued for securities fraud by federal regulators in connection with a bizarre case involving nearly $3 million worth of government revenue bonds, issued to finance the takeover of a casket maker. The Bond Buyer said Attorney Chalmer E. Detling III, of Marietta, Ga., and his client, Charles Aiken, of Columbus, Ga., face charges of omissions and fraudulent misrepresentations in the case. Detling is alleged to have withheld information on Aiken's criminal record when the client formed a company to take advantage of industrial redevelopment bonds issued by Raleigh County, W. Va. The purpose of the bond sales in 2006 and 2007 - totaling $2.96 million - was to finance Aiken's acquisition of Continental Casket Co., the Bond Buyer said. Detling is accused of failing to tell parties in the bond issue that he had previously represented Aiken in a financial fraud criminal case, the SEC said. The bonds are now in default and taxpayers apparently are on the hook for the principal and accrued interest.

Canadian Takeover Results In Charges Against Two Men

1/19/2012 7:33:47 AM

In Canada, the Ontario Securities Commission has begun an insider trading action against two men involved in the 2011 takeover of an iron mining company.Stockwatch said Jowdat Waheed and Bruce Walter, both of Toronto, profited from the takeover of Baffinland Iron Mines, Ltd., based on confidential information about negotiations, mining plans, and a proposed joint venture that had not been publicly disclosed. In the end, a company formed by Waheed and Walter acquired 30 percent of Baffinland, securities regulators said. Waheed allegedly began manipulating the takeover while serving as a consultant to Baffinland in 2010, Stockwatch said. The Securities Commission wants permanent trading bands against the two men, as well as fines up to $1 million, Stockwatch added.

Japanese Official Busted For Elpida Insider Trades

1/19/2012 7:30:41 AM

A senior Japanese government official has been charged with insider trading after allegedly cashing in on a state-led bailout of a computer chip manufacturer, the Japan Times reported. The newspaper said Masaaki Kimura, 53 - the former chief of a bureau with Japan's Ministry of Economy, Trade and Industry - made millions from insider trading when the Development Bank of Japan invested heavily to prop up Elpida Memory Inc., whose digital products line was suffering. Kimura was arrested in Tokyo on charges that he violated the Financial Instruments and Exchange Law in 2009, the Japan Times said. He reportedly told investigators his wife had instructed him to buy and sell Elpida stock, but Kimura is also suspected of previous insider trades involving other companies, the newspaper added. If convicted, he faces up to five years in prison.

 

Ex-Audit Partner Admits Lies To SEC Investigators

1/19/2012 7:25:53 AM

Bryan Polozola, a former audit partner at BDO USA LLP, has pleaded guilty to lying to federal regulators during a Securities and Exchange Commission inquiry, according to Reuters. Polozola made his plea in Washington, admitting he had been untruthful when he told SEC investigators he didn't know his lawyer had repaid funds Polozola took from a former employer for his own use. In 2005, Polozola was banned by NASDAQ from working for any member firm when the incident came to light. In a separate investigation, Polozola untruthfully told SEC sleuths he was unaware his attorney had repaid nearly $50,000 to the former employer, when in fact the payment was made at his direction, Reuters said. The 37-year-old Polozola faces a maximum punishment of six months in jail when he is sentenced in March, Reuters said.

FTC Fines CVS Caremark $5 Mil For False Pricing

1/18/2012 5:35:33 AM

Has your friendly local pharmacy been straight with you? Maybe not, if it was a CVS pharmacy, according to the Federal Trade Commission, which has just fined CVS Caremark Corporation $5 million for misleading consumers about the prices they would pay for critical prescriptions. Financialfraudlaw.com reports that CVS used its subsidiary, RxAmerica, to low-ball the cost of medications in its online pricing list for Medicare Part D drugs needed by senior citizens. These included drugs used to treat epilepsy and breast cancer, the FTC said. In actuality, at the pharmacy counter, the retail price of the drugs was sometimes 10 times higher than the Internet posted price Medicare recipients expected to pay, Financialfraudlaw.com said. CVS Caremark will soon begin mailing $5 million in refunds to customers who got stung by the higher prices, the Web site said.

Ex-Lawyer Pleads Guilty In CO2 Tech Manipulation

1/18/2012 5:32:08 AM

A central figure in the C02 Tech Ltd. stock manipulation scheme has pleaded guilty in Miami to a single count of conspiracy to commit securities fraud, Stockwatch reported. Michael Krome, a 49-year-old New York lawyer, was charged with participating in a 2007 plan to boost the stock of CO2 Tech by writing fraudulent opinion letters, Stockwatch said. He is free on $100,000 bond and faces a maximum of five years in prison when sentenced May 9. Krome and his co-conspirators pumped up the price of CO2 Tech stock and then dumped it, making $7 million in illegal profits, Stockwatch added.

Regulators In Philippines Close Boiler Room Scam

1/18/2012 5:29:01 AM

An alleged boiler room operation has prompted the Philippine Securities and Exchange Commission to shut down First Asian Client Depository Services Inc., BusinessWorld reported. The news service quoted Philippine SEC Secretary Gerard M. Lukban as saying the decision was made at the urging of his agency's enforcement and prosecution department. Aside from using fictitious addresses for its incorporators, the company is under investigation for running boiler room activities, in which salespeople allegedly used high-pressure tactics to peddle fraudulent securities to consumers, BusinessWorld said.

Last Defendant Falls In Western Pipeline Fraud

1/18/2012 5:24:52 AM

John Arthur Apple, Jr., the last figure standing in the Western Pipeline Corp. case, has pleaded guilty in Dallas, according to Courthouse News. Apple and four other former company officials were charged with conspiracy and securities fraud for issuing false statements to lure investors into phony oil and gas projects, prosecutors said. All have now pleaded guilty to securities fraud or conspiracy, and face possible prison terms of five years or more. Courthouse News added that in a separate civil suit, Western Pipeline investors said they were taken for $18 million.

 

Nortel Execs Facing Long Criminal Trial In Canada

1/18/2012 5:21:07 AM

A lengthy criminal trial is expected for three former executives of Nortel Networks Corp., charged with inflating earnings for four years and pocketing millions in undeserved bonuses, Bloomberg said. The trio - former CEO Frank Dunn, former CFO Douglas Beatty, and ex-controller Michael Gollogly - are on trial in Canada for allegedly ripping off Nortel, once the biggest telephone equipment maker in North America. Prosecutors charged the three with a $4.9 million fraud, meaning that if they are convicted in a judge trial, they could get maximum prison sentences of 14 years each, Bloomberg said. The trial in Toronto is expected to run as long as nine months. Nortel filed for bankruptcy in January 2009, Bloomberg added, and eventually sold off its business units.

Insider Plea Brings Jail For Mariner Trade Figure

1/17/2012 7:28:15 AM

Drew “Bo” Brownstein, a hedge fund manager and son of a prominent Denver lawyer, will be forfeiting $2.45 million and going to prison for a year and one day after making money on an insider trading deal, Reuters said. Brownstein admitted that he made almost $2.5 million by betting on an insider trading tip that Apache Corp. would be acquiring Mariner Energy Inc. He received the tip from Drew Peterson, a Denver financial adviser, who got the information from his father, Clayton Peterson, a well-connected CPA and former board member at Mariner. Clayton Peterson has been fined $400,000 and given two years of probation in the case. Drew Peterson also pleaded guilty but has yet to be sentenced, Reuters said. The news service quoted Manhattan U.S. Attorney Preet Bharara as saying: “The board room should be where investors' interests are protected, not a money trough for tippees of the wealthy and connected.”

Federal Judge To Stanford Lawyers: 'Forget About It'

1/17/2012 7:25:00 AM

Allen Stanford's trial on charges that he orchestrated a $7 billion, Antigua-based Ponzi scheme will proceed as planned on Jan. 23, Compliance Week reported - even though his lawyers tried a last-minute dodge and sought court permission to walk off the case. The defense team protested it was not given enough time or resources to mount adequate defense, but U.S. District Court Judge David Hittner in Houston wasn't buying it. He noted that two of Stanford's lawyers had represented their client since November 2010, while two others were appointed last March. The legal team had already lost a number of motions, including efforts to have Stanford declared incompetent for trial and a trial date postponement, Compliance Week said.

Alleged Con Re-Arrested While First Case Is Tried

1/17/2012 7:21:48 AM

After one criminal trial against him had already begun in Colorado, Phillip Richard Trujillo was arrested again on fraud charges, according to The Coloradoan. Trujillo, 62, now faces new charges that he took $213,000 from seven investors for a land deal in Monument, Colo., then failed to use the money for property purchases, the newspaper said. Meanwhile, his first trial - on six counts of securities fraud and theft, for allegedly losing investor money that had been moved from retirement accounts and life insurance payouts - is still underway. In addition, the newspaper said, the Securities and Exchange Commission is suing Trujillo for allegedly ripping off investors who lost their life savings.

Health Care Policies Bad; 'Agent' Popped On Charges

1/17/2012 7:18:24 AM

Oklahoma authorities are going after an unlicensed insurance agent who took money from customers for health insurance policies, claiming that he was self-insuring them, the Tulsa World reported. The newspaper said Terry Lynn McCrackin, 64, of Broken Arrow, Okla., is charged with embezzlement for charging as many as 13 clients from $300 to $700 per month for policies. One customer who was allegedly ripped off said he paid more than $17,000 for health coverage for three people, but his credit was ruined when McCrackin allegedly reneged on paying medical claims worth about $33,000, the newspaper said. An alternative charge of grand larceny is also pending against McCrackin, The World added.

2 Florida Execs Will Be Banned From Top Posts

1/17/2012 7:15:17 AM

Two former officials of a Florida company have become the subjects of injunctions, bans, and forfeiture orders by the Securities and Exchange Commission after allegedly raising $2.5 million from investors for an essentially phony operation, Financial Advisor Magazine said. The SEC charged Daniel Imperato, the owner and CEO of Imperiali Inc., and Charles Fiscina, the company's former CFO, with issuing misleading statements to investors between 2005 and 2008. Regulators said the two hustled up investment capital by certifying multiple false and misleading registration statements, at one point overvaluing the firm's worthless assets by as much as $269 million. Both men will be barred from serving again as officers or directors of a publicly traded company, and Imperiali's auditor was also charged with issuing audit reports based on false corporate financial information, Financial Advisor added.

U.K. Trader Could Get 7 Years For Insider Deals

1/13/2012 7:50:30 AM

A securities crackdown in the United Kingdom has included charges of money laundering and insider trading against an unregistered trader, Bloomberg said. Forty-two-year-old Richard Anthony Joseph was charged with 10 counts and released on conditional bail following an investigation by Great Britain's Financial Services Authority, the news service said. If convicted, he faces fines and a maximum of seven years behind bars. Details on the case were scant, but Bloomberg said the FSA has at least two insider trading cases pending trial over the next six months.

Former Fugitive To Serve 14 Years For Loomis Fraud

1/13/2012 7:47:48 AM

A California man who fled the U.S. in 2009 to avoid charges in a $100 million Ponzi scheme has pleaded guilty, according to the Sacramento Bee. Christopher J. Warren, 29, is believed to have taken $5 million in gold when he fled to Beirut to avoid charges in the case of Loomis Wealth Solutions, which prosecutors said processed fraudulent loan applications in a Ponzi scheme that covered five states. After being returned to the U.S., Warren confessed to taking part in fraudulent loan transactions worth $12 million, The Bee explained. In a plea bargain, he has agreed to serve 14 years and seven months in prison, the newspaper said.

 

Colleague Of Scam Artist Gets Year For Tax Dodge

1/13/2012 7:45:07 AM

A man who made millions by recruiting investors for Florida Ponzi artist Nevin Shapiro will spend a year and one day in jail for evading taxes on the money he earned, The Miami Herald said. Sydney Williams had been paid $6 million for steering more than 60 people into Shapiro's $930 million Ponzi scheme, but dodged $2 million worth of taxes due on the payments, prosecutors said. Williams, of Naples, Fla., was not accused of knowing Shapiro's investments were a scam. The newspaper quoted him as telling a judge: “I always tried to live an honest life and be faithful to my core values … I blame no one but myself.” Shapiro is already serving 20 years in prison, The Herald added.

$600,000-Plus Profit May Bring Millions In Fines

1/13/2012 7:41:49 AM

Peter E. Talbot, of East Longmeadow, Mass., will be sentenced in April after pleading guilty to a six-count federal indictment that grew out of a 2008 insider trading scheme. The Boston Herald reported that Talbot, 43, had been employed by an insurance firm when he tipped his nephew that another company, Safeco Corp., was a potential takeover target, the newspaper said. The two set up an online trading account and began buying Safeco shares, then sold when the company was acquired by Liberty Mutual. Their profit: more than $615,000. The Herald said Talbot could get a maximum sentence of 20 years in prison and millions in fines.

Guilty Plea Is Entered In Vegas Mortgage Scam

1/13/2012 7:38:58 AM

A New Mexico man has pleaded guilty to a mortgage fraud scam involving seven properties and about $3.4 million, the FBI announced. Hugo Patrick Coutelin, 62, was originally indicted along with three other defendants for recruiting straw buyers and defrauding banks by lying on mortgage loan applications in property acquisitions through CPT Real Estate Investments in Las Vegas, Nev. He faces sentencing on April 18. Two of his co-defendants have already pleaded guilty as well, prosecutors said.

Couple Scams Ex-NFL Star But Could Get Probation

1/12/2012 7:28:13 AM

A Texas couple has pleaded guilty to scamming investors including a former pro football player, but could make an end-run and get probation if they can pay $850,000 in restitution before their April sentencing date, according to the San Antonio Express-News. Prosecutors said Alan Keith Nelson, 63, and Mary Alice Monteza, 68, took $150,000 from former New England Patriots player T.J. Slaughter through their Castro International, claiming to be investing in overseas, high-yield securities. At one point, they told Slaughter his investment had grown to more than $7 million, but refused to release any of the earnings, the Express-News said. Slaughter finally turned them in to authorities, saying he “never received a dime,” the newspaper said. Prosecutors have agreed to reduced sentences for Nelson and Monteza, but also agreed to a probation recommendation if the two can pony up restitution, the Express-News said.

Stanford Lawyers Attempt Once More To Dodge Trial

1/12/2012 7:25:00 AM

The world is full of uncertainties, but there's one thing that's absolutely certain: Allen Stanford, the alleged Ponzi king from Texas, does not want to go on trial. In the 2 ½ years he has been in jail, Stanford's attorneys have tried to have him declared mentally incompetent, and then asked for a three-month trial delay. Now, CNBC reports, Stanford's lawyers have filed a “barrage” of motions to get his case dismissed. Reasons range from a claim that his due process rights have been violated, to his inability to help in his defense and testify at trial, CNBC said. Stanford is accused of master-minding a $7 billion Ponzi scheme, using certificates of deposit sold through his bank in Antigua. No word yet from the judge on the latest attempts to circumvent trial, which is scheduled for Jan. 23, CNBC said.

2 Enter Guilty Pleas In Muni Bond Rigging Case

1/12/2012 7:22:13 AM

Two former officials of CDR Financial Products Inc. have pleaded guilty to rigging bids on investment and derivative contracts in the municipal bond market, the Bond Buyer reported. The two - Zevi Wolmark, 56, and Evan Andrew Zarefsky, 37 - admitted in Manhattan federal court to paying a bond marketer kickbacks as high as $475,000 to submit intentionally losing bids on municipal bonds. David Rubin, who founded CDR in California, also pleaded guilty recently and will be sentenced in April. Wolmark and Zarefsky both face maximum penalties of 35 years in prison and fines of $1.5 million, the Bond Buyer said.

Wash. Broker Pleads; Gets Lifetime Securities Ban

1/12/2012 7:19:26 AM

A Washington state stock broker has been banned from the securities industry after pleading guilty to a scheme that cost his clients an estimated $7 million, according to The Seattle Times. Richard A. Finger, 32, received the ban from the Financial Industry Regulatory Authority, and also faces a lawsuit filed by the Securities and Exchange Commission, The Times said. Finger admitted to committing fraud against his clients, many of them family and friends, by churning millions of dollars through his Black Diamond Securities firm in Kirkland, Wash. He will be sentenced for wire fraud on Feb. 17. Prosecutors have asked for a 6 ½ year prison sentence based on a plea bargain agreement, The Times said.

 

Feds: Mellon Lawsuit May Be Close To A Settlement

1/12/2012 7:15:35 AM

Federal prosecutors appear close to settling some claims in a lawsuit against Bank of New York Mellon Corp., alleging the bank cheated public pension funds out of $2 billion during a decade-long period, Bloomberg reported. The case has to do with the alleged overcharging of customers in foreign exchange trading activities, automatically conducted by custody banks on behalf of pension funds, the news service said. A possible settlement came to light in Manhattan federal court when U.S. Attorney Preet Bharara sought an extension for Mellon's answer to the October lawsuit, saying in a court filing that some type of accord may be close. Similar complaints against Mellon are pending by attorneys general in New York, Florida, California and Virginia, Bloomberg added.

15 Years To Serve In $14 Mil Medicare Fraud Case

1/11/2012 7:25:54 AM

Sixty-one-year-old Christopher Iruke, a former Los Angles preacher, has been sentenced to 15 years in prison and must pay $6.7 million in reimbursement for running a $14.2 million Medicare fraud, CNN reported. Officials said Iruke and his wife, Connie Ikpoh, were co-pastors at Arms of Grace Christian Church in Los Angeles, where they ran the scam. Last August, they were convicted of paying kickbacks to get documents that allowed them to bill Medicare for prescriptions and equipment that were either unnecessary or non-existent, CNN said. With several employees also involved, the operation actually received about $6.7 million in reimbursements, prosecutors said. Ikpoh is scheduled for sentencing Feb. 27, CNN added.

Four More Arrested For Big Israeli Lottery Scam

1/11/2012 7:23:06 AM

The case of a long-running lottery fraud scam that ripped off millions from U.S. investors continues, with four more defendants being arrested and extradited to the U.S. from Israel, the FBI said. Federal prosecutors alleged that members of the ring operated from boiler rooms in Israel, where they purchased lists of U.S. citizens who had entered sweepstakes lotteries. They would contact their victims - many of them elderly - and tell them they had won cash prizes, but first had to send in the costs of fees and taxes. In doing so, they collected about $25 million, investigators said. The four suspects - Avi Ayache, Yaron Bar, Ian Kaye, and Shai Kadosh - were arrested and bought to New York to faces charges. All told, 11 people have been arrested in the scam and six have already pleaded guilty, the FBI said.

Lawyer To Get Second Try In N.Y. Refco Fraud Case

1/11/2012 7:20:14 AM

An appeals court has given a break to Joseph P. Collins, a former Illinois lawyer who was convicted in 2009 for his part in a $2.4 billion fraud at Refco Inc., an independent commodities broker that eventually collapsed, the Associated Press reported. The 2^nd U.S. Circuit Court of Appeals has decided Collins should have a new trial because a lower court judge didn't include Collins in a disciplinary discussion with a juror during the trial. AP quoted the appeals court as saying the trial judge “deprived Collins of his right to be present at every stage of the trial.” Refco Inc. collapsed after losing hundreds of millions in trades and then launching a plan to disguise the losses, the AP said.

 

Prosecutors May File A Second Gupta Indictment

1/11/2012 7:16:57 AM

Government prosecutors have indicated they may bring another indictment against Rajat Gupta, the Wall Street executive accused of leaking insider trading tips to convicted hedge fund manager Raj Rajaratnam, Bloomberg reported. The news service said that in a recent pre-trial hearing, prosecutors said they may file a superseding indictment against Gupta, a former board member of Procter & Gamble and Goldman Sachs. The government now alleges that Gupta, 63, may also have tipped Rajaratnam to P&G's $3 billion sale of Folgers Coffee Co. to J.M. Smucker in 2008. Gupta is already charged with three instances of passing insider trade information along to Rajaratnam, who was convicted by a jury for insider trading last summer and is now serving 11 years in prison. Gupta's trial is tentatively scheduled for April 9, Bloomberg said.

Hot Air & Wind Turbines Lead Straight To Prison

1/11/2012 7:13:56 AM

A federal judge in Los Angeles has packed James A. Rivera off to prison for 12 years, for defrauding investors who thought they were putting $1 million into a wind turbine product that could make cheap electricity and was about to light up the energy world. The FBI said Rivera, 42, of Carson, Calif., was convicted in 2010 on multiple counts of mail and wire fraud, after talking dozens of investors out of their money and claiming the U.S. Government wanted to buy his wind machines, which purportedly were under patent. He even claimed a major movie producer would use the products to power the scene of his next production, the FBI said. But there were really no orders, no financing, and no patents. However, there was a prior conviction for another fraud case, which Rivera forgot to mention to his investors, prosecutors said.

Couple To Pay $2.69 Mil In Forex Trade Agreement

1/10/2012 9:05:13 AM

Under a consent order issued in Texas, the U.S. Commodity Futures Trading Commission will collect $2.69 million in penalties and restitution from a couple charged with running a Ponzi scheme through a foreign exchange trading arrangement. The CFTC said Larry Benny Groover took $1.49 million from investors who thought they were investing in Forex trades. His wife, Joanne Groover, received nearly $45,0000, the CFTC said. But Larry Groover lost about $600,000 in trading, and used part of the investment money to make Ponzi payments to early customers and to pay personal living expenses. The money received by Joanne Groover must also be disgorged, the government said.

 

Alleged Calif. Property Fraud Bringing Charges

1/10/2012 8:52:56 AM

Not all property scams are huge, but all are dangerous to investors, and in Stockton, Calif., a new arrest reported by
 KTXL-TV repeats an old, familiar story. Authorities have concluded a 22-month-old investigation by arresting Keith Wilson, 55, KTXL said. He is charged with taking $300,000 from investors, claiming to buy foreclosed or otherwise distressed properties, flipping them, and then distributing the returns. The deals were to be made through Wilson's companies, Tribecca Properties, LLC and Lone Cedar Corporation. But investors began complaining, and prosecutors now allege that no properties were ever bought, KTXL said. After an investigation that included issuance of 34 search warrants, Wilson is charged with securities fraud, money laundering, grand theft, and elderly abuse, the TV station added.

Durham's Defense Lawyer Asks Judge For Dismissal

1/10/2012 8:49:40 AM

Tim Durham, the legendary Indiana party animal who came to be called “Madoff of the Midwest” after allegedly engineering a $200 million Ponzi scheme, is asking a federal judge to let him off the hook, the Indianapolis Star reported. Durham, renowned for his yacht, boisterous parties, mansions and fleet of cars, is charged with two other defendants on a host of felony counts alleging they defrauded 5,000 investors out of millions through Fair Finance, based in Akron, Ohio. Durham was also CEO of National Lampoon in California. Now he's asking a judge to dismiss his charges because of problems with a warrant, and is also asking that evidence against him be suppressed. His lawyer told the Star the defense is “putting out a more complete picture” of what happened at Fair Finance: “There wasn't any criminal activity.”

Survey: Investors Happy, But Advice Quality Varies

1/10/2012 8:46:47 AM

Are you happy with what you're getting from your investment adviser? While a recent survey of Consumer Reports online subscribers showed most were very satisfied with 13 major brokerages, an undercover study by the publication revealed problems,InvestmentNews reported. Staff members visited brokerages in New York and Washington posing as potential investors, with mixed results. In one case, a woman in her 50s was steered to a complex annuity, although the broker knew little about her. In another case, the magazine's experts found, a 60-year-old with $1 million to invest was steered into investments with too light an equity mix. Bottom line: Don't just depend on the experts. Do a little legwork yourself. InvestmentNews said the survey ranked USAA Brokerage Services top in customer satisfaction, while Morgan Stanley Smith Barney was ranked the lowest.

Deceased Broker Leaves His Legacy Of Sadness

1/10/2012 8:43:54 AM

Cliff Popper, a South Florida high-flier who made millions in the mortgage boom - and allegedly lost millions for investors - is now dead before a judgment was rendered in his fraud trial. The 48-year-old Popper sold off pieces of collateralized sub-prime mortgage packages, The Miami Herald said, betting the housing boom would continue forever. At one point, he and others at Brookstreet Investors made $16.2 million in commissions over a mere three years, The Herald said. But it all fell apart, and in 2009, federal regulators came after him on fraud charges. Following his trial, he was found dead in his luxury beachfront condominium. Suicide was the attributed cause. Sources said his legacy will be the investors he and others injured. “It was a horror show,” the newspaper quoted an attorney for some of Popper's victims as saying. “People lost homes, retirements, life savings. These were mom-and-pop investors.”

 

Mormon Swindle Growing With New Charges Filed

1/8/2012 6:37:53 PM

Regulators have filed new charges in a case alleging that a group of people used the Mormon Church to further a $16 million Ponzi scheme from 2005-2010. The Deseret News reported that three more people have been named in a case against Joseph A. Nelson,33, of El Dorado Hills, Calf. The Securities and Exchange Commission has already charged Nelson and a group of accomplices with swindling millions from 100 victims who bought promissory notes purported to earn returns up to 200 percent. Many of the victims were members of The Church of Jesus Christ of Latter-Day Saints, and the SEC said Nelson used his position of authority as a church leader to recruit investors. Victims thought their money was going into merchandise portfolios that would be resold for high profits, but the merchandise never existed, authorities say. The SEC has now filed an additional complaint against Eric R. Nelson, 36, Joseph Nelson's brother, and two others. Eric Nelson is alleged to have deceived investors about the financial well being of the Nelson companies, and is accused of altering bank statements to show inflated balances to would-be investors, The Deseret News said.

Jesuit Prep School Among S. Fla. Ponzi Victims

1/8/2012 6:24:55 PM

A 73-year-old Florida man is charged with ripping off investors - including a Jesuit school he once attended - for $47 million, The Miami Herald said. The newspaper cited court records in reporting that Gaston Cantens has been charged with wire fraud conspiracy for promising investors big returns in Florida land deals, but failing to disclosed pertinent facts, including the financial health of his business. He is also accused of operating a Ponzi scheme and paying early investors with proceeds contributed by later ones, the newspaper added. His alleged victims include Belen Jesuit Preparatory School, his own alma mater, as well as a number of Belen graduates. Many of those are elderly people, the Herald said.

Commodities Trader Was A Big Favorite At Hooters

1/8/2012 6:21:52 PM

Missouri regulators have issued a cease and desist order against a commodities trader, alleging that he mislead investors and spent their money for frivolous personal reasons, including a gift of $10,000 to three waitresses at a Hooters restaurant, The Lee's Summit Journal reported. The Missouri Secretary of State's Office said Richard Joseph Gumerman was not registered to sell securities, but lost more than $700,000 for investors since 1990, failing to disclose he had little experience in trading commodities - and had lost money at that. He is also accused of dipping into his business account to pay the waitresses and also fund other expenses, including his rent, a car, clothing, and furniture. He now faces making more than $700,000 in restitution, along with $75,000 in costs and penalties,The Journal added.

Deloitte Unit Must Come Appear In U.S. Court

1/8/2012 6:13:51 PM

A running battle between the feds and Shanghai-based Deloitte Touche Tohmatsu continues, with the company being dragged kicking and screaming into a U.S. court. For months, Bloomberg reported, the Securities and Exchange Commission has tried to get the company into court to explain possible signs of fraud it reportedly found in Longtop Financial Technologies of Hong Kong, a former client. The company has resisted, saying Chinese law doesn't allow it to surrender the necessary documents. Now, a U.S. Magistrate has ruled that DTT must comply and appear in court. Longtops' American depository shares were de-listed by the New York stock exchange last August, Bloomberg said.

Life Partners Holdings Inflated Facts, SEC Says

1/8/2012 6:06:57 PM

A Texas company that makes money selling shares in life insurance policies it purchases now stands accused of misleading investors about the life expectancies of people insured under those agreements. Life Partners Holdings, of Waco, and three of its corporate officials have been named in a lawsuit filed by the Securities and Exchange Commission, said The Fort Worth Star-Telegram. The SEC alleges that the company used “an unqualified medical doctor” to assign bogus life expectancy information to its insurance policies, thus pumping up the value of its stock. That allowed 69-year-old Brian Pardo, CEO of Life Partners, to sell $11.5 million of the stock at inflated prices, regulators said. Also named in the action are corporate counsel Scott Peden and Life Partners CEO David Martin, The Star-Telegram said. The company denies the allegations, while the government is demanding civil penalties and disgorgement, the newspaper added.

SEC: Predators Moving To Ads On Social Media Sites

1/6/2012 8:09:32 AM

The day had to come, and now it's here: Federal regulators are sending up warning balloons over investment scams now being pushed on social media sites, The Chicago Tribune said. Among the first spotted is the case of Anthony Fields, an investment adviser in Lyons, Ill., who is charged by the Securities and Exchange Commission with offering more than $500 billion in fraudulent securities through the Linkedin site. Fields used the site to push his companies, and to advertise unregistered securities, the agency said. He is also charged with not maintaining required books and records, and with falsely claiming to be registered with the SEC. In response to what it sees as a growing trend, the SEC has issued warnings to investors, adding that pump-and-dump penny stock schemes have also started appearing on Facebook and Twitter.

 

Feb. 6 Trial Date Set In $14.3 Mil Montana Case

1/6/2012 8:06:42 AM

Trial will be held Feb. 6 for Keith B. Kovick, believed by federal authorities to have orchestrated the largest Ponzi swindle in Montana history, The Leader-Advertiser reported. He has pleaded not guilty to multiple counts of wire and mail fraud and money laundering, after allegedly selling phony promissory notes to investors for millions of dollars. Prosecutors said investors wrongly believed the notes were secured by valuable real estate, and that their first year of interest payments were safely held in escrow. But it was all a fraud perpetrated by Kovick and a partner, Robert J. Congdon, through their companies, Cornerstone Financial and K&B Investments, investigators said. All told, the two are believed to have swindled 100 investors out of $14.3 million, The Leader-Advertiser said. Congdon is cooperating with prosecutors and has already entered a plea agreement, the newspaper said.

TARP Probe Concludes In Arrest Of Texas Resident

1/6/2012 8:03:25 AM

A Texas man is expected to plead guilty to charges that he took money from distressed property owners to fraudulently delay bank foreclosures of their properties. The Austin Statesman-American said Frederic Alan Gladle, 53, of Lakeway, Texas, is being held on charges of bankruptcy fraud and aggravated identity theft. He allegedly made $1.6 million by charging monthly fees to homeowners on the brink of foreclosure, then fraudulently transferring a fractional share of their property to unaware bankruptcy petitioners, whose names were obtained from public records. The bankruptcy case would then automatically delay foreclosure, the newspaper said. Gladle, who was caught through an investigation by the inspector general for the Troubled Asset Relief Program, has been in custody awaiting his plea date, The Statesman-American said.

Rothstein Pins The Tail On Trio Of Hedge Funds

1/6/2012 7:59:43 AM

Is he just lying, or really trying? Convicted Ponzi schemer and ex-lawyer Scott Rothstein has been talking again in South Florida, seemingly implicating everyone but his law office janitor in a $1.4 billion Ponzi scam that sent him to prison for 50 years. In a string of recent depositions, Rothstein has been pinning the blame on others, most recently three hedge funds, Bloomberg reported. The news service quoted a deposition transcript in which Rothstein said officials at the funds - Platinum Partners Value Arbitrage, Centurion Structured Growth LLC, and Level 3 Capital Fund - agreed not to tell potential Rothstein investors that he was no longer making payments to the funds. “My only concern was that, at the end of the day, they would lie for us,” Bloomberg quoted Rothstein as saying. A spokesman for the funds flatly denied the allegations, calling them “absolutely false,” Bloomberg added.

Judge: Infomercial Stars Not Liable In SEC Action

1/6/2012 7:56:05 AM

A federal judge in Virginia has declined to hold two infomercial personalities liable for losses suffered by consumers after the pair allegedly lied about their background and experience while peddling the “Teach Me to Trade” system. Courthouse News said the Securities and Exchange Commission had gone after Linda Woolf and David Gengler, saying the two misrepresented their backgrounds and trading experience on television and in seminars. Through their corporate alter egos, Hands on Capital and Lashaico, the two sold a securities trading system to consumers for amounts ranging from $11,000 to $40,000, the SEC alleged, with their victims including many rookie and elderly investors. Woolf is believed to have made $4 million through the scheme and Gengler hauled in $2.25 million, Courthouse News reported. But on a point of securities law, District Court Judge Gerald Lee, of the Eastern District of Virginia, ruled that the SEC can go after the two corporate entities but not the individuals themselves. The SEC's case did not include allegations that the two hucksters and the companies “were united by interest and ownership,” the news service quoted the judge as concluding.

 

Trailer Sales Scam Ends With 26-Month Jail Term

1/5/2012 7:35:52 AM

Ohio businessman Phillip Bell sold a lot of semi-truck trailers through his two businesses, to customers all over the county. There was just one glitch, according to the FBI: Bell didn't really own the merchandise he was selling. Now, Bell, 49, of Miamisburg, Ohio, has been sentenced to 26 months in federal prison after pleading guilty to wire fraud. The U.S. Attorney's Office said Bell sold semi-trailers through Pre-Owned Semi Trailers, Inc. and Hydraulic Trailer Sales, Inc., both of which he operated. Typically, he would collect from customers with promises to deliver the trailer title soon. But customers would wait. And Wait. And wait, with the title never arriving. That's because Bell didn't really have the titles, officials said. In addition to jail time, he has also been ordered to make $375,000 in restitution, the FBI said.

Barclays Is Fined $3 Mil For Sub-Prime Info Case

1/5/2012 7:32:26 AM

The Financial Industry Regulatory Authority has slapped a $3 million fine on Barclays Capital Inc., saying the company misrepresented delinquency numbers associated with residential sub-prime mortgage securitizations. Historical performance - including the failure of mortgage holders to make payments - must be disclosed when similar securities are offered to investors, FINRA said. Yet from March 2007 through December 2010, Barclays issued incorrect information “significant enough to affect an investor's assessment” of the likelihood that sub-prime securities would succeed, FINRA said. Barclays consented to the filing of FINRA's findings, but neither admitted nor denied the charges themselves.

 

Cars, Movies, Land Deals: Anything But Mutual Funds

1/5/2012 7:28:40 AM

Chicago-area financial adviser Steven W. Salutric was into all kinds of investments, the FBI said. Only problem was, his clients allegedly didn't know it. Now, the 53-year-old Salutric is charged with diverting $4.26 million that was supposed to be invested for his clients in mutual funds, and putting the money without their knowledge into a wide range of other things, including a move production company, restaurants, and real estate developments. The FBI said the alleged misdeeds were done through customer accounts at Salutric's Results One Financial LLC, where he had discretionary trading power over many accounts. If convicted, he could get a maximum prison sentence of 20 years, a $250,000 fine, and mandatory restitution, the FBI said.

Mexican Brokerage Scam Brings $5 Mil In Penalties

1/5/2012 7:22:19 AM

A former San Diego securities trader has been charged with an interpositioning scheme that cost investors unnecessary extra millions. The Securities and Exchange Commission announced the charges against Aurelio Rodriguez, saying he colluded with Mexican firm InvesTrust to insert an extraneous broker-dealer into securities trades made on behalf of pension fund clients. Result: The funds paid nearly $65 million more than they otherwise would have, the SEC said. Rodriguez has agreed to settle the agency's charges for $1 million. His former U.S. employer, Investment Placement Group, will pay another $4 million for failing to properly supervise Rodriguez, the SEC said.

Daughter Skinned Clients, But Took Good Care Of Mom

1/5/2012 7:19:20 AM

Fair Lawn, N.J. resident Jennifer Devine is scheduled for sentencing Jan. 11 after pleading guilty to taking more than $8 million in a Ponzi scheme, Northjersey.com reported. The news site said Devine, 39, ran her swindle between 2008 and 2010, taking investments and promising 25 percent returns within 30 to 60 days. But instead of buying and selling electronics and clothing as she purported, Devine made Ponzi-style payments to early investors with proceeds from later ones, and also blew a bundle on herself, Northjersey.com said. Her extravagances included a Royal Caribbean cruise and goods bought at high-end retailers including Gucci and Burberry, prosecutors said. But the government did at least add that Devine was a dutiful daughter: From her illicit profits, she also gave $26,000 to her mother. Devine now faces a 20-year federal prison sentence and fines up to $1 million, Northjersey.com said.

 

Le-Nature's Exec Gets 15 Years For Role In Big Scam

1/4/2012 5:59:08 AM

Robert Lynn, 67, once the chief revenue officer of Le-Nature's, a defunct Pennsylvania bottling company, is going to prison for 15 years for his role in the firm's $684 million Ponzi scheme, reported The Washington Post. Lynn was vice president of the Latrobe, Penn. beverage company that took millions in financing from investors after inflating earnings reports in a scheme run by former CEO Gregory Podlucky, The Post said. Lynn was sentenced after being convicted last July on 10 counts of conspiracy and fraud. Yet his attorney had asked for a maximum of 12 years in prison, saying Lynn has lived a “quiet, humble, dignified life” and is too old for a long sentence, other press sources reported. The prosecuting assistant U.S. attorney, on the other hand, had asked for a sentence of 27 to 33 years. Podlucky has already been sentenced to 20 years in prison, The Post said.

'The Falls' Fell Apart With Okla. Fraud Case

1/4/2012 5:55:19 AM

What began as a swank Oklahoma commercial and residential complex called “The Falls” has in fact fallen to pieces, with one of its originators going to federal prison for 40 months. TheFBI said Derek Christopher Swann, 34, was sentenced in Oklahoma City for taking $5 million from investors, making Ponzi payments to some of them, and scamming millions more to buy BMW cars and pay golf expenses and other personal costs. As for The Falls, it never happened. Swann's partner, Giovanni Bryan Stinson, 38, has yet to be sentenced, the FBI said, but two other lesser accomplices have already received probation in the case.

Alleged Utah Scam Artist Is At It Again, Suit Says

1/4/2012 5:52:19 AM

A former Utah securities fraud defendant is back in business again, according to a civil suit filed in Salt Lake City,
Courthouse News reported. The corporate plaintiff, Q-6 Associates, has sued Dwight Shane Baldwin and his partner, Mark Staples, claiming the men and their company, Silverleaf Acquisition Holdings, sold $4 million worth of shares to Q-6. The money was to be used for purchasing commercial properties, Courthouse News said, but the plaintiffs now say the deal was built on misrepresentations. Baldwin and Staples did redeem some of the shares, but still allegedly owe Q-6 $1.57 million. Meanwhile, Baldwin pleaded guilty in 2010 to theft in a separate case, and allegedly spent much of the money invested by Q-6 on luxuries including a Porsche and private planes, Courthouse News said the lawsuit added. Q-6 is now seeking $5 million in damages.

N.H. Trustee's Targets Include Christian School

1/4/2012 5:47:09 AM

A bankruptcy trustee in the Financial Resources Mortgage, Inc. case is going after 50 individuals and businesses - including a Christian school - that gained money from the New Hampshire company's Ponzi scheme, reported the Laconia Daily Sun. Financial Resources and a second company, CL&M, were involved in taking more than $20 million from investors for purported construction loans, promising returns as high as 20 percent, and then not delivering. Now, a trustee is filing lawsuits to recoup money for victims of the Ponzi scheme that operated from Meredith, N.H., the Daily Sun said. Laconia Christian School, one of the trustee's targets, is the alma mater of Scott Farah, the former owner of Financial Resources Mortgage, the newspaper said. He is now serving 15 years in prison. The trustee is alleging that Farah's company illegally transferred more than $50,000 to the Christian school before going out of business, the newspaper added.

Toronto Broker Loses Bid To Beat 25-Year Sentence

1/4/2012 5:43:08 AM

A former Toronto stock broker has lost a fourth attempt to get a new trial after being convicted for a long-running stock manipulation swindle, according to Stockwatch. George Georgiou, who is currently serving 25 years for securities law violations, had sought a new trial on grounds that federal prosecutors gained his 2009 conviction by using key testimony from a witness with serious mental, alcohol, and drug problems. The witness had testified that between 2004 and 2008, Georgiou had instructed him on how to illegally manipulate four pink-sheet stocks. In the end, the witness cooperated with the FBI in a sting that concluded with Georgiou's arrest. Now, a judge has disagreed with Georgiou's claim that his trial was unfair, Stockwatch explained, reasoning there was ample evidence for his conviction. Georgiou is serving his time at a federal prison in California.

74-Year-Old Mich. Con Man Off To Jail For 16 Years

1/3/2012 7:25:10 AM

A Michigan septuagenarian will likely spend the rest of his life in prison after being sentenced on 59 counts of mail fraud, according to WKZO in Detroit. As he pulled in $35 million with phony claims, 74-year-old Edward May was actually playing a corporate shell game, racking up gambling debts, and underwriting Las Vegas business ventures, prosecutors said. After pleading guilty, he has now been sentenced to 16 years in prison, the news station reported. Since 1997, prosecutors charged, May had been operating E-M Management Co. LLC and eventually opened at least 150 other LLCs. Investors thought they were buying into businesses that provided profitable communications services to top-flight hotels, but it was all a scam. The contracts did not exist, and in pleading guilty, May admitted that he squandered the cash on gambling junkets, oil and gas investments, and real estate ventures.

 

Former Bixby Energy Boss Facing 5 Years For Fraud

1/3/2012 7:21:27 AM

It sounded too good to be true, and now, federal prosecutors say, it was. In Minneapolis, Robert Allen Walker, of Ramsey, Minn., has been indicted for allegedly bilking investors of Bixby Energy Systems, a company he founded, said the
U.S. Attorney's Office. Walker, 69, is charged with lying to investors on a number of fronts as he raised $43 million from more than 1,800 people over a decade. The government said Walker made false representations about his company, lied about how commissions would be paid, falsely claimed to be readying an initial public offering, and fraudulently said Bixby had a coal gasification system ready for the market. Now, Bixby's new management has admitted that Walker's regime cheated investors out of as much as $7 million. Walker, if convicted, faces a possible five years in prison, prosecutors said.

Hedge Fund Manager Faces 20 Years For $5 Million Fraud

1/3/2012 7:16:53 AM

A Philadelphia-based hedge fund manager has pleaded guilty in federal court to running a $5 million Ponzi scam that collapsed, said the U.S. Attorney's Office for the Eastern District of New York. Prosecutors had accused Ward Onsa of soliciting millions for his New Century Hedge Fund, made up primarily of money from individual retirement accounts. He claimed the investments consisted of stocks, options, and futures contracts that would show high profits when the Dow Jones Industrial Average reached 10,748, the government said. But when the market reached that level and then kept on climbing, Onsa's bets failed and the fund fell insolvent. In addition, prosecutors said, Onsa had been plundering the fund to take money for himself and his company. Onsa now faces a maximum 20-year sentence for the securities fraud, which ran from 2005 until 2010, prosecutors said.

SEC Loses Insider Case In Potash Corp. Trading

1/3/2012 7:13:22 AM

The Securities and Exchange Commission has lost a case against a Spanish trader who was accused of using insider information when trading Potash Corporation of Saskatchewan Inc., Reuters has reported. A federal judge in Chicago ruled the agency did not adequately prove that Luis Martin Caro Sanchez, 37, had a direct insider link when he traded call options before Potash announced it had become the target of a $38.6 billion takeover bid. SEC investigators had alleged that Sanchez bought his options for $47,500 and made a $497,000 profit by selling after the announcement. A second defendant, former Banco Santander analyst Juan Jose Fernandez Garcia, had already settled with the SEC for $625,000 in the case, Reuters said.

Settlement Reached In '08 Pantera Petroleum Bribery

1/3/2012 7:10:20 AM

A Vancouver-based trader, Bozidar “Bob” Vukovich, has reached a settlement with the Securities and Exchange Commission for a pink-sheet scheme to bribe stock brokers, Stockwatch reported. He and a co-defendant, Christopher Metcalf, were charged with offering brokers 30 percent kickbacks to buy $2 million worth of shares in Pantera Petroleum, Inc., an OTC company that Metcalf served as president. Metcalf had already settled in the case six months ago, Stockwatch said. Vukovich has agreed to pay $262,171 in penalties and disgorgement, without admitting guilt. The charges stemmed from a 2008 scheme to boost the trading price of Pantera, which now operates as ESP Resources, Inc., Stockwatch added.

 

Stanford Delays Are Over; Trial To Begin On Jan. 23

12/30/2011 6:19:10 AM

A federal judge refused to give accused fraudster Allen Stanford a Christmas gift of leniency, ordering instead that he go on trial Jan. 23 for an alleged, $7 billion fraud scheme. Bloomberg reported that Stanford has been jailed since 2009 on charges that he ran a Ponzi through certificates of deposit sold by his bank in Antigua, defrauding thousands of investors. First, trial was delayed because Stanford was injured in a jailhouse fracas, and then became addicted to prescriptive narcotics. Then when he recovered, the news service said, his lawyers maintained he was incompetent to stand trial. When that failed, they asked that trial be delayed until late April. That has now been denied by federal Judge David Hittner in Houston, who noted that Stanford's investors have not yet begun to recoup hundreds of millions they lost. “This case needs to be tried,” Bloomberg quoted the judge as saying in a seven-page ruling.

SEC Wants Its Citigroup Case Put On Ice For Now

12/30/2011 6:15:52 AM

The Securities and Exchange Commission wants to make an end run in its dispute with a federal judge, who refused to allow the agency's settlement with Citigroup Inc. in a case that cost investors millions. Bloomberg said the SEC has asked a federal appeals court in New York to put a hold on its case against Citigroup. The agency had proposed to let the bank off the hook for securities fraud with a $285 million settlement after Citigroup sold a $1 billion, mortgage-backed securities package that failed. Without telling investors, Citigroup had bet short on the package and profited when it collapsed. Federal Judge Jed Rakoff had lambasted the SEC in the case, and ordered that Citigroup stand trial. Now, the SEC wants the case derailed while it appeals the Rakoff ruling. His order that Citigroup answer charges by Jan. 3, the SEC said, “threatens the commission with additional irreparable harm,” Bloomberg quoted the SEC's lawyers as saying in court filings.

Colo. 'Developer' Pleads In Property Sales Swindle

12/30/2011 6:12:47 AM

Kevin Frazier, a developer in Fort Collins, Colo., has pleaded guilty in state court to swindling investors out of more than $1 million they gave him for fraudulent projects, The Coloradoan reported. Frazier, 47, had promoted a 200-home development in Puerto Vallarta, Mexico, and a multi-building retirement community in Colorado, the newspaper said, taking money from investors in four states. He issued unsecured promissory notes to investors and provided them with fraudulent monthly statements providing the illusion that they were making money, the newspaper said. He is charged with five counts of securities fraud and five counts of theft, The Coloradoan added.

 

Judge: Securities Fraud Suit To Go Against J&J

12/30/2011 6:09:48 AM

A federal judge in New Jersey has declined to stop a civil lawsuit alleging that Johnson & Johnson committed securities fraud by not publicly revealing the true reasons behind product recalls, Bloomberg said. Ronald Monk, an investor, filed the suit alleging he suffered trading losses because of a recall coverup by J&J, the world's biggest health products company. He claims J&J issued a so-called “phantom recall,” essentially hiding the reasons that products were taken off the market. In the last two years, Bloomberg said, the company has recalled numerous brands of pain relievers and other products, and signed a consent decree for government oversight at three of its manufacturing plants. The judge did dismiss complaints against some J&J executives, but allowed the class-action lawsuit to proceed, Bloomberg said.

 

Prosecutor Still Going After Hidden Proceeds

12/30/2011 6:06:49 AM

The U.S. Attorney for the Southern District of Illinois doesn't believe the government has gotten all its pound of flesh out of convicted Ponzi artist Ed Moskop, and he's looking for more assets to be seized, reported the Belleville News-Democrat. The 64-year-old Moskop, a former stock broker, is waiting to go to prison for swindling 26 victims out of $2.4 million, and the only asset prosecutors have located to seize thus far is a $300-per-month pension, the newspaper said. Previously, Moskop was believed to have spent all the money swindled from his victims on parties, resorts, country clubs, and gambling. But U.S. Attorney Steve Wigginton told the News-Democrat he believes Moskop has other hidden assets, possibly including real estate, vacation rentals, or time-shares and other properties jointly owned with others. Wigginton said he's putting a special financial asset recovery team on the case. The prosecutor said he's going after “anything of value. Anywhere,” the newspaper said.

 

Plastics Exec Must Pay Total Of $49.5 Million

12/29/2011 6:50:08 AM

A former New Jersey plastics executive who was previously sentenced to prison must now also pay nearly $50 million for lying about the stock he held in a retail company, The Associated Press reported. Alfred S. Teo, chairman of Sigma Plastics Group, had been charged with low-balling amounts of stock he owned in Musicland Stores, Corp., thus disguising his violation of rules governing the size of his holdings, the AP said. A jury found him liable for securities fraud earlier this year, and a federal judge in Newark has now issued a final judgment. Teo and a trust he runs must pay $49.5 million in disgorgement, interest, and penalties. In 2007, Teo had already been sentenced to 30 months in prison, the AP said.

This Isn't Funny: Eddie Murphy's Ex Loses $8 Mil

12/29/2011 6:46:26 AM

There are con artists and then there are con artists. But Troy Stratos, 45, all but defies description, according to law enforcement and news sources. Now, after a lifetime of globe-trotting and spending millions he allegedly scammed from others, Stratos - a self-described entrepreneur and movie producer - is charged by the FBI with defrauding the former wife of actor Eddie Murphy out of $8 million. InvestmentNews said the end came for Stratos in Los Angeles after he was indicted for mail fraud, money laundering, and obstruction of justice. The government alleges that Stratos convinced Nicole Murphy, his longtime friend, to turn over a divorce settlement from her ex-husband, promising to invest the money at high interest rates in the United Arab Emirates and Dubai. Stratos also allegedly cajoled Nicole Murphy into refinancing properties she and her mother owned, and leasing luxury cars to entice buyers of her home home in Granite Bay, Calif. But there were no buyers and no investments, the government said. If convicted, Stratos faces maximum prison time of 30 years and more than $270,000 in penalties.

 

Judge Says Trustee Can Go After Madoff Family

12/29/2011 6:42:08 AM

A federal judge has refused to hear the appeal of a bankruptcy court decision that allows a trustee to go after Bernard Madoff's family members for millions, The New York Post reported. Irving Picard, trustee in the bankruptcy of Bernard L. Madoff Investment Securities, had sued Mark and Andrew Madoff, the con man's sons, as well as Peter Madoff, his brother, and Shana Madoff Swanson, his niece, in efforts to collect $198 million for victims of Madoff's Ponzi scheme. In the lawsuit, Picard said the Madoffs used the investment firm as their “family piggy bank,” The Post said. Mark Madoff committed suicide last year, but other family members had appealed a bankruptcy court decision allowing the lawsuit. The appeal has now been derailed by U.S. District Judge William Pauley, The Post said. Bernard Madoff is serving 150 years in federal prison for running the biggest Ponzi scheme in American history, The Post added.

Rothstein: We Handed Out Money Like Candy Canes

12/29/2011 6:38:54 AM

When it came to Christmas, disbarred South Florida lawyer Scott Rothstein was Santa Claus. According to The Palm Beach Post, Rothstein said in a recent deposition that he kept $1 million at his office, to keep the wheels greased for the $1.4 billion Ponzi scheme he operated, selling shares in phony lawsuit settlements. “We were handing out money like Santa Claus hands out candy canes to anybody that needed it for our purposes,” The Post quoted Rothstein as saying in deposition. Rothstein also claims to have repeatedly bribed a bank official who turned a blind eye to the scam, at one point sliding an enveloped stuffed with $50,000 in cash to the man over a fancy lunch. A lawyer for the banker laughed that one off, The Post reported, saying, “same con man, different motivation.”

Mellon Will Pay $1.3 Mil Over '08 ARS Bid Fixing

12/29/2011 6:35:49 AM

BNY Mellon Capital Markets LLC has agreed to pay a penalty for an action by the former Mellon Financial Markets that lost $6.7 million for investors in auction rate securities deals, according to the Texas State Securities Board. Mellon Financial became a unit of BNY Mellon after the incident occurred. Authorities said Mellon Financial helped Citizens Property Insurance Corp. of Florida rig the interest rates Citizens paid for auction rate securities, so the company got long-term financing at rates usually associated with shorter-term investments. Investors subsequently took it on the chin, losing millions because of the collusion. Under terms of a new consent order, Mellon Capital will now pay $1.3 million to Texas, New York and Florida, the TSSB said. Officials said the deal between Mellon Financial Markets and Citizens Property was exposed in 2008, when a global credit markets freeze threw auction rate securities into turmoil.

 

Another Primary Global Figure Packs Off To Jail

12/28/2011 6:06:51 AM

A former salesman for Primary Global Research - a key corporate figure in federal insider trading prosecutions this year - has been sentenced to 30 months in federal prison, Forbes reported. James Fleishman, 42, was a player in the “expert network” scam, which matched inside corporate information from industry experts with hedge fund managers, who used the scoops to trade stocks. The tips ranged from new products to mergers and acquisitions and supply channel information. Fleishman's sentencing was preceded by that of Winifred Jiau, another Primary Global employee who provided traders with information in exchange for gifts and cash, Forbes said. She is now serving 48 months in prison. Don Chu, a third Primary Global figure, got off with no jail time after cooperating with prosecutors, Forbes added.

'Trading Training' Could Be Costly To Defendants

12/28/2011 6:03:43 AM

A Chicago-based outfit that charged fees from people wanting to be commodities traders is now itself being charged with solicitation fraud. The U.S. Commodity Futures Trading Commission alleges that Richard Regan and his company, Pro Trading Course, LLC, fraudulently promised to teach the commodities business to aspiring people, using impressive “payout charts” as a lure to believing they could make big bucks. The company also used misleading information about advancement opportunities available through the training program it was selling, the CFTC said. The agency is seeking repayment of money that Regan and PTC got from victims, along with civil penalties and a permanent injunction prohibiting future violations of commodity laws.

Ind. Politician, Others Facing Fed Scam Charges

12/28/2011 6:00:55 AM

An Indiana federal grand jury has indicted a member of the Indianapolis City-County Council, the head of a charitable foundation, and a third man for allegedly conning $1.7 million out if a would-be investor, and blowing the money within weeks. Council member Paul Bateman, 57, faces wire fraud and money laundering charges along with Manuel Gonzalez, 53, and Michael Russell, also 53, the FBI said. Russell is head of the Russell Foundation, a religious and charitable organization devoted to poverty relief. Officials said the trio convinced an investor in 2007 to put $702,000 into a foundation enterprise, then came back again and took $1 million to fund a purported corporate bond. But the cash actually went for personal expenses, including custom-made clothing and a fleet of cars, investigators said. If convicted of multiple charges, the three men face possible decades in prison and astronomical fines.

GE Funding Agrees To Pay Millions In SEC Penalties

12/28/2011 5:57:44 AM

Does your local or state government really know what it's doing when your tax money is invested?Maybe not, and case in point: The Securities and Exchange Commission has announced a settlement with GE Funding Capital Market Services, in which the company will pay more than $70 million for rigging hundreds of municipal bond reinvestment contracts that adversely affected governments in 44 states. In doing so, GE will pay $25 million to the SEC and another $45.3 million to individual states. Between 1999 and 2004, the SEC said, GE Funding CMS made hidden payments to bidding agents and fraudulently manipulated transactions in at least 328 municipal bond reinvestments. An SEC official said that in this case and others, the agency has “uncovered pervasive corrupt practices in the municipal securities reinvestment market.” As usual in such cases, GE agreed to the settlement “without admitting or denying the allegations,” the SEC said.

Inside Trading Crackdown Crosses The Seas To China

12/28/2011 5:53:58 AM

While the U.S. Government made big gains this year with insider trading prosecutions, regulators in China are also on a campaign to reign in market corruption.Bloomberg reports that in the latest case, the China Securities Regulatory Commission arrested Ji Minbo, a vice president at Southwest Securities, charging that he used insider information to trade more than 40 stocks in a two-year period, making an illicit $3.2 million. Although China's securities market is only 20 years old, it is the world's third-largest equities market, Bloomberg said, presenting plenty of opportunities for illegal activity. The chairman of the Regulatory Commission recently announced “zero tolerance” for market fraud, and those prosecuted thus far have included corporate executives, elected and appointed government officials, and fund managers, Bloomberg added.

Funds Sue Deutsche Bank Over $1.6 Bil Madoff Deal

12/27/2011 7:48:49 AM

Two funds that pumped millions into Bernard Madoff accounts have now sued global financial powerhouse Deutsche Bank Securities, Courthouse News reported, claiming it has refused to honor a commitment to purchase $1.6 billion in bankruptcy claims. In Manhattan federal court, Kingate Global Fund LTD and Kingate Euro Fund LTD filed their claim that Deutsche has not honored a letter of commitment. For years, the two funds were major “feeder funds” that pumped money into Bernard Madoff Investment Securities until Madoff's massive Ponzi scheme crumbled in November 2008, Courthouse News said. The lawsuit claims that Deutsche Bank agreed in a letter of confirmation to pay the funds 66 percent - or more than $1.6 billion - of their losses in the Madoff collapse, with the money to eventually be distributed to Madoff's victims, the news service added. If Deutsche Bank doesn't come through on its end of the deal, the two funds “will suffer real and concrete damages,” Courthouse News quoted the lawsuit as saying. An answer from Deutsche Bank has not yet been filed in the action.

 

Rothstein: All Wanted The 'Rock Star Lifestyle'

12/27/2011 7:45:13 AM

In an ongoing series of depositions, imprisoned Florida lawyer Scott Rothstein has been giving details on how he ran a $1.4 billion Ponzi scheme, and how his law partners knew about the operation, but did nothing to stop it, The Sun-Sentinel said. Rothstein - who is already serving a 50-year prison term - has been spilling the beans on the scam that operated from his booming law practice in Fort Lauderdale, hoping to have his sentence reduced. In round one of the depositions, he said his partners, Stuart Rosenfeldt and Russell Adler, were fully aware that he was selling shares of non-existent lawsuit settlements to unwary investors. Rothstein said there was “a large category of people” who wanted to live what he called “the rock star or Rothstein lifestyle,” The Sun Sentinel said. More deposition details will be released soon.

Fed Judge Upholds $54.1 Million Citigroup Payment

12/27/2011 7:40:37 AM

A federal judge in Colorado has socked it to Citigroup Global Markets Inc., upholding an arbitration award against the company for $54.1 million, InvestmentNews reported. Citigroup had appealed the award decision, even though it originally agreed to enter arbitration and avoid legal action in the first place. The arbitration grew from action brought by investors who lost 80 percent of their money through long-term municipal bonds peddled by Citigroup, InvestmentNews said. The investors said Citigroup claimed the bonds presented little risk. Citigroup rebutted that investors knew what they were getting into, and said the arbitration panel ignored legal precedents when making the award. In denying the appeal, federal Judge Christine Arguello said she found Citigroup's argument “wholly unpersuasive,” InvestmentNews said.

Former Fannie Mae Chief Now Faces Fraud Charges

12/27/2011 7:36:34 AM

Daniel Mudd, the disgraced former chief of Fannie Mae, has now taken a leave of absence as CEO of Fortress Investment Group as he prepares to fight securities fraud charges recently brought against him and others, CNN reported. Mudd went to Fortress in August 2009, after being ousted as CEO of Fannie Mae in September 2008, when the federal government seized control of the mortgage giant. Now Mudd, two other Fannie Mae executives, and three former Freddie Mac officials have been charged with securities violations by the Securities and Exchange Commission. The SEC said the executives concealed their agencies' exposure to the risks of substandard mortgages, a play that brought Fannie Mae to its knees. At Fortress, Mudd headed a firm with more than $43 billion in customer assets under management, CNN said.

Feds Track E-Mail Chain To Find Missing MF Funds

12/27/2011 7:33:13 AM

Federal investigators are still digging to find out what happened to $1 billion in missing customer funds when derivatives broker MF Global collapsed and filed bankruptcy at the end of October. The U.S. Commodity Futures Trading Commission is keeping a tight lip, The New York Times reported, but the newspaper cited confidential sources as saying that investigators are shedding some light by tracking a chain of in-house e-mails sent in the firm's final days. One e-mail is purported to have approved sending $200 million to JPMorgan Chase, even though the funds reportedly consisted entirely of money belonging to MF customers, The Times said. When it filed bankruptcy, MF was unable to account for nearly $1 billion in customer money; since then, a trustee in the bankruptcy has said the lost funds may exceed $1.2 billion.

 

French Physician Walks On Inside Trading Charge

12/23/2011 8:01:40 AM

A French doctor has walked away with a slap-on-the-wrist sentence for taking gifts and cash in exchange for critical inside corporate information he passed along to an American physician-hedge fund manager. Bloomberg said Yves Benhamou, a liver specialist, fed stock tips to Joseph Skowron, a doctor who also ran a hedge fund at FrontPoint Partners LLC. The information allowed Skowron to made stock trades related to the suspension of trials for a Hepatitis C drug made by Human Genome Sciences, Inc. Benhamou had pleaded guilty in the case, and has now been sentenced in the U.S. to time he served after being arrested - a grand total of 24 days. A prosecutor told the judge that Benhamou's cooperation “put the nail in the coffin” of the case against Skowron, who was sentenced to five years in prison, Bloomberg added.

 

Mich. Hedge Fund Manager Pleads Guilty To Charges

12/23/2011 7:58:32 AM

Former Michigan hedge fund manager James F. Turner II has pleaded guilty to an insider trading plot that netted illegal profits of $2.5 million, Bloomberg reported. Turner, who ran Clay Capital Management LLC, made his plea in New Jersey federal court. He was accused of making illegal trades in the stock of three companies, based on insider tips he received from his brother-in-law and another man, Bloomberg said. The scam ran from 2007-2010, according to the Securities and Exchange Commission. Turner will be sentenced on April 16, and faces a possible maximum prison sentence of 20 years, Bloomberg said.

Physician Bribery Case Ends In $23.5 Mil Fine

12/23/2011 7:55:26 AM

A lot of people walking around with pacemakers produced by Medtronic Inc. may not realize, it, but they were part of an extensive bribery scam that just resulted in a $23.5 million penalty against the Minnesota-based company. The FBI said Medtronic will pay that amount to the government for bribing doctors to install its pacemakers and defibrillators in patients, then submit false payment claims to Medicare and Medicaid. The bribes were made in the form of payments for “post-market studies,” pitched to physicians as a way to divert them from using products from Medtronic competitors. People who blew the whistle on the case will receive $3.96 million of the settlement, the feds added. The FBI did not say how many bribes the case involved, but did explain that doctors received from $1,000 to $2,000 per patient for each device they implanted. It was big money, any way you figure it.

Bear Stearns Execs Tell Court 'Enough Is Enough'

12/23/2011 7:52:02 AM

In 2009, former Bear Stearns executives Ralph Cioffi and Matthew Tannin were acquitted by a federal jury of allegedly misleading investors whose losses reached $1.6 billion, Bloomberg said. But the Securities and Exchange Commission is still going after them with a civil action, and the two Wall-Streeters are saying enough is enough. In Brooklyn federal court, they have asked Judge Fredric Block to throw out part of the SEC's case, Boomberg explained. “The SEC has persisted in pursuing this action based on the same underlying facts” that didn't work in the criminal trial, lawyers for Cioffi and Tannin said in court filings. A Feb. 13 trial date is scheduled in the SEC case.

A Tale Of Football, Stock, Greed, And Alleged Crime

12/23/2011 7:46:18 AM

The Securities and Exchange Commission has charged six men - including former NFL star Willie Gault, a California lawyer, and a Hollywood executive - of lying to investors as part of a pump-and-dump scheme that involved millions of dollars. Regulators say Gault, a former wide receiver for the Chicago Bears and the Los Angeles Raiders, served as a figurehead co-CEO, along with J. Rowland Perkins, of Hollywood notoriety, at Heart Tronics, a heart monitoring device company. A third accomplice, attorney Mitchell J. Stein, allegedly installed Gault in his position to wow investors, the SEC said, as the company lied about its success. When the cash rolled in, Stein and Gault diverted the proceeds and Stein made millions by secretly selling off Heart Tronics stock as the share price rose, regulators said. Three other men, including Stein's chauffeur, also face civil charges in the case. Meanwhile,Stein has also been arrested on federal criminal charges, according to the SEC. An agency official said Stein, who allegedly orchestrated the scheme, “has been living the high life off his illicit proceeds, with multiple homes, exotic cars, and private jets.”

 

Former Madoff Controller Cops Plea; Faces 50 Years

12/22/2011 7:23:39 AM

The former controller for Bernard Madoff's firm has pleaded guilty to a spate of securities fraud charges, will forfeit millions, and faces a maximum sentence of 50 years in prison. Enrica Cotellessa-Pitz worked for Madoff from 1978-2008, said financialfraudlaw.com. She is charged with falsifying company records and statements, including those given to the Securities and Exchange Commission, to disguise illegal fund transfers. Cotellessa-Pitz is cooperating with the government in helping to bring down other suspects in the enormous Ponzi scheme and will be sentenced next June, financialfraudlaw.com said. She was released on a $2.5 million bond, the Web site said. Madoff is now serving a 150-year sentence.

Not-Guilty Pleas Entered To OTC Bribery Charges

12/22/2011 7:19:46 AM

Giuseppe Baldassarre, the ex-president of Dolphin Digital Media Inc., and his broker, Robert Mouallem, have pleaded not guilty in New York federal court to bribing brokers, Stockwatch reported. The two are charged with offering 30 percent kickbacks to crooked brokers who would steer client accounts to buy up to $4 million worth of stock in Dolphin, a tiny company trading on the OTC exchange, Stockwatch said. The scheme was to pump Dolphin's 30-cent-per-share price as high as 70 cents, prosecutors charge. Mouallem's alleged job was to coordinate dumping the stock after broker purchases pushed up share prices, Stockwatch said. Both men remain free pending trial.

Fannie Mae, Freddie Mac Face Calif. Mortgage Suit

12/22/2011 7:16:31 AM

California has sued Fannie Mae, the government-sponsored company that issues mortgage-backed securities, and Freddie Mac, the mortgage finance company, Bloomberg said. The lawsuits are part of the state attorney general's investigation into lending and foreclosure practices, the news service said. Specifically, the state wants to confirm whether prostitution and drug dealing have occurred in foreclosed homes owned by the companies, and if loan companies have illegally evicted military families, Bloomberg said. Since 2007, more than 768,000 mortgages have been foreclosed in California, and the state has already pulled out of a national effort to negotiate settlements with five major mortgage servicers. California Attorney General Kamala Harris said the settlement didn't go far enough, and would not allow enough homeowners to keep their houses, Bloomberg added.

Tom Petters Execs To Pay Clawbacks Worth $8.5 Mil

12/22/2011 7:13:01 AM

Fallout continues from the Tom Petters Ponzi case in Minnesota, with a bankruptcy judge approving clawbacks that will take $8.5 million from the pockets of former Petters employees who received stupendous bonuses, the Pioneer Press reported. Petters ran an international business enterprise purportedly selling electronics to retailers, but prosecutors said investors who pumped $3.5 billion into the scheme were paying for non-existent goods. After it imploded, Petters was convicted in 2009 and sent to prison for 50 years. Many of the 42 former employees being targeted are women: A former CEO will give back $1.9 million, while another executive and the ex-human resources director will forfeit $1.86 million and $1.2 million respectively, the Pioneer Press said.

'Rudy' Nailed By SEC For Deal That Didn't End Well

12/22/2011 7:09:45 AM

Daniel Ruettiger became famous by making only two plays in his football career with Notre Dame, sacking the opposing quarterback on one of them and being carried off the field in glory by teammates. His accomplishment led to the 1993 film, “Rudy,” and a motivational speaking career. Now, Ruettiger and 12 others are charged by the Securities and Exchange Commission with deceiving investors and reaping $11 million in illicit profits, Reuters reported. The defendants are charged with making false and misleading statements to spur stock purchases in Rudy Nutrition, a now-defunct company that sold a sports drink. Reuters said most of the group agreed to pay penalties without admitting or denying guilt. Ruettiger's tab: $$382,866. “Investors were lured into a scheme by Mr. Ruettiger's well-known, feel-good story, but found themselves in a situation that did not have a happy ending,” Reuters quoted an SEC lawyer as saying.

 

Conn. Accountant Gets 63 Months For Fraud Charges

12/21/2011 12:01:39 PM

F. Robert LaSaracina, who ran an accounting business in Norwich, Conn., will spend 63 months in federal prison for defrauding a family trust of as much as $4.2 million, while he also cheated his own employees and scammed the IRS, The Day newspaper said. He will make $2.25 million in restitution to dozens of people, The Day added, after pleading guilty to wire and tax fraud. LaSaracina scammed the Kauppinen family while serving as a trustee, prosecutors said. In addition, he was accused of failing to pay taxes he withheld from employees of the accounting firm he ran. He was sentenced to dual terms of 63 months and 60 months, but they will run concurrently, The Day said.

Feds: Forex 'Trader' Was Actually A Big-Time Loser

12/21/2011 11:58:46 AM

Jeffrey L. Groendyke and his Michigan company, JG Forex Fund, have been ordered to pay nearly $1 million in restitution and a $420,000 penalty for running a foreign exchange trading Ponzi scheme, according to Hedge Week. The federal consent order was obtained by the U.S. Commodity Futures Trading Commission, and it also bans Groendyke from future commodities trading. The CFTC had charged that Groendyke raised more than $1 million from 42 investors for Forex trades, but only traded about a third of the total and lost most of that, Hedge Week said. He also siphoned off money into a personal account and spent more than $131,000 on computers, rent, groceries, retail merchandise, and hotel bills, according to the CFTC.

Sentencing Is Delayed In Marian Morgan Scam Case

12/21/2011 11:55:57 AM

A judge in Sarasota, Fla. has agreed to delay sentencing for Marian Morgan, the socialite who was convicted in September of defrauding investors of $28 million, the Herald-Tribune said. Morgan was scheduled for sentencing this week on 22 securities fraud-related counts after being convicted at trial. Her husband, John Morgan, has already seen sentenced to 10 years after pleading guilty to having investors in Morgan European Holdings wire millions to their lawyer in Denmark. A judge agreed to a delay request from Marian Morgan's new lawyer, and rescheduled sentencing for Jan. 27, the newspaper said. The Herald-Tribune added that sentencing experts predict she could get a prison term as long as 25 years.

Stanford To Psychologist: 'I'm Sharp, Clearheaded'

12/21/2011 11:53:06 AM

At a hearing now underway in Houston, the government is chipping away at Allen Stanford's claim that he is not competent to stand trial for allegedly operating a giant Ponzi scheme. Stanford has been treated with anxiety drugs at a North Carolina federal prison, but a psychologist who treated him there testified that he is able to assist in his defense, the Memphis Commercial Appeal reported. “He said, 'I'm thinking great. I'm sharp, clear-headed.' He looked quite well,” the newspaper quoted the expert as saying. If a judge agrees, Stanford will be tried next month for allegedly cheating investors out of $7 billion through a certificates of deposit scam at his Caribbean-based bank.

Agency Issues Top Ten List Of Scams To Avoid

12/21/2011 11:49:40 AM

The Michigan Department of Licensing and Regulatory Affairs has issued its annual “Top 10” list of investor traps, and it mirrors the range of investment frauds we write about in this column daily. As reported by insurancenewsnet.com, number-one on the list of schemes to avoid is affinity fraud, where a criminal targets members of a particular group when selling a scam. Victims may be members of a religion, social or ethnic organization, or any other group where fraudsters take advantage of the trust fellow members place in them. Other top scams include commodities investments such as oil or precious metals; frauds that target senior citizens; “green schemes,” which use innovative energy products as bait; real estate scams that offer to help people mired in mortgage trouble; phony promissory notes offering sky-high returns; exaggerated credentials or phony expert designations; investments sold by unlicensed agents or companies; and plain old deceit, where advisers sell investments completely unsuitable for the client's needs or risk tolerance. One other top scam that didn't make the list: foreign exchange trading, where investors are promised huge returns through trading in risky foreign currency markets.

'Longtime Friends' Burned In California Loan Scheme

12/20/2011 7:16:48 AM

Mark Alan Helsing, a Southern California businessman, is going to state prison for 15 years after pleading guilty to bilking investors out of almost $7 million through a real estate-related Ponzi scheme, according to a report by the Associated Press. Helsing, 53, of Tustin, Calif., ran his scam from 2004-2007, raising money he said would be passed along to borrowers. Investors who put up the cash were promised 15 percent returns on six-month loans. In return, Helsing furnished forged deeds of trust. Interest payments would come to investors for awhile, but then the checks would start bouncing. As it happened, no loans were really made, and it was all a big Ponzi. Most of the victims were Helsing's longtime friends, the AP said.

 

Someone Will Lose From Alleged New Mexico Ponzi

12/20/2011 7:08:04 AM

Doug Vaughan, an accused Ponzi scheme operator in New Mexico, is expected to enter a guilty plea in court this week, said KOB-News 4 in Albuquerque, but that may provide cold comfort to many of those who invested with him. Vaughan, a former real estate executive, is charged with swindling victims out of $74 million through shaky investments. The scheme wrecked retirements, real estate deals, and savings accounts held by Vaughan's victims, the news station said. But a guilty plea isn't likely to help the bilked investors. KOB-4 quoted a bankruptcy trustee sorting through the remains of Vaughan's wreckage as saying: “I gather there are a lot of people out there who are out substantial sums of money. The house has been sold, the contents of the house were sold.” Proceeds will pay claims filed in the bankruptcy, but somebody's probably going to come up short, KOB-4 concluded.

 

Salinas Scam To Be Costly For Young Texas Athletes

12/20/2011 7:04:30 AM

In the wake of the David Salinas scandal, the Houston Athletics Foundation could lose more than $2.2 million for non-existent bonds it bought from the now-deceased, alleged flim-flam man, reported The Houston Chronicle. Salinas, a former financial adviser who ran a youth basketball program, killed himself in July after allegations of fraud arose against him. The Securities and Exchange Commission said Salinas scammed more than $39 million from 100-plus investors before his death, The Chronicle said. After his suicide, the SEC filed a lawsuit accusing Salinas and an associate of peddling phony corporate bonds and promising investors yields up to nine percent, the newspaper said. Another loser in the tragedy is expected to be the University of Houston, which could see reductions in money it receives from the foundation to fund athletic scholarships, The Chronicle reported.

Industry Eyes Are On The SEC-SIPC Legal Skirmish

12/20/2011 7:00:39 AM

Lots of eyes are locked on a looming legal battle between the Securities and Exchange Commission and the Securities Investor Protection Corp., InvestmentNews reported. The SEC is … well, the SEC. The SIPC was formed by federal action, but funds itself from assessments to brokerages. Its purpose is to protect wronged investors when their brokerage firms fail. Thus far, the SIPC has refused to protect people who lost $7 billion to Allen Stanford's alleged, Caribbean-based Ponzi scheme, saying the fraud was perpetrated through certificates of deposit, not through securities held by brokerages. The industry's chief fear is that a forced payout would drain the SIPC's $1.4 billion reserve fund, leading to higher assessment costs for the brokerage industry. “It's killing off the small firms,” one industry leader told InvestmentNews. “Why should we be paying off for fraud?” But there's also a political slant to the story: The SEC's new lawsuit against the SIPC was filed only after a U.S. senator forced the agency's hand, demanding legal action.

Unrelated Lands Seized After Ponzi Conviction

12/20/2011 6:56:59 AM

The case of James W. “Bill” Bailey, a convicted North Carolina Ponzi artist, is a cautionary tale for investors, especially those in retirement. The Asheville Citizen-Times said Bailey, who pleaded guilty early this year to running a $13 million Ponzi scheme for a decade, not only fleeced victims of the scam. Now, the government is also seizing property belonging to other investors, who purchased land through Bailey's Southern Financial Services in unrelated cases. Example: The newspaper said one man used his retirement money to buy 100 acres of mountain land, and employed Bailey's company to manage the deal. Now, the feds have informed the man his land is bring seized because of Bailey's involvement, even though it was not connected to the Ponzi. All told, 42 people who used Bailey's services are now battling the government to get back seized lands worth millions, The Citizen-Times said. “The government demonstrates a fundamental lack of understanding” of the role of Bailey's property dealings, “and the fundamental law governing criminal forfeiture,” the newspaper quoted lawyers for the petitioners as saying in court filings.

 

SEC Says Utah Men Used Mormon Church For Scam

12/18/2011 4:29:07 PM

Federal regulators in Utah have sued a father-and-son team, alleging they used ties through the Mormon church to scam investors for more than $200 million in one of the state's largest financial frauds in history, The Salt Lake Tribune said. Wendell A. Jacobson, 58, and his son, 33-year-old Allen R. Jacobson, are charged with using their Management Solutions, Inc. to run a Ponzi scam that most recently took $2 million from an investor in November, The Tribune said. The men used connections made through the Church of Jesus Christ of Latter-Day Saints to locate investors, promising high returns by purchasing, renovating, and flipping apartment complexes, The Tribune said. But in its lawsuit, the Securities and Exchange Commission claims the scheme was a hoax, with the Jacobsons paying early investors with money fleeced from newer ones. A lawyer for the men told the newspaper they “intend to vigorously defend the case,” The Tribune added.

Goldman Offers $9.85 Mil To Victims Of Nadel Crime

12/18/2011 4:25:46 PM

A division of Goldman Sacs has offered a settlement of nearly $10 million to investors who were scammed by Arthur Nadel in his Florida-based Ponzi operation, the Gulf Coast Business Review has reported. In 2010, Nadel - a piano-playing hedge fund manager and disbarred lawyer, who was 77 at the time - was sentenced to 14 years in prison for a scheme he ran through a hedge fund, Scoop Management Co. Many trades for the fund were handled by Goldman Sacs Execution & Clearing LP, the Business Review reported. Now, a trustee in the case has said Goldman is offering to settle with Nadel's former clients for $9.85 million in a “good faith willingness to resolve these matters amicably,” the newspaper said. As his scam unraveled, Nadel became known as the “Mini-Madoff of Southwest Florida.”

Can Stanford Recall His $7 Billion Alleged Ponzi?

12/18/2011 4:22:28 PM

A competency hearing is set for this week in the case of Allen Stanford, the Texas millionaire who allegedly ran a $7 billion Ponzi scheme from his Antigua bank. Although his doctors say the 61-year-old Stanford has no memory of his past actions because of a savage prison attack, The Houston Chronicle said federal prosecutors aren't buying the tale, and are pushing to get him on trial. In 2009, Stanford was attacked by another inmate who smashed his face into a steel pole, threw him down and repeatedly kicked him, The Chronicle said. But prosecutors are disputing medical claims of the long-term results of the injuries, saying in court filings that Stanford's claimed amnesia is “grossly out of proportion to expected memory loss from a head trauma,” the newspaper said. A judge will now determine whether Stanford is competent for trial.

Guilty Plea Entered In CO2 Tech Pump Scheme

12/18/2011 4:19:24 PM

Stock promoter Robert Weidenbaum has pleaded guilty in federal court to engaging with others to pump up the stock of CO2 Tech Ltd., and will be forfeiting $360,000 he made in the ripoff, according to Stockwatch. In 2007, Weidenbaum and others made phony claims about the pollution control-device manufacturer, telling investors that Boeing was interested in CO2. Weidenbaum admitted that he conspired to boost the company's stock price and profited from selling CO2 stock when the share price rose. Charges against others are still pending; meanwhile, Weidenbaum faces a possible five-year prison term and is scheduled for sentencing in Miami on Feb. 21, Stockwatch said.

SEC Is Appealing Rakoff Ruling In Citigroup Case

12/18/2011 4:16:22 PM

The Securities and Exchange Commission has asked a higher court to overturn a ruling that Citigroup must stand trial for allegedly duping clients in a mortgage-backed securities investment deal that collapsed, making money for the bank but losing about $700 million for investors, Compliance Week reported. New York federal Judge Jed Rakoff had rejected the SEC's proposal to let the banking giant off the hook with a $285 million settlement, in which Citigroup neither admitted nor denied wrongdoing. Regulators charged that Citigroup helped select undesirable securities for the collateralized debt obligation deal, all the while profiting by taking short positions on its own package behind the scenes. Rakoff blasted the SEC in the case and refused allow the settlement. Now, Compliance Week said, the agency is asking the U.S. Court of Appeals to overturn Rakoff's decision, maintaining that a trial would delay getting repayments for wronged investors, and saying the ruling applies a “new and unprecedented standard” in dealing with such alleged Wall Street chicanery.

Vancouver Promoter Gets U.S. Pump & Dump Charge

12/16/2011 6:09:24 AM

There has been a flurry of FBI undercover activity lately to nail pump-and-dump operators, and the arrest of Vancouver stock promoter Louis Dion is among the newest cases. The Vancouver Sun reported that Dion, a 61-year-old fixture on the penny stock scene in Canada, has been arrested in New York for paying secret commissions in hopes that corrupt stock brokers would peddle shares of a flimsy OTC stock to their clients. Dion allegedly paid a $26,000 bribe for shares of Signa Resources to be hustled, unaware that the go-between he used was an undercover FBI agent. The plan involved moving 273,000 shares of Signa, The Sun said. Dion is charged with conspiring to pump up Signa's trading volume, trying to orchestrate trades to keep the share price rising, and paying kickbacks to brokers, who would foist the stock upon unwary clients. At last report, Dion was being held in a Brooklyn jail, The Sun said.

Feds: $100 Million In Bribes Led To Indictments

12/16/2011 6:05:59 AM

An indictment issued by the U.S. Attorney's Office has revealed a business and political scam of enormous proportions, in which officials with a German conglomerate allegedly planned to grease palms to the tune of $100 million, in efforts to get a $1 billion contract. Financialfraudlaw.com reported that the fraud spanned years beginning in 1994, when executives and agents of Siemens AG began making bribes to land a contract to produce national identification cards for Argentina. Siemens officials spread tons of cash among Argentine government officials, the opposition party, and even candidates for office, the U.S. Department of Justice now alleges. Over time, Siemens operatives allegedly used 17 offshore shell companies to launder the money, Financialfraudlaw.com reported. Now, eight former Siemens associates are charged with counts including conspiracy to violate the Foreign Corrupt Practices Act, wire fraud, and money laundering.

Utah Mortgage Frauds Get Jail Time For 3 Partners

12/16/2011 6:02:11 AM

A former husband and wife have been sentenced in Utah for a mortgage loan scam that involved multiple properties and has already sent a third person to prison, the U.S. Department of Justice said. Christopher Ethington, 36, will go to prison for 37 months, while his ex-wife, 34-year-old Janet Ethington, will serve 30 days in a county jail followed by five years of probation, the government said. Their former co-conspirator, James Merrill Roberts, 42, is already serving a 37-month sentence. Prosecutors said that through Amerifinance Group, the three recruited straw buyers, lied to mortgage lenders, and falsified documents to get loans on residential properties. Eventually, the properties all went into foreclosure or short-sales when mortgage payments weren't made. To nail the case, federal investigators focused on 18 separate property deals, but the scam actually involved a “significantly larger set of transactions,” the government said.

 

Insider Trading Partners Considered Burning Cash

12/16/2011 5:59:07 AM

Attorney Matthew Kluger, the third member of an insider trading trio, has pleaded guilty in New Jersey to four securities fraud-related charges - three of which carry maximum sentences of 20 years each, reported The Asbury Park Press. Kluger's two co-conspirators, Garret Bauer and Kenneth Robinson, have also pleaded guilty. The three made millions through trading stocks on insider tips that Kluger gained through working at various law firms, prosecutors said. One deal alone, Oracle's acquisition of Sun Microsystems, made them $11 million, The Park Press said. At one point, the newspaper added, the three were so awash in illegal profits that they contemplated burning $175,000 in cash, to keep from getting caught.

Senate Committee Passes New Insider Trading Ban

12/16/2011 5:55:47 AM

A U.S. Senate committee has acted quickly in approving a bill that would make it illegal for members of Congress to profit through insider trading with knowledge they gain on the job, Newsday reported. On a 7-2 vote, the Committee on Homeland Security and Government Affairs whisked through the Stop Trading on Congressional Knowledge act, which combined twp separate bills. The new bill - which still must go to the Senate floor after New Year - bars insider trading by members of Congress, their staffs and families, Newsday said. In addition, lawmakers would be required to report their stock trades monthly. The bill was born after “Sixty Minutes” blew the whistle on some members of Congress who have profited by trading with privileged information on pending contracts, federal product approvals, or other market-moving tips. The House has a similar version of the STOCK act, but it was derailed in committee by Majority Leader Eric Cantor, a Virginia Republican, Newsday said.

 

Indiana Adviser To Plea In $7 Million Ponzi Case

12/15/2011 7:03:26 AM

Keenan Hauke, an Indiana financial adviser who advanced his career by appearing on television and in a local business journal, has admitted to stealing more than $7 million from investors in an elaborate Ponzi game, the Indianapolis Star said. Through his companies, Samex Capital Partners and Samex Capital Advisors, Hauke took amounts ranging from $58 to $407,000 in his scam, but federal prosecutors said most investor losses averaged from $50,000 to $150,000, The Star reported. Hauke often used gold and silver coins to pay for legal fees and other expenses, and a court has already frozen his assets, including a $400,000 condominium in Barbados, the newspaper said. His victims included people who invested money they moved from retirement accounts and college funds, The Star added. Under a plea agreement, prosecutors are recommending between 14 and 17 ½ years in prison for Hauke, but no one knows how much money is left to make restitution, The Star added.

Illinois Adviser Gets 20 Years In Long Ponzi

12/15/2011 6:59:55 AM

It was not a particularly novel scheme, but it worked well enough for Illinois financial adviser Edward Moskop for 19 years, KSDK-TV reported. Now, after taking more than $2.4 million from 26 victims in a Ponzi scheme, Moskop is going to jail. The Bellville, Ill. man has been sentenced to 20 years for mail fraud and another 10 years, to be served concurrently, for money laundering. In addition, he will pay his victims $1.49 million in restitution, KSDK said. From 1991 to 2010, Moskop, 64, took money from family members, friends, and other investors, promising to make profits for their retirement. But instead he kept the cash for himself, creating phony statements that showed non-existent gains and interest, prosecutors said. Moskop had entered a guilty plea last August, according to KSDK.

Rothstein Spilling Beans On His $1.2 Billion Scam

12/15/2011 6:57:07 AM

Disbarred Florida lawyer and Ponzi scheme impresario Scott Rothstein has been a Chatty Cathy in recent days, giving closed-door depositions and spilling the beans on details of the $1.2 billion fraud that sent him to prison for 50 years. Rothstein was convicted for selling shares in non-existent lawsuit settlements; now, National Public Radio News said, he's believed to be giving more details on how the scam was built and who was involved. A judge has agreed to release transcripts of the depositions to the media eight days after Dec. 23, when they are expected to be completed. Otherwise, the public would not have learned of their contents until late this month or in January, NPR added.

 

Top SEC Inside Cop Now Getting Heat Of His Own

12/15/2011 6:54:06 AM

The inspector general of the Securities and Exchange Commission, who is said to have sparked fear and loathing inside the agency, is now speaking out in his own defense, Bloomberg reported. H. David Kotz, the SEC's top inside investigator for four years, has been critical of the agency, primarily for fumbling red flags in the giant Bernard Madoff Ponzi scam. Now, Bloomberg said, he recently caused consternation by giving a taped interview to a financial adviser who used it on the Internet and the radio to solicit investors for a “crash-proof” retirement plan. Furthermore, the adviser, Phillip Cannella III, gave Kotz three tickets to a sold-out football game between the Philadelphia Eagles and the New York Giants, Bloomberg said. Kotz acknowledged accepting the tickets, but told the news service he paid Cannella $285 for them a few days after the game. Cannella is said to have paid $95 each for the tickets, but an Eagles spokesman said the team valued the seats at $240 apiece, Bloomberg said. In an e-mail to Bloomberg, Kotz responded that “none of my actions were inappropriate or improper,” the news service added.

Convicted Trader To Pay $1.6 Mil In SEC Charges

12/15/2011 6:50:57 AM

In a deal made with the Securities and Exchange Commission, Zvi Goffer, the imprisoned former hedge fund trader, will be paying $1.6 million in dual civil case charges for insider trading,Reuters said. Goffer agreed to forfeit more than $1 million in illegal gains and also pay interest of more than $231,000 for one case. In the second, he will give up more than $265,000 and pay nearly $60,000 in interest, Reuters said. Both settlements have been approved by federal judges in New York. In his heyday, Goffer was known as “Octopussy” because he had so many sources of insider information on pending corporate developments that would affect stock prices. Last June, Goffer was convicted of securities fraud and conspiracy and sentenced to 10 years in prison. He also received a $10 million criminal penalty, Reuters said.

A Web-Based Forex Scam May Lead To 30-Year Term

12/14/2011 10:50:25 AM

When he is sentenced in a Nevada federal court next week, Lewistown, Mont. resident Richard Young faces up to 30 years in prison for running an Internet-based foreign exchange trading scam, the Associated Press reported. Earlier this year, a jury convicted Young, 51, after a 13-day trial on counts of mail, wire, and securities fraud, as well as money laundering. The U.S. Attorney's Office for the District of Nevada charged that Young and a partner used the Web-based Global One Group LLC to sell training sessions to investors on foreign exchange trading, and to take investment money, claiming a 95 percent success rate in FOREX trades. They fleeced 1,700 investors out of $16 million, the AP reported. Federal officials have already seized a Young bank account holding $500,000, as well as a towing company and four houses the convicted swindler owned in Montana, officials said.

 

Penny Stock Promoter Is Feeling Wrath Of The SEC

12/14/2011 10:47:19 AM

Federal regulators are going after penny stock promoter Geoffrey Eiten and his National Financial Communications Corp., claiming they have issued glowing stock reports that turned out to be false, or at best, exaggerated, Stockwatch reported. Eiten, a former stock broker who bills himself as “America's Leading Micro-Cap Stock Picker,” publishes the official-sounding OTC Special Situations Report, Stockwatch said. But in actuality, the SEC alleges, he promotes the stocks of companies that pay good money to be pumped up in his reports, and has also bought the stocks himself before his positive reports were issued. Stockwatch cited the case of Nexaira Wireless, which Eiten allegedly promoted as having developed the world's fastest router, also claiming Nexaira received revenue from larger, well-known wireless companies. Not true, the SEC alleges. The agency is now suing Eiten through a civil fraud action, Stockwatch said.

Feds: Glaxo Subsidiary Cheated Its Own Workers

12/14/2011 10:43:48 AM

The Securities and Exchange Commission is alleging that a subsidiary of pharmaceutical company GlaxoSmithKline cheated its own employees and other shareholders when it bought back their company stock at prices far lower than actual value. At the time, Florida-based Stiefel Laboratories, which was the world's largest private maker of dermatology products, had not yet been acquired by GlaxoSmith, the SEC said. Beginning in 2006, Stiefel engaged in a buy-back plan of its stock, but neglected to tell employees and other shareholders that it was paying less than the stock was worth. Five private equity firms had already offered to buy the preferred stock at levels as high as 200 percent above what company CEO Charles Stiefel was paying his own employees, regulators alleged. Result: Stiefel shareholders who sold out lost more than $110 million, the SEC charges. The agency is seeking injunctive relief, penalties, and disgorgement, and wants to ban Charles Stiefel from serving as a corporate officer or director.

SEC Seeks Punishment In Alternative Green Scheme

12/14/2011 10:40:21 AM

The principals of a Long Island company and several other people have been charged with illegally creating back-dated documents to allow the sale of free-trading shares in Alternative Green Technologies, reported the Long Island Business News. The publication said Mitchell Segal, the company's CEO, and his partner, Howard Borg, submitted the phony documents to a lawyer and a transfer agent, who concluded that free-trading shares of the company's stock could be legally issued. Through a subsidiary, Alternative Green manufactures insulated concrete construction forms. Three stock promoters are also charged in the case, the Business News said. The SEC is seeking varied punishments against the defendants, including injunctions, disgorgement, and penny stock bans, the newspaper added.

 

Chicago Trader Fined In 'Naked' Short Sales Case

12/14/2011 10:37:11 AM

An options trader in the Chicago area has been suspended from market activity and will pay more than $2 million for failing to actually deliver shares of stock he promised in short-sale transactions. Gary S. Bell neither admitted nor denied wrongdoing in the case, but the Securities and Exchange Commission said he made at least $1.5 million by loaning “hard-to-borrow” stocks to broker-dealers for short sales. However, the SEC said, the stocks Bell provided were not really available for delivery, thus making short sales based on the securities “naked” and illegal, the SEC said. Bell will pay $1.5 million in disgorgement and more than $586,000 in penalties and interest, regulators said. He also is essentially banned from market activity for nine months.

 

Houston Man Charged With Running $72 Million Scam

12/13/2011 7:46:47 AM

A Houston lawyer and investment manager has been charged with ripping off clients in a scam that reached $72 million proportions, according to the U.S. Department of Justice. Robert J. Andres, 60, has been indicted by a federal grand jury in Utah for his operation of Winsome Investment Trust, which he served as sole manager, trustee, and attorney, officials said. He is charged with lying about Winsome's assets and allocations, and with issuing phony balance sheets. Prosecutors charge that between 2005 and 2007, Andres raised more than $39 million from investors. Then from 2007 until last January, he raised another $32 million, using some of that money to make “profit payments” to earlier investors, the Justice Department said. In fact, the government said, the profits were fictitious, and Andres also skimmed off $2.2 million for his own living expenses and hotel bills. He now faces five counts of wire fraud.

'Golden Goose' Laid Eggs That Cost Months In Jail

12/13/2011 7:43:45 AM

For Jamil Bouchareb and Daniel Corbin, it was a pretty good gig while it lasted: The two day traders made hundreds of thousands in the stock market and never had to leave the comfort of their Miami Beach homes, Courthouse News reported. But now they have been sentenced to respective jail terms of 30 months and six months, after pleading guilty to insider trading-related charges, the news service said. As it happens, they were getting insider information from a third man. Matthew Devlin funneled tips received from his talkative wife, who worked for an international communications firm that handled mergers and acquisitions. Devlin has also pleaded guilty to conspiracy and securities fraud, Courthouse News said, while in addition to serving jail time, Bouchareb and Corbin will also forfeit $1.5 million and $1 million. The news service added that the men referred to Devlin's wife as “the golden goose.”

Alleged Dolphin Digital Bribery Cases Are Filed

12/13/2011 7:40:22 AM

Civil enforcement and criminal charges have been filed against two men alleged to have bribed stock brokers with 30 percent kickbacks, if they would help sell off $4 million worth of penny stock shares. One of the defendants, Malcom Stockdale, 66, lives on Eastern Canada's Prince Edward Island, Stockwatch said, while the other, 53-year-old Guiseppe Pino Baldassarre, is a Canadian residing in Florida. The plan for both defendants allegedly was to get rid of all their stock in Dolphin Digital Media, an OTC-traded company that makes security software and other products. During their first transaction in 2010, Stockwatch said, Baldassarre allegedly paid an $11,440 bribe to sell 105,000 shares of Dolphin. Both men have now been charged by the Securities and Exchange Commission and New York prosecutors. A third accomplice, Boca Raton, Fla. broker Robert Mouallem, has also been charged, Stockwatch said.

 

Claims Of Big Money End With Calif. Man Indicted

12/13/2011 7:37:08 AM

A federal indictment charges a former California stock trader with wire fraud and tax evasion, after he allegedly raised more than $25 million by lying to investors, the U.S. Department of Justice said. Robert L. Holloway, 54, of San Diego, faces charges stemming from his operation of U.S. Ventures LC, founded in 1999. Prosecutors charge that he raised money by telling investors the company used profitable proprietary trading software, had $32 million-plus under management, and generated returns of eight percent each trading day. But the government claims Holloway actually filed phony return statements with investors, blew their cash for personal expenses, and suffered more than $10 million in trading losses between October 2005 and April 2007 alone. He now faces a maximum sentence of 20 years for wire fraud, plus a $250,000 fine for each of four counts. The tax evasion charge could bring three years behind bars and a $100,000 fine, the Justice Department said.

 

SEC Wants $4.5 Million For 2005 Pump-And-Dump

12/13/2011 7:32:38 AM

The Securities and Exchange Commission wants its money from two Canadian stock promoters who profited from a pink-slip pump-and-dump back in 2003, Stockwatch reported. The SEC had accused William Todd Peever and Phillip Curtis of manipulating shares of SHEP Technologies, Inc., which they said had developed a new type of anti-lock brakes. The two paid for favorable coverage by four tout sheets, then made $3.1 million by dumping three million shares in the market. In 2008, Peever and Curtis became the targets of penny stock bans by the SEC, and were charged $2.9 million in disgorgement and $1.6 million interest. Problem is, the money never came. Now, the SEC is asking the Supreme Court of British Columbia to enforce the court-ordered penalty, which was issued in New York, Stockwatch said.

 

Feds: L.A. Radio Host Ran $20 Mil Ponzi For 5 Years

12/11/2011 1:04:56 PM

Fifty four-year-old John Farahi, a former Los Angeles radio financial talk show host, has been indicted and charged with running a five-year Ponzi scheme that ripped off investors for $20 million, according to a report from The Los Angeles Times. Aside from dispensing financial advice and managing client money at his New Point Financial Services, Farahi spent eight years hosting “Economy Today,” a Persian-language program on KIRN-AM 670 in L.A., The Times said. That apparently did not keep him busy enough: A federal indictment charges that he also collected millions from investors, promising to put their money into corporate bonds insured by the Troubled Asset Relief Program, The Times said. But prosecutors say it was just a Ponzi, with Farahi using client money to cover personal expenses and make payments to early investors, while he lost millions on risky options trades. His lawyer, David Tamman, has also been indicted and charged with helping Farahi obstruct an investigation into the alleged fraud, The Times added.

 

Broker Pleads Guilty To $37 Million Insider Scam

12/11/2011 1:01:19 PM

New York stock broker Garrett Bauer has admitted to an insider trading scam that ran for more than 15 years and made in excess of $37 million for its participants, Reuters said. Bauer, 44, pleaded guilty in New Jersey federal court to making trades on more than 30 corporate transactions, based on advance information he got indirectly from Matthew Kluger, a mergers and acquisitions attorney who allegedly filched the information from various law firms where he worked, Reuters said. Kluger was charged with passing the tips along to a third man, Kenneth Robinson, who then allegedly relayed them to Bauer, the news service said. Although it was a three-way deal, Bauer reaped most of the illegal benefits: Robinson is said to have made about $875,000, while lawyer Kluger, the fountain of information, is charged with receiving $500,000, Reuters said. Bauer is set for sentencing in March and will also forfeit $23 million in assets, including a home in Florida and a New York condo, Reuters added.

 

Chinese Are Charged With Illegally Making $2.7 Mil

12/11/2011 12:58:11 PM

Four Chinese citizens and a Chinese-based company have been charged with insider trading that allegedly brought $2.7 million in profits, the Securities and Exchange Commission announced. The SEC also obtained an assets freeze against the defendants, who are charged with trading on insider information concerning the merger of Beijing-based Global Education and Technology-Group, LTD, and Pearson plc, of the United Kingdom. A merger of the two education companies was announced in November. The SEC said the defendants bought American Depository shares of Global Education during the two weeks before the announcement, then dumped them after the merger was made known. A Chinese company, All You Know Holdings, has also been charged, along with defendants identified as Sha Chen, Song Li, Lili Wang and Zhi Yao, the SEC said.

 

New Zealand Officials Reveal $1.7 Bil Fraud

12/11/2011 12:55:07 PM

The Serious Fraud Office in New Zealand has filed charges against five people in what it described as a $1.7 billion fraud revolving around South Canterbury Finance, which went into receivership last August, The National Business Review reported. Details were slim, but the SFO said charges include theft, obtaining by deception, false accounting, and making false statements. NBR said the government has not yet named those charged. South Canterbury was largely owned by Allan Hubbard, 83, who died in a car accident in September. At the time, Hubbard was facing 50 fraud charges stemming from other business activities, NBR said. The new charges resulted from a 14-month-long investigation, the Review added.

Insider Trading Bill Is Stopped In Its Tracks

12/11/2011 12:52:07 PM

A bill that would make it illegal for members of Congress to conduct insider trading - the same law that already applies to the rest of America - was gaining steam, but has now been stopped cold in its tracks. Rep. Tim Waltz, of Minnesota, had found bipartisan support from about 200 other members for the STOCK Act (Stop Trading On Congressional Knowledge), but now faces an obstacle thrown up by Alabama Rep. Spencer Bachus, Minnesota Public Radio reported. Bachus, who chairs the House Financial Services Committee, had promised a hearing on the bill before it headed for a vote on the house floor. But he then issued a surprise press release, announcing the hearing was “indefinitely” postponed, MPR reported. The issue followed a recent report by “60 Minutes,” blowing the whistle on members of Congress who have used privileged information they gained on the job to make money by trading stocks. And it's currently legal, because of a loophole in securities laws. Bachus was among lawmakers mentioned in the “60 Minutes” report, MPR said.

 

Trustee Says Accountants Blew It In A Giant Ponzi

12/9/2011 10:48:07 AM

In Washington State, accounting firm Moss Adams has been sued for $150 million, on claims the firm failed to detect fraud that led to the collapse of a group of mortgage investment funds. Moss Adams had issued “negligent” audits of the Meridian funds, The Seattle Times said, overlooking a Ponzi scheme run by Frederick Darren Berg, founder of Meridian. The results, the newspaper said, included $280 million lost by 750 investors, and the collapse of the funds in 2010. Berg later pleaded guilty to using the funds as a Ponzi scheme that paid for a $45 million bus company, an $11 million island mansion, yachts, jets, and other toys. The lawsuit was filed by a bankruptcy trustee in the Meridian case. The accounting firm had no comment, The Times added.

 

Former Food Service Exec To Serve Three Years-Plus

12/9/2011 10:44:54 AM

A former marketing chief for Ahold NV, a Dutch food services company, has been sentenced in New York federal court to three years and 10 months in prison for engineering a scheme to grossly inflate financial results, thus enriching himself and others with whopping year-end bonuses, Bloomberg reported. Mark Kaiser pleaded guilty last August to securities fraud, admitting that he represented promotional rebates his company received as actual income. That pumped up the bottom line by $800 million from 2000 to 2003, resulting in “substantial year-end bonuses,” prosecutors alleged. Kaiser was originally convicted in 2010, but an appeals court threw out that conviction because improper evidence had been admitted in the trial, Bloomberg said.

Ernst & Young Is Sued For $900 Mil Over M-Vest Mess

12/9/2011 10:41:11 AM

Another massive lawsuit has been filed in the Bernard Madoff aftermath, this one against accounting firm Ernst & Young, Bloomberg reported. The $900 million legal action was filed in New York State Supreme Court by liquidators of M-Vest Ltd., a now-defunct feeder fund that channeled money into Madoff's investment company. Though wording of the lawsuit was lacking in details of the allegations against Ernst & Young, the action centers around the firm's audits of M-Vest's financial statements from the years 2003-2007, Bloomberg said. The news service said M-Vest was a Cayman Islands company established to funnel investments to Madoff, who is now serving 150 years in prison for operating a long-running Ponzi scheme.

Senator Calls For SEC To File Stanford Case Suit

12/9/2011 10:38:09 AM

A U.S. senator has called for the Securities and Exchange Commission to file suit against the Securities Investor Protection Corp., which he said has failed to take action on behalf of Allen Stanford's Ponzi scheme victims. Reuters said Sen. David Vitter, of Louisiana, asked for the legal action as a member of the Senate Banking Committee. The SEC has already sought action by the SIPC, which handles claims for investors when their brokerages have failed, but nothing has happened. The 61-year-old Stanford was arrested in 2009 for allegedly operating a scheme involving $7 billion in certificates of deposit sold through his bank in Antigua, Reuters said. He has yet to stand trial.

 

N.Y. Accountant Gets 5 Years For Pipeline Ponzi

12/9/2011 10:35:10 AM

A New York accountant is going to prison after admitting to stealing the better part of $2 million from a group of investors, Courthouse News reported. Laurence M. Brown, who had an accounting firm in Westchester County, N.Y., was accused of selling investments in a non-functioning gas pipeline, then using the money for personal expenses, prosecutors said. More than $136,000 was also used to make Ponzi payments to early investors, Courthouse News added. Brown, 64, had pleaded guilty in September and has now been sentenced in Manhattan to five years in federal prison, the news service said.

 

Rjaratnam Gone At Last To The Fed Lockup

12/8/2011 6:44:31 AM

There will be no million-dollar bail or house arrest in his Manhattan luxury condominium for Raj Rajaratnam, according to the
 Los Angeles Times. The once-powerful hedge fund trader and billionaire reported this week to a federal prison and medical facility west of Boston, where he will serve an 11-year sentence, The Times said. Rajaratnam, 54, was convicted on charges that he made more than $70 million by trading stocks with insider information for six years. He became the biggest fish pulled in by the FBI during an investigation that ultimately netted more than 24 convictions. After his conviction, Rajaratnam's lawyers tried a last-minute dodge, seeking bond for their client while he filed an appeal. That was rejected by a three-judge panel last week, The Times said.

B of A To Pay $315 Mil To Settle Investor Suit

12/8/2011 6:39:36 AM

Without admitting wrongdoing, Bank of America agreed to end a lawsuit by paying a $315 million settlement to investors who said they were duped into buying toxic mortgage-backed securities, even as the nation was sliding into the housing crisis in 2006 and 2007. Reuters said plaintiffs in the suit, led by a Mississippi public employees pension fund, said Merrill Lynch - now a unit of B of A - misled them about the risks of buying into 18 mortgage-backed securities offerings that crumbled. Damages to pensioners and other investors could total billions, the plaintiffs said. Charlotte, N.C.-based Bank of America had no comment on the settlement, Reuters said.

Former SEC Lawyer Loses Appeal In Pump-And-Dump

12/8/2011 6:35:33 AM

Phillip Windom Offill, a Texas lawyer and former veteran attorney at the Securities and Exchange Commission, has lost an appeal of his conviction for making millions in a pump-and-dump scheme, Reuters reported. Offill, who spent 15 years at the SEC, later entered private practice. He was convicted in early 2010 of conspiring to pump up the share price of penny stocks before dumping them on the public, Reuters said. He had appealed the conviction, saying a trial judge allowed improper testimony by expert witnesses. An appeals court has now rejected that logic, and Offill will resume serving his eight-year prison sentence, Reuters added.

Wall Street Trade Groups File A Suit Against CFTC

12/8/2011 6:31:51 AM

Two major Wall Street trade groups have gone to court to fight against a federal rule that attempts to prevent excessive risk in the trading of oil, gold, and other commodities. Reuters said the Swaps and Derivatives Association and the Financial Markets Association filed suit in Washington, D.C., to stop the U.S. Commodity Futures Trading Commission from using the rule, which Reuters described as “the biggest overhaul of U.S. financial regulations in decades.” The lawsuit is the first ever filed against a CFTC rule, and claims the agency's plan to limit positions in certain investments is unnecessary, and at worst, could “negatively impact commodity markets and users,” Reuters said.

Obama Issuing Call For Tighter Wall Street Reins

12/8/2011 6:28:46 AM

Maybe it was political posturing, maybe not, but Barack Obama has sided with New York federal Judge Jed Rakoff in calling for tougher punishment when investors lose millions because of chicanery by big banks and investment firms. Housing Wire reported that during a speech in Kansas, the U.S. president hearkened up the case of Citigroup, which federal regulators want to fine a mere $285 million for duping investors who bought into a collateralized mortgage debt package that ultimately collapsed. Investors lost $700 million in the deal, while Citigroup, which short-sold its own investment, made $160 million. Rakoff, the federal judge handing the case, rebuffed the settlement and ordered that Citigroup stand trial for fraud. Now Obama has promised to call for tougher enforcement of current laws in securities fraud cases. “I'll be calling for legislation that makes these penalties count,” Housing Wire quoted him as saying.

 

Newspapers: Feds Probe 3 More Investment Firms

12/7/2011 10:26:10 AM

So far, many federal insider trading investigations have involved hedge funds, while the more highly-regulated, ordinary mutual funds largely seem to have gotten a pass. That may now be changing, with talk that Neuberger Berman Group is under investigation, InvestmentNews said. The newspaper cited anonymous sources in confirming a previous Wall Street Journal report that the FBI and Preet Bharara, the U.S. attorney for Manhattan, are conducting insider trading investigations involving people at Neuberger, Level Global Investors LP, and Diamondback Capital Management LLC. The companies acted dumb on the issue when contacted by InvestmentNews, nor would the FBI or Bharara's office comment - a standard response in federal investigations, until charges are issued. Since 2009, the newspaper said, at least 56 people have been charged with New York-related insider trading, and 50 have been convicted or pleaded guilty.

 

New SEC Program Seeking Enforcement 'Holy Grail'

12/7/2011 10:23:08 AM

Federal regulators are beginning to take a closer look at hedge funds, in efforts to detect fraudulent activities long before investors start complaining of ripoffs. The Securities and Exchange Commission has announced a new program called the “Aberrational Performance Inquiry,” under which the agency examines reported hedge fund returns and other claims. Areas subject to investigation include valuations of portfolio holdings, possible misuse of fund assets, and other things such as performance, assets, liquidity, investment strategy, and conflicts of interest. Several actions have already been filed against funds and their managers or directors because of the program. Said Robert Khuzami, the SEC's enforcement director: “We're using risk analytics and unconventional methods to help achieve the holy grail of securities law enforcement - early detection and prevention.”

Beware Of Texting Scams During The Holiday Season

12/7/2011 10:20:16 AM

There's a text-messaging scam going on in Oklahoma that could likely spread nationally, according to KFOR-TV in Oklahoma City. The TV station reported numerous cases of people receiving text messages, informing them their banking or credit cards have been canceled, and giving them a telephone number to call and straighten out the problem. When they do so, consumers are asked for their credit or debit card numbers. Don't fall for it, officials say. No one yet knows what the scam artists are up to, but it clearly isn't good, said a spokeswoman at the Oklahoma Bankers Association. “This is the holiday season. It brings out the best in people and the worst in people. I'd hate to see anyone fall victim to a scam like this,” KFOR quoted her as saying.

'Robin Hood' Lived It Up On Investors' Two Million

12/7/2011 10:17:21 AM

In Australia, an unlicensed financial planner who called himself “Robin Hood” has admitted to cheating investors out of nearly $2 million over a six-year period. Simon Finnigan pleaded guilty in court to running a Ponzi scheme, The Sydney
Morning Herald reported. Finnigan told investors in his Financial Partners Pty Ltd they were pouring money into derivatives and property investments, when in reality he was using their cash to travel overseas, pay extravagant credit card bills, live in a luxury apartment, and make Ponzi-style payments to early investors, the newspaper reported. Those returns of 15 percent that he promised turned out to be pipe dreams, and he will be sentenced later this month, the Morning Herald said.

 

CFTC Brings Legal Action Against Miss. Father-Son

12/7/2011 10:13:35 AM

An enforcement action has been filed against a father-son team in Mississippi, charging they lied to investors and took undisclosed risks that lost $5.6 million through option spread trades. The U.S. Commodity Futures Trading Commission said Meridian, Miss. resident Gary Futch and his son, Bradley A. Futch, gathered investments for their Tradewind Investments LLC from family, friends, and acquaintances. They are charged with fraudulently claiming that Tradewind's investments would always have protective positions, that only 25 percent of any given investment would be at risk, and that the company's strategy would prevent margin calls. That all proved false during a volatile market day on Oct. 10, 2008, and the whole $5.6 million was wiped out, the CFTC said. The agency is now seeking disgorgement of ill-gotten gains, restitution for customers, civil fines, and permanent trading bans against father and son.

 

Two Rothstein Associates Facing Charges In Scheme

12/6/2011 7:31:32 AM

Two more former employees of Scott Rothstein's now-defunct, South Florida law firm face charges connected to his $1.2 billion Ponzi scheme, the American Bar Association Journal said. Rothstein is in prison for 50 years after being convicted of selling shares in settlements of non-existent lawsuits to investors in the firm of Rothstein Rosenfeldt Adler. Now, federal officials have also charged sixty-six-year-old William Boockvor, a bookkeeper, and Marybeth Feiss, 42, Rothstein's former assistant, the ABA Journal reported. Boockvor is accused of preparing phony bank documents that Rothstein used to pitch his investments to clients. Feiss is charged with misrepresenting political donations made by the law firm that beefed up its influence, the Journal said. Both face possible five-year prison sentences, and others are also expected to come under indictment, the Journal said. The law firm is now mired in bankruptcy.

Feds Charge That Manager Pumped Up Assets Of Fund

12/6/2011 7:28:18 AM

Michael Balboa, a British citizen who once ran a hedge fund, as been arrested in New York on charges that he mislead investors by inflating the value of the fund, Courthouse News said. Balboa, 42, managed the Millennium Global Emerging Credit Fund from 2006 until it closed in 2008, prosecutors charge. He allegedly convinced two brokers to provide fraudulent quotes for some of the fund's holdings to its auditor and valuation agent, causing the fund's net asset value and monthly returns to appear higher, Courthouse News said. Balboa also faces a civil action by the Securities and Exchange Commission, in addition to criminal charges of conspiracy and wire fraud. The alleged crimes carry total maximum penalties of 45 years in prison, Courthouse News said.

 

U.K. Judge Orders Assets Freeze For Madoff Buddy

12/6/2011 7:25:30 AM

When Sonja Kohn met Bernard Madoff in the 1980s, money began rolling into her bank accounts. As the chairwoman of the European Bank Medici AG at the time, Bloomberg said, Kohn billed Madoff for research and consulting services, but actually only provided high-dollar investors for the elaborate Ponzi scheme that eventually sent Madoff to prison for 150 years. Now, a trustee in the bankruptcy of Madoff's company wants some of that money back, to distribute to Madoff's victims. And in the United Kingdom, a judge has agreed that Kohn's payments were nothing more than “secret kickbacks,” Bloomberg said. Accordingly, Judge Julian Flaux has ordered that Kohn's assets be frozen. Flaux said evidence shows that Kohn made more than $56 million by funneling investors to Madoff, Bloomberg added.

Petters Employees To Pay $8.5 Mil For 'Clawbacks'

12/6/2011 7:21:27 AM

Thirty past associates of convicted Minnesota con man Tom Petters will be paying $8.5 million to settle clawback suits filed after his $3.65 billion Ponzi scheme fell apart, Twin Cities Business reported. The agreed payments came from a mediation process seeking assets to repay money lost when investors bought into a wholesale electronics business whose products never existed. The payments are only about a third of $22.8 million sought by the trustee appointed to sort through the mess Petters left on his way to 50 years in prison, the newspaper said. All told, clawback suits have been filed against 56 former Petters employees. Other settlements are anticipated in the near future, Twin Cities Business said.

Action Stalls In Alleged California Investor Scam

12/6/2011 7:18:01 AM

Little appears to be happening in the case of Medical Capital Holdings, a Tustin, Calif. company that was sued more than two years ago by the Securities and Exchange Commission for its alleged involvement in an $800 million Ponzi scheme, according to the Orange County Weekly. The newspaper said the company and two directors, Sidney Field and Joey Lampariello, were alleged to have scammed 20,000 investors by using their cash for inappropriate purposes. The SEC filed suit in 2009 after MCH loaned millions to another firm, which owned several hospitals, the Weekly said. MCH was also accused of spending wads of cash on a yacht for its directors, and made other dubious investments. Now, the Weekly reports, a receiver appointed by a federal judge to recover and distribute assets to the bilked shareholders has come up with only $100 million. So far, no criminal charges have been filed against Field, while Lampariello only faces misdemeanor tax evasion charges, the newspaper added.

 

Investment Solicitations Put Man Back In Slammer

12/4/2011 4:24:17 PM

Sometimes, one warning isn't enough. In September, Minnesota consultant Dennis Desender was released on $200,000 bond, after pleading guilty in a $60 million securities fraud involving Bixby Energy. Now he's back in jail, charged with violating a federal court order to stop soliciting money from investors before he is sentenced in the Bixby case, The Star Tribune said. Desender, 64, and Gary Collyard, 62, are accused of soliciting investors for Dana's Desserts, a small company that sells cheesecakes to non-profit organizations for use in fund-raising efforts, the newspaper said. After The Star Tribune reported on Desender's newest entrepreneurial efforts, he was immediately picked up again and put in the pokey without bail, pending a hearing. The newspaper also found another businessman who reported being solicited by Desender and Collyard to help him raise $1 million to buy an athletic shoe company. He said Desender asked for $15,000 and 20 percent of any investments he raised. “It felt like a hustle,” the man told the newspaper.

Vacation Home Company Is Being Probed In Colorado

12/4/2011 4:20:47 PM

Although no criminal charges have been filed, Colorado officials confirm they are investigating why millions of dollars were apparently lost by investors in a vacation homes operation that collapsed, the Gazette Telegraph reported in Colorado Springs. The newspaper said huge amounts - including initial investments as high as $425,000 - were poured by investors into Continental Resort Homes LLC, run by Brian Melchior Wellens. The Colorado Division of Securities said investors were also charged $30,000 annual fees, to help buy and maintain vacation homes where they could stay for free, the newspaper said. But Wellens has filed bankruptcy and listed $36.4 million in liabilities owed to 76 creditors, The Gazette reported. His lawyers are now in court, trying to quash a subpoena issued by state regulators, the newspaper added.

 

Jail Time Is Reduced For Former Nat. Century Exec

12/4/2011 4:18:07 PM

A former health care executive who was previously sentenced to five years has now been re-sentenced in Columbus, Ohio, to four years, the Associated Press said. A federal appeals court had overturned a money-laundering conviction for James Dierker, 43, previously handed down in the $1.9 billion fraud case of National Century Financial Enterprises, the AP explained. That led to the shorter sentence for conspiracy and wire fraud. Dierker had been vice president for corporate development at National Century, which sold bonds that were backed by worthless, uncollected hospital and medical clinic billings. When the company collapsed in 2002, that spurred the bankruptcies of 275 clinics and hospitals, and left investment companies holding the bag for millions. Lance Poulsen, National Century's CEO, was sentenced to 30 years in prison.

 

Ex-Lawyer Gets 6 Months For Insider Trading Role

12/4/2011 4:15:05 PM

As a young New York lawyer, Brien Santarlas once ventured into deep Wall Street waters. Now, the former Ropes & Gray attorney is going to prison for six months, for feeding trading tips to the sharks with whom he liked to swim. 
Crain's New York Business said Santarlas, 33, has been sentenced in Manhattan federal court after pleading guilty to passing along insider trading tips. It all became part of the FBI's massive insider case that resulted in more than 24 convictions, the newspaper said. Santarlas admitted to receiving $25,000 from his first tip alone. His light sentenced was earned in part by testifying against three traders who have already been convicted.

 

'Green Energy' Firm Puts Green In Owner's Hands

12/4/2011 4:11:51 PM

New Jersey resident Michael D. Kelly has been charged by state regulators with selling unregistered shares in a “green energy” company, then ripping off a huge chunk of the money he raised from investors, The Star-Ledger reported. The New Jersey Bureau of Securities charges that from 2007-2009, Kelly raised $576,000 by selling shares in ForeverGreen Enterprises, Inc., promising to invent ways to create new energy sources out of medical, chemical, and industrial waste. But regulators have charged him with mostly inventing ways to spend investors' money on himself and family members, The Star-Ledger said. He is also charged with lying about his company's high rate of return and its plans to go public, as well as failing to register his shares, and with refusing to buy back shares from unhappy customers as allegedly promised, the newspaper added.

Actor-Producer Pleads In Illegal Trading Case

12/2/2011 8:09:06 AM

Actor and film producer John Bennett has pleaded guilty in New York federal court to illegally making more than $1 million by using insider information when he traded shares of pharmaceutical stocks, Bloomberg said. Bennett told a federal judge that in 2008 and 2009, he had gotten information from Scott Allen, a former financial adviser, on the pending takeovers of two pharmaceutical firms and used the tips in his stock trades. Allen has already been indicted, and his case is pending, Bloomberg said. Bennett is best known as an actor in the movies, “Presumed Innocent” and “Last Exit to Brooklyn,” and produced a 2010 movie called “Playback,” the news service said.

Ga. Ponzi Gets Jail Time For Boss And His Helper

12/2/2011 8:05:42 AM

A Georgia man and woman who pulled off a Ponzi scheme by promising investors returns as high as 15 percent are going to prison, The Atlanta Journal-Constitution reported. The newspaper said Geoffrey Gish, 57, a financial adviser, and Myra Ettenborough, 56, his office manager, have been sentenced in federal court to 20 and seven years, respectfully. The pair took $29 million from victims for pooled fund investments managed by Gish's Weston Rutledge Financial Services Inc., the newspaper said, paying out $11 million in Ponzi payments and scamming the other $18 million. The scheme ran from 2004-2006 and the two kept on going, even after being warned that their actions were illegal, The Journal-Constitution said.

Stanford Still Not Well For Trial, Lawyer Says

12/2/2011 8:00:04 AM

Jailed investments whiz Allen Stanford remains in jail, but has yet to be arraigned on revised charges and remains incompetent to stand trial, CNBC has quoted his lawyer as saying. Stanford has been jailed on charges that he ran a $7 billion Ponzi scheme by using phony certificates of deposit at his Caribbean-based bank. But after being beaten by another inmate in 2009 and then spending months on prescription drugs in a medical facility, the 61-year-old is still reportedly unable to stand trial. When he will be well enough to faces justice “remains uncertain,” CNBC said.

 

Ex Gunns Ltd. Chairman Gets Inside Trade Charge

12/2/2011 7:47:54 AM

The former chairman of an Australian timber company has been charged with dumping 3.4 million shares of the firm's stock just weeks before news of a profit slump sent its share price into the tank. John Gay, 68, made the sales in December of 2009, The Age newspaper said. Two months later, Gunns Limited announced a 98 percent profit slump, and the company's stock fell by 20 percent, the newspaper said. Gay later left the company, but he couldn't shake the Australian Securities and Investments Commission, which has charged him with insider trading, The Age said.

Rajaratnam Loses Bid To Remain At Home On Bond

12/2/2011 7:41:21 AM

Raj Rajaratnam, the multi-millionaire hedge fund founder convicted of insider trading, will be reporting to federal prison next Monday, The New York Times reported. The 54-year-old Rajaratnam was sentenced following a high-profile trial to 11 years, after being convicted of making $72 million-plus in the stock market by trading on inside information. But The Times said his lawyers had tried a last-ditch request that he be allowed to stay out on bond as his appeal is heard. A three-judge panel shot that down this week, expressing fears that the native of Sri Lanka would be a flight risk. After a hearing over the matter, The Times quoted one of the judges as wondering: “Wouldn't he rather be living as a centimillionaire in his own country, rather than as a convict in jail?”

Reinsurance Scam Folds; CPA Admits To His Fraud

12/1/2011 7:17:50 AM

A Certified Public Accountant has pleaded guilty in Washington, D.C. to charges that he falsely claimed to have audited the financial statements of a sham insurance company that sold $670 million in “financial guarantee bonds” to investors worldwide. The FBI said accountant Jorge Luis Castillo, 56, also wrote a letter of verification claiming that Provident Capital Indemnity Ltd. had contracts with major reinsurance companies, lowering the risk of investing in the bonds. Buyers believed the bonds - which were essentially worthless - would cover their risk in life settlement contract investments, even if the insured persons lived beyond their life expectancies, the FBI said. Castillo will be sentenced in May on charges of conspiracy to commit wire and mail fraud, and could get 20 years. Minor Vargas Calvo, 60, the president of PCI, also faces numerous charges and is scheduled for trial in February, the FBI said.

 

Luxurious Ride Ends For Former S.C. Johnson Exec

12/1/2011 7:13:19 AM

Milton E. Morris, the former transportation director of S.C. Johnson & Son, Inc., is going to prison for eight years and one month after admitting that he cheated the company out of $20 million, all the while living a life of luxury from his fraud. The Milwaukee Journal Sentinel said that in 1999, Morris led Johnson - the maker of Pledge, Glade, and Windex, among other products - in a plan to ship its products by intermodal transportation. But he and his accomplices actually set up shell companies that got hired for transporting products, while contracting out the shipments to other firms, the Journal Sentinel said. Along the way, Morris was also taking bribes and kickbacks from other vendors - raking in goodies that included cash, golf and gambling trips, meals, jewelry, and clothing, the newspaper said. The ride had to end, and that happened when Morris pleaded guilty to seven criminal allegations in 2008. He had already been fired from S.C. Johnson in 2004, the newspaper said.

 

Penny Stock Ban Grows Out Of Guyana Gold Scam

12/1/2011 7:08:06 AM

Without denying or admitting wrongdoing, New York resident Glenn Grossman is being slapped with a penny stock ban after allegedly offering kickback bribes to a broker's representative who turned out to be an FBI agent, Stockwatch reported. Grossman agreed to an out-of-court settlement with the Securities and Exchange Commission on the charges, Stockwatch said. He was accused of offering a 30 percent kickback to the undercover agent posing as a broker's rep, who promised to peddle up to $3 million worth of shares in Guyana Gold to corrupt brokers. They, in turn, would funnel the deals through discretionary accounts of wealthy investors, Stockwatch said. Another man, Vancouver stock promoter John Zanic, is already serving a one-year criminal sentence in relation to the case. Grossman also agreed to an injunction barring him from committing future trading violations, Stockwatch added.

 

Regulators Accuse Pair Of Long-Running Forgery

12/1/2011 7:03:46 AM

Canadian regulators are alleging that two financial advisers in Toronto - who reportedly managed more than 2000 investment accounts worth $500 million - forged client signatures on hundreds of critical documents for a decade. The Globe and Mail said Mark Steven Rotstein and Jessica Elizabeth Zackheim are believed to have routinely forged client signatures on a wide range of documents, while working at RBC Dominion Securities Inc., in Toronto. Those documents included transfer and trading authorizations, account agreements, risk disclosure forms, an equity credit line agreement, and a trust declaration for a minor, the newspaper said. There was no mention of financial fraud, but Canada's Investment Industry Regulatory Organization announced that the two advisers “failed to observe high standards of ethics and conduct in their business,” the Globe and Mail reported. An April hearing is scheduled in the case, which could grow to include forgeries on 500 documents, the newspaper added.

Last Man Pleads Guilty In St. Louis Fraud Case

12/1/2011 7:00:03 AM

A third man involved in stealing money from a retiree in the St. Louis area has pleaded guilty and awaits sentencing, the FBI said. Matthew Kent, a co-owner in Coral Mortgage Banker's Corp., admitted to a scheme he ran with two other men from 2007-2010, when they took $1.2 million from an investor, promising the money would not be spent, but would only be used as collateral to help fund Coral's operations. But federal agents said the three actually blew the money on home renovations, credit card bills, adult entertainment, and their own salaries. By late 2010, it was all gone, the FBI said. Kent now faces a possible 20 years in prison. The second man, Joshua Gould, has already pleaded guilty and was sentenced to 97 months in prison. A third, David Rubin, also copped a plea and is set for sentencing in January. Kent will be sentenced the following month, the FBI said.

Fed Judge Says 'No Way' To SEC-Citigroup Deal

11/30/2011 6:27:58 AM

If the small investor has one champion in the justice system, it has to be U.S. District Judge Jed Rakoff of New York. CNN reported the outspoken judge has now solidified his reputation as the Securities and Exchange Commission's worst nightmare by rejecting a $285 million settlement between the SEC and Citigroup, which profited by $160 million and cost investors $700 million in losses through a sleight-of-hand, 2007 mortgage collateralized debt obligation deal. Citigroup, we now know, profited by loading its own investment package with bad debts, and then short-selling it. Fraud, pure and simple, Rakoff indicated in his ruling. CNN said Rakoff lambasted the SEC and Citigroup, after the bank agreed to pay the settlement without even admitting or denying blame for the deal. No way, the judge said, adding, “there is an overriding public interest in knowing the truth.” Citigroup will now face trial on the fraud allegations in July 2012, Rakoff ordered. After the ruling, the SEC defended its position. Citigroup declined comment, CNN said.

$80 Mil N.J. Ponzi Brings 16 Years In Jail

11/30/2011 6:24:18 AM

Charles Schwartz, the former owner of a New Jersey medical equipment leasing company, is going to federal prison for 16 years after pleading guilty to cheating banks out of $80 million in a Ponzi scheme that ran for nearly a decade. The
 Star-Ledger said Schwartz was sentenced in Newark for cheating 74 financial institutions, whose officers thought they were financing equipment purchases for Schwartz's Allied Health Care Services, Inc. But Allied was actually paying a phony supplier kickbacks to provide receipts for the equipment, which actually never existed, the Star-Ledger said. Schwartz then used part of his profits to repay bank loans. He also used the money to buy millions of dollars worth of property, prosecutors said. At sentencing, U.S. District Judge Susan Wigenton told Schwartz that his crime was “equally as heinous” as kidnapping or involuntary manslaughter, which carry punishments as stiff as the one she gave him, The Star-Ledger said. Schwartz will be 74 when his prison term ends.

Victims Say D.C. Adviser Took All They Invested

11/30/2011 6:20:02 AM

Federal investigators are looking for Garfield Taylor, a Washington, D.C. financial adviser accused of defrauding clients who thought their money was going into low-risk ventures but was actually disappearing, according to Fox News. Taylor is accused of running a Ponzi scheme and misusing money put into his Gibraltar Asset Management by victims in locations ranging from D.C. and Massachusetts, to Pennsylvania and Virginia, Fox News said. One institutional victim, a Washington-based, non-profit children's center, allegedly lost $8 million to Taylor, the news channel said. “We find it hard to believe that he spent every dollar that came his way,” Fox News quoted one lawyer representing Taylor's victims as saying. “He's been difficult to locate. No question.”

New Hampshire Firm Was Just A Ponzi, SEC Alleges

11/30/2011 6:16:54 AM

The Securities and Exchange Commission has filed suit against a Canadian businessman who is charged with running a New Hampshire internet trading operation, which regulators said is a Ponzi scheme, the New Hampshire Business Review reported. Regulators say Henry Roche cheated 14 investors from nine states out of $1.3 million when they poured money into New Futures Trading International Corp., allegedly selling them promissory notes and promising returns up to 10 percent monthly. The federal suit was filed in Concord, and alleges that much of the money pulled in by New Futures was used to pay victims of other Roche schemes, while another $359,000 was used to support Majestic Horses, an Ontario breeding farm owned by Roche. A federal judge also issued a restraining order freezing assets owned by Roche and New Futures, the Business Review added.

 

Ala. Title Pawn Broker Faces Multiple Charges

11/30/2011 6:13:06 AM

Alabama securities regulators have caught up with Harry H. “Woody” Duncan, a former title pawn business owner who was indicted on multiple counts of fraud and other charges in October. Duncan, of Huntsville, was arrested in Madison County, The Birmingham News reported, and ordered held under $1.8 million bond. The Alabama Securities Commission alleges that between 2003-2008, Duncan sold unregistered promissory notes to investors in the name of Title Lenders, a company he formerly owned. The News said he now faces 50 counts including fraud, theft by deception, and selling unregistered securities. Other news sources said Duncan has claimed in court filings that he was not required to register the securities, and that state officials misinterpreted the law when he was indicted.

A Thirst For Money Gets Costly For Entrepreneurs

11/29/2011 7:32:48 AM

Two young entrepreneurs in the Minneapolis area are facing possible federal prison time after their rush to success got tangled up by lies and scheming. Ryan Daryl Krutzig, 31, and Jesse Scott Hoffman, 32, have both pleaded guilty to a real estate fraud of almost $2 million that involved 28 properties, said the U.S. Attorney's Office in Minnesota. Krutzig was owner of
U.S. Appraisal Management and Hoffman sold real estate for Stellar Realty. Both have admitted to either pumping up appraisals, failing to mention their ownership of properties involved, taking commissions for false transactions, or otherwise misleading lenders in real estate deals. Hoffman could go to prison for 20 years and Krutzig could get a five-year sentence, prosecutors said. Two other accomplices, both also in their early 30s, have already been sentenced to 24 months and 40 months, the government said.

 

Broker Arrested For N.Y. Acquisition Scam Charge

11/29/2011 7:29:24 AM

Former stock broker Daniel Gallagher, of New York state, has been arrested in Boca Raton, Fla., on charges that he participated in a scheme to defraud investors, federal officials said. The U.S. Attorney's Office for the Eastern District of New York said Gallagher had been a broker and part owner of Vision Securities in Port Washington, N.Y. when he solicited investors for Nano Acquisition Group, a company formed to acquire assets of another firm that went bankrupt. Clients were told they'd get their money back if the new company failed to raise at least $1 million, prosecutors charge. But allegedly, the money wasn't raised, no assets were acquired, and nobody got repaid. Gallagher is charged with wire fraud and could get a maximum sentence of 20 years behind bars.

Bookkeeper: 'Boss Used Me' In $74 Million Ponzi Scheme

11/29/2011 7:26:02 AM

A former bookkeeper who assisted her boss while he ran a $74 million Ponzi scheme for years has now agreed to testify against him at his trial, Canadianbusiness.com said. Martha Runkle is expected to take the stand when Doug Vaughan faces a 30-count indictment at trial next May in Albuquerque, N.M., the publication said. Through the years, Vaughan's alleged scheme grew to include more than 600 victims scattered across seven states, prosecutors say. The victims thought they were making loans at high interest rates to buy real estate through Vaughan's firm, Vaughan Company Realtors. But allegedly, no property was bought, and Vaughan used Runkle to help carry out the scam. “She was pushed and pushed by this guy,” Runkle's lawyer was quoted as saying. “He didn't care about her, but was just trying anything to keep his scheme from collapsing.”

 

If You Fail Once, Then Just Continue To Scheme

11/29/2011 7:22:01 AM

You can't keep a dedicated con man down. Knoxville, Tenn. resident John Edward Hankins has been sentenced in Atlanta to three years in prison for an investment scam he cooked up at home while under house arrest for a previous investment fraud, the Associated Press reported. Federal prosecutors said Hankins, 38, dreamed up the new scheme in 2009-2010, while finishing a prior sentence he got for an $8 million securities fraud he ran through Tenent Asset Management in 2007. In the new scam, he dreamed up a non-existent hedge fund called Christian Financial Brotherhood, claiming to have more than $100 million already under management, the AP reported. He then ran Internet ads, soliciting investors, and seeking financial advisers and stock brokers to handle sales. Before being caught, Hankins had also created a Web site and designed phony brochures and other documents, prosecutors said. The AP added that more than $200,000 has been recovered and returned to victims.

Forex Fraud Results In A $2.6 Mil Fine, Trade Ban

11/29/2011 7:18:05 AM

A Wisconsin man and two of his companies will be coughing up a lot of money after being nailed with an anti-fraud enforcement action, the Commodity Futures Trading Commission announced. The commission obtained an order through U.S. District Court in Wisconsin, charging that Jacob Juma Omukwe ran a multi-million dollar foreign currency trading scam through a Web site, fraudulently soliciting and then misappropriating more than $3.2 million pumped in by investors. The consent order requires that Omukwe and the companies, JadeFX LTD and Jade Investments Group, LLC, pay more than $2.6 million in restitution and civil fines. The order also permanently bans them from ever again carrying out commodities-related trading, the CFTC said. The scam had operated from Wisconsin Dells, Wis., the agency added.

 

Botfly LLC Scammer Is Sentenced In Fla. Ponzi

11/28/2011 7:09:50 AM

Floridian David Lewalski, whose Ponzi scheme afforded him a luxurious lifestyle, has been sentenced to 20 years in prison and will also make $19 million in restitution to victims of the Botfly LLC scam, the Florida Attorney General's Office said. Lewalski stole millions from more than 500 Floridians, who thought they were investing in foreign exchange currency trades. In reality, Florida Attorney General Pam Bondi said, Lewalski made Ponzi payments to early investors and used profits to pay for a Ducati motorcycle, multiple luxury cars, clothes, jewelry, and jet charters. The AG's office also sued Lewalski, seizing nearly $5 million in assets and resulting in the $19 million restitution settlement, Bondi said.

 

Madoff Associate Facing Possible 85 Years In Jail

11/28/2011 7:06:06 AM

The Bernard Madoff story continues: In Manhattan federal court, a 66-year-old former senior trader for the con man's investment firm has pleaded guilty and admitted he was engaged in shady dealings for Madoff as far back as the early 1970s, Bloomberg reported. The news service said David Kugel admitted he had also given historical information to a pair of other Madoff employees, and they used the tips to create phony, backdated, arbitrage trades. The two, Joann Crupi and Annette Bongiorno, have already been charged with securities fraud. Kugel pleaded guilty to six criminal counts and faces a maximum of 85 years in prison and fines of more than $11 million, Bloomberg said. He remains free on a $3 million bond pending sentencing.

Hedge Fund Crook Gets Time For $18 Mil Scam

11/28/2011 7:02:41 AM

A New Jersey resident who pleaded guilty has been sentenced to five years and three months in prison for stealing at least $18 million from 70 investors by using fake hedge funds,Bloomberg reported. William Shternfeld, 39, was sentenced for stealing from investors - many of them elderly - who believed their money was going into oil, gas, and real estate ventures, federal prosecutors said. Shternfeld and a partner, Benjamin Koifman 40, were actually sending much of the $18 million from their fraud to the Ukraine and other parts of the former Soviet Union, officials said. That money is not expected to be recovered. “In some cases, the defendants wiped out the victims' entire retirement savings,” Bloomberg quoted Manhattan U.S. Attorney Preet Bharara as saying. Koifman had already been sentenced to five years and three months, Bloomberg added.

Indiana Adviser To Serve Six Years In Client Scams

11/28/2011 6:59:00 AM

An Indianapolis judge is packing former financial adviser Randell Morrison off to jail for six years, after he bilked 15 older investors out of $1.4 million they had saved for retirement, according to the Indiana Secretary of State's Office. Morrison, 55, admitted to using using social and religious connections to find his victims, who cashed in IRAs, insurance proceeds, and other assets, turning the money over to him. Prosecutors in Allen County Superior Court said clients believed Morrison was putting their money into conservative investments, while he actually placed the cash in self-directed IRAs, then got control of the accounts and pilfered them for “his own personal businesses and lavish living expenses.” After serving six years in prison, he will do another year of home detention, the state added.

Marketing Firm Is Under Fire From Several States

11/28/2011 6:55:30 AM

Depending on which Internet page you click for Fortune High-Tech Marketing, you'll either read that the company is a fantastic employment opportunity, or an outright pyramid scheme that charges high fees to its members, persuades them to buy overpriced products, and requires them to recruit other new members before they make any money. Now, the Kentucky-based company has run afoul of regulators in several states, accused of ripping off employees who thought they were launching home-based businesses. Critics say Fortune requires its commissioned-based affiliates to buy products ranging from satellite dishes and roadside assistance plans, to vitamins and cell phones. In San Antonio, KSAT-TV reported that one local woman lost at least $60,000 and lured others into the scheme before realizing she had allegedly been scammed. Fortune agreed to repay its Texas customers $1.3 million and settle with the state Attorney General for another $200,000, KSAT said. Montana charged the company $1.8 million in fines and reimbursement, and North Dakota issued a cease and desist order against Fortune, according to other news reports. Bottom line: Check it out before writing the check.

Hedge Fund Manager Gets 2 Decades In $30 Mil Scam

11/23/2011 8:50:36 AM

Former hedge fund director Philip Baker is packing off to prison for 20 years and will pay restitution of $155 million for wire fraud, Reuters said. Baker, 46, a Canadian citizen, was sentenced in Chicago federal court after admitting he solicited $294 million from 900 clients around the world, Reuters said. The money was raised to trade commodities futures, but Baker, as a director of hedge fund Lake Shore Asset Management Ltd., misappropriated $30 million for himself and another fund director, Reuters said. And even as he was covering up millions in trading losses, Baker solicited new investors by advertising impossibly high returns up to 55 percent, according to prosecutors. In addition to the restitution Baker must pay, a trustee has already returned $120 million to his investors, Reuters added.

Ex-Day Trader To Serve 70 Months For Pilfering

11/23/2011 8:47:11 AM

Earlier in this decade, Clarence Allen Rice must have considered himself a pretty hot day trader. Now he's going to federal prison for 70 months after stealing millions to finance that habit, the FBI said in Des Moines, Iowa. Rice, the owner of C&J Leasing, lost so much money in the market that he began pilfering a partner company, Frontier Leasing Corp., to cover the dissipated funds, prosecutors said. From that point on, apparently, there was no turning back, and the FBI said that between 2003-2006, the looting continued until millions were gone. The result: Frontier was driven into the ground and 20 employees lost their livelihoods. Rice has now been sentenced on wire fraud charges, the FBI said.

Light-Fingered Adviser Admits $8.7 Mil Ripoff

11/23/2011 8:44:02 AM

In New York City, William Landberg once ran a flourishing boutique advisory firm that invested on behalf of rich individuals and cash-fat institutional clients, according to Courthouse News. Now, he has admitted that as CEO of West End Financial Advisors LLC, he was raking off client money from one of his investment funds, known as the “Hard Money Fund.” In pleading guilty, the news service said the 59-year-old Landberg agreed to repay $8.7 million he stole from the fund. When sentenced in March, he faces a maximum prison term of 20 years, Courthouse News added.

$29.5 Million Gold Scam Earns 151 Months In Jail

11/23/2011 8:40:53 AM

Jamie Campany, the owner of several so-called “precious metals” firms in Florida, is going to prison for a long time after he pleaded guilty to taking nearly $30 million from investors and never purchasing the gold he promised them. The Palm Beach Post said Campany had lured 1,400 victims through advertising, promising to secure investments for them in gold, silver, and other metals. He took part of their investments up front and claimed to have the rest of the cost financed, all the while charging high interest rates to customers. But Campany, 48, pleaded guilty last August, admitting that he never purchased the goods, The Post said. He has now been sentenced to 151 months in prison for mail and wire fraud, the newspaper added.

Okla. Ponzi Returned 2 Cents On The Dollar

11/23/2011 8:35:54 AM

Investors who spent more than $6 million to finance a chain of payday loan stores in Oklahoma will end up recouping about two cents on each dollar they spent in what turned out to be a Ponzi scheme, The Oklahoman reported. The perpetrator, 47-year-old Brian McKye, has pleaded guilty to securities fraud and conspiracy in Oklahoma City federal court and faces a possible 20 years in prison, the newspaper said. But a receiver in the case told The Oklahoman that investors who financed seven payday loan stores through McKye's Global West Financial LLC are out of luck. An investigation into of the now-dead business showed the loan stores actually lost up to $100,000 per month, The Oklahoman said. The newspaper quoted one disgruntled investor's take on the situation: “Two cents on the dollar is a slap in the face.”

Doctor-Fund Manager To Serve Time, Pay $10 Mil

11/21/2011 5:48:26 PM

An Ivy League-trained doctor and hedge fund manager is going to jail for five years and must pay $10 million-plus in restitution and forfeitures after using insider trading tips to dodge $30 million worth of investment losses, the Associated Press reported. Joseph “Chip” Skowron III, who earned two doctorates from Yale University and did his medical residency at Harvard, was sentenced in New York federal court for trading on tips he received from a French doctor he had repeatedly showered with cash, the AP said. Skowron avoided losses for his hedge fund by dumping shares in Human Genome Science before one of the company's hepatitis treatment drugs flopped in medical trials, prosecutors said. At sentencing, Skowron mournfully admitted to disappointing his wife. “I am not what she expected when she married a young doctor 15 years ago,” the AP quoted him as saying. U.S. Attorney Preet Bharara, meanwhile, said Skowron “took a corrupt path to protect his hedge fund,” the AP reported. The French doctor, Yves Benhamou, pleaded guilty and will be sentenced next month, the wire service said.

 

Finally, A Pittance For McGinn Smith Investors

11/21/2011 5:44:08 PM

Many months after Albany, N.Y. brokerage and investment firm McGinn Smith & Co. filed bankruptcy, there's finally about $8.2 million to be passed out among investors who got burned, the Albany Business Review said. For years, firm principals Timothy McGinn and David Smith swam in the deepest social waters of New York state, cultivating clients, jetting off to play golf in Ireland and Palm Springs, and even hiring strippers to go on a sexually-themed cruise, according to press reports. But eventually, the firm's clients - many of them retired and elderly - learned they had been cheated, and had lost a collective $84 million, the Business Review said. When the firm folded, its primary investment fund held less than $500,000. Now, a receiver has told the Business Review that about $8.2 million has been scraped together to be passed out to clients. The money comes from lawsuit settlements, McGinn business associates, and other sources, the Business Review reported. No word on where Messrs. McGinn and Smith are teeing off these days.

 

Scandalous Tale: Ripping Off Deathly Sick Victims

11/21/2011 5:40:40 PM

Two Rhode Island-based financial advisers have been indicted for an alleged heartless scheme that authorities claim made $25 million from the deaths of elderly and terminally ill people,Reuters reported. A 66-count federal indictment charges Joseph Caramadre, 49, and Raymour Radhakrishnan, 27, with scheming to profit from the demise of people they expected to die soon, Reuters said. Federal authorities allege that Caramadre originated the scheme in 1995 as chief executive officer at Estate Planning Resources in Cranston, R.I. In 2007, he hired his younger associate, who entered the scam, prosecutors said. The two are charged with selecting their elderly and seriously ill targets, gathering personal information on them, and then setting up variable annuities and brokerage accounts in the names of victims. Eventually, they collected survivor benefits on the investments when the victims died, Reuters said. The news service quoted a federal prosecutor as saying the two men “either forged the signatures of terminally-ill people on account documents or obtained the signatures by means of misrepresentations.” The results, the prosecutor added, were “substantial profits” for the alleged fraudsters.

Former Olympus Chief To Meet With Feds Over Fees

11/21/2011 5:36:39 PM

The former CEO of Olympus Corp., who blew the whistle on alleged irregularities inside the Japanese maker of cameras and medical equipment, is about to turn up the heat even more, Bloomberg quoted sources as saying. Michael C. Woodford, a British citizen, is expected to travel again soon to New York and meet with federal investigators about strange happenings at Olympus, Bloomberg reported. Woodford was fired from Olympus after criticizing $687 million in advisory fees the company paid to an offshore firm. Olympus initially denied wrongdoing, then changed the story and said the whopping fees were paid to help disguise corporate losses, Bloomberg said. Woodford has already met once about Olympus with U.S. investigators and prosecutors, who are interested because the company's American depository receipts are traded in the U.S. Bloomberg added that the New York Times previously reported $4.2 billion in Olympus assets remain unaccounted for, and said Japanese officials are probing whether the company worked with organized crime to disguise losses.

Phony Concert Promoter Gets Jail Time And Fines

11/21/2011 5:30:04 PM

When he was hot, Miko Dion Wady was all but on fire. Posing as a music concert promoter between 2004 and 2007, the FBI said, Wady, now 36, stripped investors of more than $30 million they contributed to finance profitable shows by famous musicians. In those years, the government explained, Wady blew millions on 30 fancy cars and other luxuries, including real estate purchases worth $800,000. The problem was, he had “no association or contract arrangement with any of the concerts or tours” he claimed to be booking, the FBI said in a statement. Now, a federal judge in Phoenix has sentenced Wady to nine years in prison on 10 counts of wire fraud and money laundering, to be followed by 250 hours of community service. Items the court ordered him to forfeit include a Ferrari, a 41-foot boat, $100,000 in cash, a luxury fifth-wheel camper, jewelry, and guns. He was also ordered to repay the $30 million he fleeced from 250 victims, the FBI said.

Tenn. Firm To Pay $1.5 Mil For Aiding Sentinel Fraud

11/20/2011 3:30:27 PM

Memphis, Tenn. brokerage firm FTN Financial Securities Corp. has been ordered to pay almost $1.5 million plus interest penalties for failing to maintain accurate books and records of securities transaction liabilities, thus helping a now-defunct advisory firm defraud clients, Financial Advisor Magazine reported. The Securities and Exchange Commission said Sentinel Management Group Inc. used false financial information to defraud clients in a reverse repurchase transaction in 2006 and early 2007. Sentinel used proceeds from the deal to pay down part of a bank loan, reducing figures it reported in year-end statements. Sentinel later went bankrupt, Financial Advisor said. The magazine added that FTN agreed to pay the $1.5 million and nearly $378,000 in prejudgment interest, without admitting or denying the SEC findings.

Peddling IPOs On Sites Earned A Quick $12 Mil

11/20/2011 3:07:46 PM

The feds have slammed the lid on a scheme that raised $12 million in 15 months, with promises to give investors the inside track on buying shares of initial public offerings, The Register reported in the United Kingdom. The newspaper said the Securities and Exchange Commission caught up with five men who were advertising on Facebook, Twitter, and other sites, saying investor money would be stashed in escrow and used to buy shares through a hedge fund, The Praetorian Global Fund, when the IPOs were issued. Prospective IPOs the five listed included Bloom Energy and Fisker Auto, The Register added. But an SEC official was quoted as saying the men merely “exploited investors' desire to get an inside track on a wave of hyped future IPOs.” Most of the $12 million raised was blown on expensive cars, private jets, and fine art, the SEC said. The Register identified the five alleged culprits as John Mattera, Brad Van Siclen, David Howard, Joseph Almazon, and John Arnold.

 

Trio And Lawyer Agree To Settle Charges From SEC

11/20/2011 3:04:49 PM

Three South Florida stock traders and their lawyer have settled allegations from federal regulators, who charged them with penny stock fraud for selling shares of securities that were never registered. The Securities and Exchange Commission had gone after the three, Frank Calmes, Lynn Rowntree, and Manny J. Shulman, who ran First Equity Corp. in Boca Raton, the South Florida Business Journal said. Calmes and Rowntree decided to settle with the SEC, taking penny stock bans and agreeing to pay almost $2.4 million and more than $856,000 respectively, the Business Journal said. Shulman went to trial and lost, and must pay $373,815, the newspaper said. In addition, James E. Pratt, the trio's New York lawyer, settled SEC allegations that he provided “baselesss legal opinions” about selling the stock. He agreed to pay more than $328,000 and received a penny stock ban, the Business Journal added.

Pump-And-Dumps Result In Fines, SEC Trading Bans

11/20/2011 3:01:53 PM

Vancouver stock promoter Joseph Fernando and his company, Wellington Capital Enterprises, Inc., have been socked by federal regulators in the U.S. with penalties of $2.87 million and a permanent penny stock ban, after all but ignoring previous efforts by the Securities and Exchange Commission to get their attention, Stockwatch reported. The SEC charged that Fernando and others engaged in a pump-and-dump scheme in 2005, and said Fernando, 42, used spam e-mail and paid tout sheets to hype two pink-sheet stocks. Then, he and others allegedly sold $3.5 million worth of shares, Stockwatch said. For the same scam, the SEC also issued a $105,374 penalty against Colorado promoter John Coutris, and a penalty of more than $53,000 against his brother, Michael Coutris. Scott Gelbard, another Colorado stock promoter, reportedly agreed to a permanent penny stock ban and payment of $350,000 in the case. The later three did not admit to wrongdoing, Stockwatch added.

 

Recovery May Be In Sight For Victims In Ponzi Case

11/20/2011 2:55:14 PM

His criminal case hasn't even been adjudicated yet, but an attorney in the Allen Stanford Ponzi scheme said victims of the $7.2 billion scam may be able to submit claims soon, according to a report from Reuters. The 61-year-old Stanford may finally go on trial in Houston in January, facing 14 criminal charges that he ripped off investors through a certificate of deposit scheme run through his Stanford International Bank in Antigua. Reuters quoted a lawyer representing the receiver as saying that during an October conference, a judge made it clear that the recovery process should get started for investors. So far, the receiver has collected $80.1 million in cash from the crimes, as well as nearly $97 million in material assets. Another $955.3 million is being pursued through lawsuits, Reuters said.

 

A Bright Light Shines On Congress Insider Trading

11/18/2011 10:03:10 AM

At present, members of the U.S. Congress are allowed to use the considerable corporate and military intelligence they gather on the job to make investments before events actually occur, thus lining their own pockets. It's called insider trading, and it's the same underbelly activity that sent a lot of stock traders to prison this year. But the law applies only to civilians, not to elite congressional personages. The bubble was pricked, however, by a recent 60 Minutes episode exposing this loophole, which allows some politicians to leave office a lot richer than they came in. Support has now grown in Congress to outlaw insider trading by members, The Democrat and Chronicle and other newspaper are reporting. The newspaper said Rep. Louise Slaughter, a New York Democrat, has co-sponsored such legislation since 2006 - with scant support from her House peers. But as of this week, she suddenly had 47 other co-sponsors, and two bills to stop insider trading are pending in the Senate. In addition, a powerful Senate committee announced it will hold hearings on insider trading by Congress members. In even the most hardened of hearts, hope springs eternal.

FINRA Fines Chase For Not Informing Investors

11/18/2011 9:59:47 AM

Chase Investment Services Corporation will pay $3.6 million for selling investments loaded with junk bonds and other risky securities to vulnerable, unsophisticated customers, the Financial Industry Regulatory Authority announced. The company has been ordered to reimburse customers by $1.9 million and was fined another $1.7 million, after allowing brokers to sell unit investment trusts and floating rate loan funds to people “with little or no investment experience and conservative risk tolerances,” the agency said. Chase is also accused of sloppy supervisory activities in the sales of UITs - baskets of securities that often contain substandard, high-risk bonds. Likewise, floating rate funds can involve loans made to entities with dubious credit, FINRA said. The agency added that unbeknownst to investors, Chase brokers made “almost 260 unsuitable recommendations” on UIT purchases to people who weren't equipped to handle the risks. Customers ended up losing $1.4 million. Chase consented to the agency's findings, but neither admitted nor denied the charges, FINRA said.

 

Clinton, Bush And Gore Used In Diplomacy Scam

11/18/2011 9:56:28 AM

Two former U.S. presidents and an ex-vice president didn't know it, but they helped sponsor a ton of fun in Las Vegas for a mother-son team who allegedly bilked investors through a fund-raising scheme. Now the FBI in Los Angeles is looking for more victims of 26-year-old Jack Hu and his mother, Kuei Fuang Tsuei Hu, 62. Agents allege that the pair took money from investors and promised returns of three to 10 percent monthly, saying proceeds would sponsor trips to China for Bill Clinton and George W. Bush. They are also charged with claiming that former Vice President Al Gore would go to Taiwan, compliments of investors, many of whom are Chinese-American. But if the politicians made such trips, it was on somebody else's dime. Instead of sponsoring goodwill junkets, Jack and his mom allegedly used investor money to live it up with high times that included “large amounts of gambling activities in Las Vegas casinos,” the FBI said. The two were indicted for wire fraud and misusing the Great Seal of the United States, then were arrested in October and are being held without bond , the agency said.

Trevor Cook Associate To Serve 10 Months For Lies

11/18/2011 9:52:07 AM

Another leaf has fallen in the case of Trevor Cook, the Minneapolis-based Ponzi artist who cheated more than 900 investors in a phony foreign currency trading scheme. The FBI announced that Jon Jason Greco, 41, has been sentenced to 10 months in prison for lying to federal investigators in the Cook case. Seems Greco had stashed $6,000 in cash and coins, all associated with Cook's scam, in a locker at the Mall of America. When it was uncovered, he lied and told investigators the money was his, the FBI said. Greco's 10-month sentence looks like child's play, compared to the 300 months Cook is now serving.

 

MF Global Customers Will Get A $520 Million Payout

11/18/2011 9:48:50 AM

A bankruptcy judge in New York has approved distributing $520 million in cash to more than 23,000 investors in the scandal-ridden MF Global Holdings Ltd., a futures brokerage that went belly-up on Oct. 31, Reuters reported. Until now, the cash belonging to brokerage customers had been frozen. The firm also disclosed in filings that at least two top executives have departed, and will not be collecting millions in termination or severance pay. One of them, former MF Chief Executive Jon Corzine, the ex-governor of New Jersey, left without taking $9 million in severance, Reuters said. That was probably gratifying to more than 1,000 employees of the firm's broker-dealer operation, who have lost their jobs. New York-based MF Global crumbled after investing $6.3 billion in European sovereign debt. That resulted in widespread margin calls and rapid depletion of liquidity as investors fled for the woods. Reuters said about another $600 million in client funds are still unaccounted for.

Citigroup Deal Is Just Deja Vu All Over Again

11/17/2011 7:04:17 AM

If the proposed deal holds up for Citigroup to pay $285 million for short-selling investors in a disastrous, $1 billion mortgage debt package, the company will also promise to never again violate anti-fraud laws. But will that work? U.S. District Judge Jed Rakoff, who must approve the deal, has already expressed skepticism. And now, a study by The New York Times gives substance to his doubts. The Times reported that over the past 15 years, on 51 or more occasions,19 Wall Street firms have violated anti-fraud statutes they had previously promised to never again break. In other words, the evidence strongly suggests that big banks and financial firms can pay a relatively few bucks and pretty well go on doing as they choose. In the Citigroup case, Judge Rakoff noted that $285 million is only a sliver of the amount investors actually lost. Still, the SEC appears unfazed by this history of corporate defiance. The Times quoted Robert Khuzami, the agency's top enforcer, as saying, “No one here is disregarding the fact that there were prior violations or prior misconduct.” Now. Doesn't that make us feel better already?

SEC Says MSIM Charged Fund For Imaginary Advice

11/17/2011 7:00:54 AM

Morgan Stanley Investment Management has been punished to the tune of more than $3.3 million for charging investors for advisory services they didn't receive. The Securities and Exchange Commission announced the penalty and reimbursement costs, after revealing that Morgan Stanley charged The Malaysia Fund $1.845 million over a decade, claiming the money was used to pay a Malaysian company for expert local advice and investment guidance. In fact, the SEC said, Morgan Stanley “failed in its duty to provide the fund's board members” with information they needed to review and approve the sub-adviser's contract. In doing so, the company violated sections of The Investment Company Act and the Investment Adviser's Act, the agency added. As usual in such cases, Morgan Stanley Investment Management neither admitted nor denied findings in the case. The company agreed to a censure, promised to behave in the future, and will repay the $1.845 million and a $1.5 million penalty, the SEC said.

 

Recruiter Makes Plea In Fla. Medicare Fraud Case

11/17/2011 6:57:52 AM

Unlike a Ponzi scheme, Medicare fraud cheats all taxpayers, not just those who choose to invest. Now, another person has pleaded guilty in the $25 million Medicare scam that fell apart in South Florida last winter. Beatriz Torres-Cruz, a former “patient recruiter” in the case, admitted to committing conspiracy and paying health-care kickbacks, the FBI announced. Torres-Cruz, 50, had worked for Florida Home Health Providers, Inc., a company at the heart of the crimes. Last February, she was indicted and charged with paying patients to lend their names for federal Medicare payments, after claiming to receive expensive treatments that were “medically unnecessary and/or never provided,” the FBI said. Another 17 people have pleaded guilty in the case, including Jose Nunez, a medical doctor. When sentenced, Torres-Cruz faces a maximum penalty of 15 years in prison, plus fines, according to the FBI.

Former CSK Auto CEO To Forfeit Cool $2.8 Million

11/17/2011 6:54:36 AM

Maynard L. Jenkins, the former CEO of CSK Auto Corporation, has agreed to give up $2.8 million he made in pay and stock profits when the company committed accounting fraud from 2002-2004, the Securities and Exchange Commission said. Although he wasn't one of the four company officials charged with fraudulently overstating CSK income to shareholders, Jenkins, of Scottsdale, Ariz., violated a federal clawback provision by not returning the cash to the company, regulators said. One of the executives charged has since died, and three others have pleaded guilty to federal criminal charges. The company itself has agreed to pay a penalty of nearly $21 million, the SEC said.

 

4 Million Computers Hit; Thieves Make $14 Million

11/17/2011 6:50:57 AM

As wonderful as computers are for individuals and businesses, they're equally good for crooks - as seen by the actions of a European group whose members allegedly infected four million computers worldwide and made illicit millions in profits. Preet Bharara, the U.S. Attorney for Manhattan, announced that seven people - one Russian national and six Estonian nationals - have been charged in the case, and six were arrested in Estonia. The scam went like this: The group is charged with using malware to infect computers in 100 nations, including 500,000 in the U.S. The malware disabled virus software that may have detected the hijackings, which secretly altered settings on the targeted computers and covertly directed them to Web sites and advertisements. Each time those were clicked by unwary users, the culprits allegedly earned fees from advertisers - a cool $14 million, the FBI estimates. Suspected participants have each been charged with five counts of wire fraud and with computer intrusion crimes. “These defendants gave new meaning to the term 'false advertising,'” Bharara said in a news release. His office is seeking to extradite the group's members to the U.S.

Preacher Gilliams Gets Fraud Charges From SEC

11/16/2011 9:45:05 AM

Tyrone L. Gilliams isn't shy about blowing his own horn. But now he's getting some extra free publicity, courtesy of the Securities and Exchange Commission. The agency is charging that Gilliams and his company, TL Gilliams, LLC, fraudulently misappropriated $5 million from investors in a phony U.S. Treasury strips trading program. Gilliams - an events promoter, self-described business whiz, and part-time preacher - allegedly promised investors returns of 5 percent weekly when they bought into a scheme to trade treasury strips, the interest-payment portion of U.S. Treasury bonds. But regulators allege that instead, Gilliams used the $5 million to travel, party, drive luxury cars, and send his kids to private schools. So who is this guy? According to the Web site “Streaming Faith,” Gilliams “excelled in academics and sports at the University of Pennsylvania,” before being “called to collaborate with the ultimate mogul, our Lord and Savior Jesus Christ.”

SEC: San Diego Advisers Failed To Report Bonuses

11/16/2011 9:41:30 AM

In San Diego, the Securities and Exchange Commission has charged financial adviser Kevin James O'Rourke and Western Pacific Capital Management LLC with lying to investors, and with hiding the fact that the company would gain from investments it was pushing. The SEC said O'Rourke and the firm conveniently forgot to tell investors that Ameranth Inc. would pay a 10 percent “success fee” for every dollar the advisers persuaded clients to invest in an Ameranth-connected fund. Western Pacific and O'Rourke made more than $450,000 from the deal over two years, the SEC said. Regulators also charge that investors were told that only 25 percent of the fund consisted of illiquid securities, when the illiquidity level was actually 90 percent.

 

Judge Calls Water Case 'A Fundamental Scam'

11/16/2011 9:37:29 AM

We've previously mentioned the case of Niles Stansfield, the Colorado man who ripped off consumers by claiming they were investing in rights to water that would be sold to municipalities. Now, Stansfield has been sentenced to four years in prison for the scam, which lightened the pockets of his investors by roughly $1 million, The Coloradoan reported. Prosecutors charged that instead of buying water rights during the three-year scam, Stansfield kept their cash and bought a house. At sentencing, Stansfield said he never expected clients to lose money, but the sentencing judge remained unmoved. The Coloradoan quoted the judge as saying Stansfield's sin was not just a business failure, but “a fundamental scam.”

Have A Heart Problem? Don't Go See This Doc

11/16/2011 9:34:17 AM

There's fraud, and then there's fraud. It will be a long 97 months in prison for Dr. John R. McLean, who enjoyed a lucrative cardiology career in Salisbury, Md. Financialfraudlaw.com said he was recently sentenced to jail for inserting unnecessary cardiac stents into at least 100 patients, all the while ordering expensive, superfluous medical tests and then scamming Medicare, Medicaid, and private insurance for payments. Prosecutors said this went on for at least four years, from 2003 to 2007. Aside from serving prison time, McLean was ordered to pay nearly $580,000 to Medicare and other health insurance programs, Financialfraudlaw.com said.

Nova Scotia Adviser To Pay $1 Mil-Plus In Scam

11/16/2011 9:31:38 AM

Financial scams have no boundaries, as evidenced by the case of John Alexander Allen, once a mutual fund salesman for Keybase Financial in Truro, Nova Scotia. The Truro Daily reported that Allen has admitted in a statement of facts that he advised clients in his Canadian province to sink money into investments far beyond their risk tolerance, and twisted the truth to help investors get loans from financial institutions. Altogether, regulators charged, Allen swindled investors out of $14 million. He has already been ordered by the Nova Scotia Securities Commission to pay more than $1 million, plus $7,000 in costs, and is scheduled to appear again in court next month, The Daily added.

The Word Is Out On SEC Actions For Blowing Case

11/15/2011 7:22:17 AM

There have long been suspicions and allegations, but actions reported last week came as confirmation: The Securities and Exchange Commission, the U.S. Government's top securities enforcement agency, blew it on the Bernard Madoff case. United Press International said the SEC has disciplined seven employees for their laxness in catching America's most infamous securities scam, which ripped off investors for billions in a Ponzi scheme that ran for 20 years or longer. An eighth SEC official resigned before the action was taken, UPI quoted the Washington Post as saying. The disciplinary actions came over the past year, and were kept under wraps by the SEC until late last week, news reports said. The SEC's own Inspector General's Office had already blasted the agency, saying the SEC had received numerous complaints over the Madoff case since as far back as 1992. But SEC officials “never took the basic steps to determine if Madoff was misrepresenting his trading,” UPI quoted the agency's internal watchdog as reporting. The disciplinary actions have included pay reductions, suspensions, and demotions, UPI added.

Whose Fault Was It? Cop Pension Fund Sues Bank

11/15/2011 7:18:45 AM

An Oklahoma pension fund for police officers has sued U.S. Bancorp, claiming it cost retirees millions by not making sure that bonds purchased by the fund were properly secured by legitimate mortgages, according to Bloomberg. In a lawsuit filed in Manhattan, the group claims the bank's actions ended with retirees “suffering millions of dollars of losses because they were dependent on a faithless trustee to protect their interests,” Bloomberg quoted the lawsuit as saying. Mortgage loans used to back the bonds were pooled by Bear Stearns, which was later taken over by JPMorgan Chase and Co., the news service added, and U.S. Bancorp was trustee. The suit claims the bank failed to review mortgage loans involved, and did not transfer documents necessary for the trusts to actually own the loans. That resulted in securities the investors bought not being legally secured, the lawsuit said. Bloomberg said the Oklahoma Police Pension and Retirement System filed the lawsuit as a class action, and is looking for other investors who had the same problem.

It's A Family Tradition: Dad, Son Set For Prison

11/15/2011 7:12:44 AM

A father and son team will be going to prison for the same securities crimes, Candianbusiness.com reported. The common denominator is that both were charged with defrauding 182 investors, most of them elderly, of at least $17.9 million in 2006-2007. The Web site said Michael Wallens, Jr., 31, was sentenced in Texas to five years in prison and ordered to repay almost $13 million in restitution. His father, 53-year-old Michael Wallens, Sr., of Nantucket, Mass., faces sentencing Jan. 5 after pleading guilty to securities fraud, the Web site said. Both men were charged by the Securities and Exchange Commission with selling “secured debt obligations” to consumers, then spending millions on unrelated investments of their own, prosecutors said. The funnel for the phony debt obligations was a company called W Financial Group. A third conspirator, Adley Husni Abdulwahab, 36, has also been indicted in Texas for conspiracy and securities fraud. He is already serving 60 years in prison for a $100 million life insurance fraud in Virginia, Canadianbusiness.com said.

 

Ponzi Victims May Have Helped Peddle The Scheme

11/15/2011 7:09:05 AM

Its originator was shipped off to prison months ago,but regulators are still looking for victims of a long-running Ponzi scheme suspected of hyping the scam to others, even as they were getting ripped off themselves, The Connecticut Post said. Michael S. Goldberg went to prison for 10 years after promising investors high returns from a gold scam and a property purchase scheme. Instead of getting the returns as high as 25 percent they were promised, customers got ripped off. Now, regulators and a trustee in the case are saying some Goldberg investors may have actually gotten fees from the perpetrator for pushing the scams to others. The trustee is seeking investors scattered across 10 states, The Post said.

Vending Machine Dreams End in Jail Wakeup Call

11/15/2011 7:05:48 AM

Would-be small business owners thought they had found a solution to the sorry economy when they invested with Michael Eisenberg, who sold them vending machine routes for a minimum of $6,000 each. After all, Financialfraudlaw.com reported, Eisenberg - who owned two companies, Atomic Vending and Energy Vend - told his suckers they would earn their money back within a mere year. But eventually, federal investigators found out that his buyers didn't get the high-traffic spots they anticipated, and in fact earned “little to no money” from their ventures, Financialfraudlaw.com said. To make matters worse Eisenberg had already been shut down by the Department of Justice for his operation of a previous company, Lifestyle Vending. After pleading guilty to the second scam in Miami federal court, he is going to prison for 28 months, and will pay a $7,500 fine and thousands in restitution, the Web site reported.

 

From A Mansion To Jail, All For A Family Favor

11/14/2011 7:17:58 AM

A housewife from the toney Pacific Heights neighborhood in San Francisco is going to jail for 11 months and must pay a $1 million fine, after poking into her husband's business affairs, stealing insider trading information, and passing it along to her sister, according to the Bay City News. The publication said 38-year-old Annabel McClellan, who reportedly lives in a mansion in the old Victorian part of 'Frisco, filched privileged information on corporate maneuvers from her husband, who was at the time an accountant with the tax firm of Deloitte Touche. She then passed the tips along to her sister in London, who husband, a stock trader, acted on it, the Bay City News said. McClellan's brother-in-law made about $648,000 by trading on information about Getty Images, the newspaper said. Aside from the jail sentence, McClellan was also hit with a $1 million fine by the Securities and Exchange Commission. Her husband, who did not know she had been fleecing his market information, was not charged or fined, the newspaper added.

Phony Securities Group Was There; Now It's Not

11/14/2011 7:14:39 AM

If you hear from a group calling itself the “State Securities Commission,” beware. It may be just a scam looking to part investors from their money, Reuters said. The news service reported that the North American Securities Administrators Association - a legitimate group - sounded the alarm on the State Securities Commission and a Web site it was operating. The site reportedly was a mock-up of the NASAA's real site, with one important difference. The SSC site invited people who have lost money in securities scams to click on a page and file complaints. But that, in turn, led to a series of questions asking for personal tax information. “We really have no way of knowing what these folks may be up to,” Reuters quoted a spokesman for the real NASAA as saying. “But it's clear from looking at the Web site that it's not what it says it is.” When thestreetsweeper.org did a Web search for the State Securities Commission, the site apparently had already been pulled. But whoever had posted it is still out there, probably up to no good.

 

Coming Soon: R. DeNiro To Play Bernard Madoff

11/14/2011 7:10:54 AM

It had to happen: The stuff was just too good for movie makers to resist. Now, a world-class con artist will be portrayed by a world-class actor, CNN said. Robert DeNiro is expected to play Bernard Madoff in a movie about the Ponzi king's rise and fall, CNN reported. DeNiro's company, Tribeca Productions, will reportedly produce the film, based on a book by author Diana Henriques. And while you may not think it, in a certain light, DeNiro and Madoff bear a resemblance. CNN ran side-by-side photos of actor and subject. Both have craggy faces and remarkably similar hair styles, although DeNiro sports more hair, at least on top. Close enough.

Former CPA Gets $400,000 Fine For Insider Trading

11/14/2011 7:07:45 AM

Accountant H. Clayton Peterson, who transported insider trading from Wall Street to the Rocky Mountains, has been fined $400,000 for securities fraud, the Denver Business Journal reported. Peterson is a former executive with the Arthur Andersen firm who also served on the board of Mariner Energy. He was arrested for tipping his son, financial adviser Drew Peterson, that Mariner stood to be acquired. Drew Peterson used the information to trade Mariner stock, and also passed the news along to hedge fund manager Bo Brownstein, who also profited from the deal. The elder Peterson recently received probation for his admitted crime, but later was also slapped with the fine. Drew Peterson and Brownstein have also pleaded guilty, but have not yet been sentenced, the Business Journal said.

 

Madoff Investors Claim JPMorgan Knew Of Scam

11/14/2011 7:04:33 AM

A group of investors who lost money to Bernard Madoff's giant Ponzi scheme has filed suit in New York against JPMorgan Chase & Co., saying the prestigious bank enabled the scam by willfully ignoring signs of fraud for years, Thomson Reuters reported. The federal lawsuit claims that JPMorgan - Madoff's bank for 20 years - should have known the millions flowing in and out of Madoff accounts weren't used for legitimate investments, but merely passed between clients and Madoff, who is now serving 150 years in prison for the multi-billion dollar fraud. The lawsuit said the bank chose to enable the crimes, by “helping to cover Madoff's naked theft with the imprimatur of a globally recognized financial institution,” Thomson Reuters said. A judge recently rejected a similar suit by the Madoff bankruptcy trustee, on grounds that only victims themselves could file such a lawsuit, the news service added.

A.G. In N.J. Sues Five For $8.5 Mil Scam On Elderly

11/11/2011 9:35:33 AM

The state of New Jersey wants restitution from five men who took $8.5 million from retired people, allegedly selling them three-year notes and falsely promising annual returns of 12 percent. Instead, money raised was misused, the Star-Ledger reported, and 73 investors - most of them elderly people - got scammed, the newspaper said. Now, the state attorney general has sued the five men for restitution and civil penalties. The newspaper identified the defendants, who allegedly were not registered to sell securities in the state, as: Michael W. Kwasnik, a lawyer; his father, William Kwasnik; and Joseph A. Schifano,Daniel F. McCorry, and William P. Leonard, all former stock brokers. The newspaper quoted Attorney General Paula T. Dow as saying the unfortunate investors “fell victims to a scam by individuals looking to unjustly enrich themselves.”

Fed Judge Grills SEC In Citigroup Toxic CDO Case

11/11/2011 9:31:16 AM

A federal judge in New York is now mulling over whether he should approve a proposed, $285 million settlement with Citigroup Inc., which neither admits nor denies engineering a toxic, $1 billion mortgage securities deal that lost millions for investors in 2007. Reuters said U.S. District Judge Jed Rakoff grilled officials of the Securities and Exchange Commission during a hearing in the case this week, making it plain that he has deep problems with the SEC's proposal to let Citigroup off the hook for only $285 million, when its investors lost $700 million in the shaky, collateralized debt obligation deal. Citigroup had secretly selected debts that made up the package, at the same time placing short positions on bets that it would implode - which it did. Rakoff also pointedly asked why the SEC would extract a pledge from Citigroup not to violate any more securities laws in the future, when the agency never punishes anybody who makes such promises and then breaks them. “It's just for show,” Reuters quoted the judge as saying. No word on when Rakoff's decision will be announced.

Group Seeks $27 Million From TD Bank In Rothstein Loss

11/11/2011 9:26:57 AM

Do banks realize it when they're dealing with criminals? That question is central to an ongoing civil case in South Florida that's tied to the Scott Rothstein Ponzi scheme. Coquina Investments is suing TD Bank, the South Florida Business Journal said, alleging that the Texas investment group put money into Rothstein's scam, at least partially because a TD officer allegedly assured Coquina its money was safe in Rothstein's hands. But those hands were unclean, and lawyer Rothstein's scam collapsed after he hauled in $1.2 billion that investors believed would buy into settlements from lawsuits. Coquina sued TD Bank for $27 million in damages and the bank denies the charges, with one of its lawyers saying Coquina is only looking for “a deep pocket to recover their investments,” the Business Journal said. Rothstein, meanwhile, is serving 50 years in prison.

Calif. Ponzi Ends With Last-Minute Plea Deal

11/11/2011 9:24:01 AM

A last-minute plea bargain in California will likely save Maria de Lourdes Ponce some jail time, but she's still in hot water, The Monterey Herald reported. Jurors were already assembled for her trial when Ponce, 55, copped a plea to grand theft for a Ponzi scheme that defrauded troubled homeowners. The newspaper said Ponce and 30-year-old Melissa Dawn Garcia were charged with taking up to $4,500 each from consumers who were behind on their mortgages, promising to negotiate with lenders and have their payments lowered. But no negotiations occurred, The Herald said. Ponce now faces up to a year in jail and $150,000 in restitution. Garcia has pleaded guilty and was expected to testify against her former partner, The Herald added.

SEC: Claimed Revenues Led To Fat Bonus For CEO

11/11/2011 9:21:02 AM

Federal regulators are using a civil suit to go after a former corporate president in Canada, claiming he misrepresented the nature of income in order to give himself a fat bonus, Stockwatch said. From 2003-2008, when he was head of Powder River Petroleum, Calgary businessman Brian Fox took loans from Asian investors, but represented the money as revenue for his pink-sheet company, the Securities and Exchange Commission said in a lawsuit. Resulting financial reports based on the numbers allegedly pumped up the company's purported revenues by $33.5 million, Stockwatch said, and led to Fox awarding himself a $320,000 bonus. The SEC is asking a court to order disgorgement of $320,000 from Fox, along with $59,000 interest. At last report, Fox had not answered an amended court complaint, and the SEC was unable to contact him or his lawyer. The SEC also wants an order banning Fox from serving in officer or director jobs at any publicly traded company.

$92.8 Million Raj Fine Is A Sad End To A Sad Story

11/10/2011 7:34:08 AM

Tired of hearing about hedge fund inside trader Raj Rajaratnam? So are we. But there remains one postscript begging to be written, and it concerns a civil penalty heaped upon the multi-millionaire, crooked trader this week. Finalternatives.com reports that in New York federal court, Judge Jed Rakoff agreed with the Securities and Exchange Commission and slapped Rajaratnam with a civil penalty of $92.8 million. Rajaratnam's attorneys had whined that he already paid enough when he was fined $63.8 million after being convicted recently in a criminal case for insider trading. When imposing the civil fine, Judge Rakoff wrote in part that such penalties are designed “to make such unlawful trading a money-losing proposition.” Finalternatives.com said Rajaratnam - once worth a reported $1.5 billion - was dropped from Forbes Magazine's billionaire list two years ago. Whether still filthy rich or not, he packs off for 11 years in federal prison next month.

He Found No Oil, But Did He Finally Get A Date?

11/10/2011 7:26:16 AM

A Texas “oilman” is under indictment for allegedly convincing a 93-year-old woman to invest $200,000 - half of it borrowed from her bank - in a North Dakota oilfield, and then blowing the money on personal expenses that included fees to a dating service. The Texas State Securities Board said Robbie Dale Walker's victim had been his own mother's best friend. Still, Walker, of Dripping Springs, Texas, is charged with telling the elderly woman she would earn 15 percent annually by investing with him. But nothing went to an oil field, and everything went to Walker, regulators say - including items purchased with his victim's money from Best Buy, Tiffany and Co., and Louis Vuitton, along with Walker's membership to Match.com. An attorney for the State Securities Board will be a special prosecutor in the case, regulators said.

 

Attorney, Wife Are Guilty Of Scamming From Lender

11/10/2011 7:22:11 AM

In Pennsylvania, a Philadelphia lawyer and his wife have been convicted of scamming a lender by obtaining money that was supposed to be used to operate the man's law firm. Mikel D. Jones was convicted of money laundering, conspiracy, and 28 counts of fraud. Financialfraudlaw.com said his wife, Dona Nichols Jones, was also found guilty of conspiracy, money laundering, and 14 fraud counts. They were charged with taking out a large line of credit to operate Jones' law practice, then stealing thousands by fraudulently claiming to pay for legitimate goods and services. The couple also laundered $160,000 through a Florida bank account and siphoned off more than $350,000 by using phony invoices in 2008-2009, Financialfraudlaw.com said.

Rochester Lawyer Gets Caught, Makes Fed Plea

11/10/2011 7:18:26 AM

Melissa A. Mahler, formerly a licensed attorney in Rochester, N.Y., has been given probation, fines, and forfeiture after making profits in stock trades by using private information she obtained on her job, according to Financialfraudlaw.com. The Web site said Mahler pleaded guilty to making a false statement to the Securities and Exchange Commission after she denied knowing about the trades, on which she made nearly $6,000. In fact, Mahler did make the trades, based on a corporate acquisition tip she received from a client, Financialfraudlaw.com said. Investigators caught the lie, of course, leading to Mahler's plea. She was sentenced to 24 months of probation and must serve 100 hours of community service, pay a $2,500 fine, and forfeit $63,750, the Web site reported.

 

Penny Stock Popcorn Co. Now Banned In Missouri

11/10/2011 7:13:11 AM

Pop N Go Inc. and two of its executives have been banned from operating in Missouri after allegedly encouraging elderly investors to use their retirement money to invest in the company, according to the Kansas City Star. The Missouri Secretary of State's Office said Pop N Go and the men, Melvin Wyman and Kirk Porter, have been ordered to stop doing business in the state. Porter was accused of hyping the Whittier, Calif.-based company to investors, enticing them with quarterly returns of 14 percent, and allegedly misleading them about the company's assets and performance. Pop N Go makes coin-operated popcorn machines, and its stock was trading over the counter this week for a penny per share, according to Bloomberg. Wyman is listed as founder, chairman, and CEO of the company, which regulators said was not registered to sell securities in Missouri. Wyman and Porter face penalties and costs as high as $90,000, and could also be ordered to make $87,000-plus in restitution to investors, The Star added.

 

An 11-Year-Old Bad Debt Nets Three Prison Terms

11/9/2011 8:42:31 AM

A bad business deal that occurred 11 years ago has come back to haunt Utah resident Marc Sessions Jenson, the Salt Lake Tribune reported. Jenson, 51, has been sentenced to three prison terms for not repaying victims who financed the purchase of a bicycle company for him 11 years ago. He had already ignored a court order to repay $4.1 million, going instead to live a lavish lifestyle in California, the Tribune said. Now he has received three prison sentences of zero to five years, and still must make restitution. Jenson and his brother also face separate, multiple charges for fraud and money laundering, stemming from a scheme to build a luxury gated community and ski resort that never happened, The Tribune added.

 

Con Man On The Lam Is Finally Arrested In Fla.

11/9/2011 8:27:16 AM

Michael R. Rouse had a pretty good run with a real estate investment trust scam, but his adventure ended when he was caught and jailed in Fort Lauderdale, the Associated Press said. In April, Rouse, 56, was convicted in Dallas on multiple counts of fraud and money laundering for his operation of the Golden Gates Real Estate Investment Trust, which took $1.9 million from investors and never put a dime into real estate, prosecutors said. Instead, he and his partner lost money on foreign exchange currency trades, and used investor funds to buy themselves Mercedes Benz cars that cost $125,000 each. A judge allowed Rouse to remain free pending sentencing and he then disappeared,. He was sentenced to 17 years in absentia and ordered to make restitution; then last week, he was tracked down in Florida and re-arrested, according to the AP. Rouse's former partner, James A. Testa, has already been sentenced to seven years in prison, the news service said.

 

Accused Crook Flees, Is Caught, Pleads Innocent

11/9/2011 8:19:55 AM

Brian Kim, accused of running a $6 million, New York-based Ponzi scheme for eight years before fleeing to Hong Kong, has pleaded not guilty to fraud charges, Bloomberg reported. Kim, 36, is accused of stealing millions from a hedge fund he ran, and of allegedly lying to investors by saying his Liquid Capital Management fund had returns of more than 240 percent, according to Bloomberg. While facing charges, he jumped bail and went to Hong Kong but was caught and returned to the U.S. in October. Federal regulators said Kim had issued false fund performance statements to investors, and used their money to go on expensive shopping excursions, take ski trips to Vermont, and gamble in Atlantic City, Bloomberg added.

Rajaratnam: 'Come On, I Already Paid $63 Million'

11/9/2011 8:16:48 AM

Observers have been awaiting a ruling from a New York federal judge on a Securities and Exchange Commission request that convicted hedge fund manager Raj Rajaratnam be made to pay more for his criminal actions, Bloomberg said. When he was sentenced to 11 years in prison for insider trading, the Galleon Group honco was also fined $10 million and ordered to forfeit $53.8 million. That's not enough, the SEC argues in court filings. The agency said Rajaratnam should be made to fork over more than $94 million, Bloomberg said. The agency maintains that Rajaratnam's arguments against paying more are “unpersuasive,” since his crimes “were serious and wrongful, and he continues to refuse to accept responsibility for them,” Bloomberg added. Rajaratnam, meanwhile, argues that he has “already suffered enormous financial consequences,” the news service said.

SEC Touting Action In Financial Crisis Cases

11/9/2011 8:13:27 AM

Skepticism has been growing over the Securities and Exchange Commission, with critics saying the federal watchdog agency has been lax in going after market bad guys whose actions led to the 2008 financial crisis. Now, Compliance Week reports the SEC has begun publishing its actions against alleged wrong-doers in the “Spotlight” section of the agency's web site. Compliance Week said that as of Oct. 19 - when the SEC filed its notoriously lenient case against Citigroup, which hid facts from investors in a failed, $1 billion collateralized mortgage debt obligation case - the agency reported it had also taken other enforcement actions against 81 people or financial entities. Interest, disgorgement and penalties in those cases totaled about $2 billion, Compliance Week reported.

Fraudster Used Religion, NFL Players For A Ripoff

11/8/2011 7:14:34 AM

Kurt Branham Barton, the founder, president, and CEO of Triton Financial LLC, is going to prison for 17 years after being convicted of stealing $50 million from investors in a long-running Ponzi case, according to a news release from the FBI. Barton was just sentenced in Austin, Texas after being convicted in an eight-day trial last August. Federal prosecutors said Barton, 44, fraudulently convinced investors that Triton was using their money to buy property, businesses, and other assets. He used former NFL players to recruit his victims, and along the way, he ripped off friends, members of the Church of Jesus Christ of Latter Day Saints, and even members of his own family, prosecutors said. In a statement, the FBI said Barton's scheme “adversely affected the lives of many investors who trusted him not only with their money, but with their faith also.” Barton's scam ran from 2005 into 2009 before it finally crumbled, the FBI added.

 

Trading Bans Issued By SEC In CO2 Tech Scheme

11/8/2011 7:11:15 AM

Two stock promoters have agreed to settle charges by the Securities and Exchange Commission that they played roles in a 2007 pump-and-dump scheme, Stockwatch said. Without admitting wrongdoing, Michael Krome and Robert Weidenbaum agreed to accept permanent bans from participating in future penny stock trading, Stockwatch said. The SEC said the men were part of a plan to boost the stock of CO2 Tech Ltd., with claims the company was about to market pollution control devices and had caught the interest of mega-airplane producer Boeing. Weidenbaum allegedly enlisted promoters who placed trade orders to jump-start the stock. Krome was accused of writing a fraudulent opinion letter that enabled others to control millions of shares that were sold during the hype campaign. Stockwatch said the SEC did not request monetary penalties, because the men will likely have restitution orders issued in a separate criminal case.

Fla. High Court Disbars Lawyers In Fraud Cases

11/8/2011 7:07:31 AM

South Florida is known for the infamous, multi-million-dollar Scott Rothstein consumer swindle, but apparently other smaller-fry crooked lawyers thrive there as well. Two have just been permanently put out of the picture by the state Supreme Court, the South Florida Business Journal reported. The two - Michael McNerney and Julio Antonio Rodriguez - were bounced from practicing law in separate cases, the business newspaper said. McNerney, a Fort Lauderdale lawyer, first began practicing in 1973. He was just disbarred after pleading guilty to conspiring to commit wire and mail fraud, the Business Journal said. Rodriguez, of Hialeah, was admitted to practice in 1993, and lost his license after pleading guilty to a felony count of conspiracy to commit wire fraud. All told, the recent announcement by the Florida Bar included 12 disbarments across the state, the Business Journal added.

Forex Scam Brings Stiff Fines And Lifetime Ban

11/8/2011 7:03:19 AM

Jeffery Alan Lowrance, accused of running a Ponzi scheme through his New Zealand company, First Capital Savings and Loan, has been ordered by a federal court to pay $4.5 million in restitution and penalties, the U.S. Commodity Futures Trading Commission said. The agency obtained the order from federal court in the Northern District of Illinois, after charging that Lowrance ran a phony foreign exchange currency trading scheme from 2008 into 2011. He promised investors monthly returns as high as 4.15 percent, but never even invested their money in forex trades, the CFTC said. The court also issued permanent registration and trading bans against Lowrance and the company, and ordered that any entity providing Web or domain hosting for them remove online sites soliciting customers for him or First Capital.

 

Feds Will Not Probe Ex SEC Top Legal Official

11/8/2011 7:00:01 AM

Federal prosecutors won't be investigating the Securities and Exchange Commission's former top lawyer, even though the agency's own inspector general recently called for such a review, according to a report from Bloomberg. David Becker, who left the SEC last February after serving as general counsel, had inherited money from his mother, and the cash was invested in an account with Ponzi artist Bernard Madoff. The 2004 inheritance cast doubt on the propriety of Becker's involvement in the SEC's Madoff case. The situation was revealed after a trustee in the Madoff bankruptcy sued Becker and his bother for $1.5 million, in efforts to get restitution for Madoff victims. But powerful forces rallied to Becker's defense, and 52 heavy-weight lawyers fired off letters supporting him. Becker also testified to a congressional committee that his actions were proper, and had been cleared by the SEC's ethics counsel. Now, Bloomberg has quoted Becker's attorneys as saying he's off the hook. The government's decision “is consistent with our viewpoint that Mr. Becker did exactly what he was supposed to do under the circumstances,” one of his lawyers told the news service.

Inside Trading Figure Lands Softly: No Jail

11/7/2011 6:24:12 AM

One of the last dominoes in the Galleon Group insider trading scandal has fallen, and he landed pretty softly, according to Reuters. Thirty-six-year-old David Plate, a former stock trader, was sentenced in New York to three years of probation and six months of house arrest, and was ordered to forfeit $289,000, Reuters said. Plate was not a big-name defendant in the case, but his testimony for the government was critical in the convictions of three other men - traders Zvi Goffer and Michael Kimelman, and Goffer's brother, Emmanuel Goffer. In contrast to Plate's sentence, Zvi Goffer is going to prison for a decade. His brother and Kimelman were sentenced to three and 2 ½ years, respectively. The biggest fish in the case, Galleon Group hedge fund co-founder Raj Rajaratnam, was sentenced to 11 years. Reuters quoted the sentencing judge as telling Plate: “There was no witness who was more important than you among the cooperators.”

 

Sorry, Raj, You Get No Say-So On Prison Choice

11/7/2011 6:20:17 AM

Convicted hedge fund trader Raj Rajaratnam is going to prison on Dec. 5, but not to the facility he wanted, according to Bloomberg. The news service said Rajaratnam - who was sentenced to 11 years and fined $10 million after being convicted of insider trading - had asked to serve time at the Butner, N.C. Federal Correctional Complex, where Ponzi king Bernard Madoff is doing 150 years. The sentencing judge agreed and recommended Butner, but federal correctional officials had a different idea, Bloomberg said. Instead, Rajaratnam is going to Federal Medical Center Devens, located on a former Massachusetts military base. Devens is equipped to treat unhealthy inmates like Rajaratnam, who has diabetes and may also need a kidney transplant, Bloomberg said. There, he will mingle with a wide variety of criminals, including mobster Frank Locascio, who was sentenced to life behind fences for colluding with John Gotti, the former Gambino family crime boss, Bloomberg said.

A New Number To Report Senior Investor Ripoffs

11/7/2011 6:16:53 AM

This will lead you to an excellent recent article by the Detroit Free Press on how senior citizens can protect themselves from financial predators, who convince them to invest their life savings or homes in fraudulent schemes promising riches. The problem keeps getting bigger: The newspaper quoted a survey by the Investor Protection Trust that discovered 7.3 million elder Americans - or one out of every five people over age 65 - have been victimized by financial fraud. The Free Press quoted several examples, including the case of Keith Epstein, a Michigan financial adviser who was recently sent to prison after he befriended senior citizens and bilked them out of $7 million. The newspaper also announced a hotline service, sponsored by the Investor Protection Trust and other groups, that starts on Nov. 10, to help older Americans keep from getting ripped off. For general financial questions, investors can call 888-227-1776. They can also call 888-303-3297 to discuss financial abuse issues, the Free Press said.

Goldline Int'l To Battle 'Preposterous' Charges

11/7/2011 6:13:15 AM

Goldline International, Inc. is saying it will vigorously fight charges that the company ripped off consumers, the Santa Monica Daily Press reported. Goldline was recently the target of criminal charges filed by the Santa Monica, Calif. City Attorney's Office, which alleged that Goldline heavily advertised to sell gold bullion, but then switched interested buyers into higher-priced gold coins. Several company executives and salespeople were charged in the case, and face possible penalties including fines and one year in jail, the Daily Press said. The newspaper quoted a Goldline executive vice president as saying the bait- and-switch charge is “preposterous.”

Regulator Indicts Disbarred Texas Lawyer Again

11/7/2011 6:09:39 AM

Richard Plato, a disbarred lawyer in Baytown, Texas, now faces an indictment from the Texas State Securities Board, the Houston Business Journal said. Plato was disbarred from practicing law in 1998 after pleading guilty in a previous securities case. Now he is charged with securities fraud and mail and wire fraud, the Journal said, for using $5 million investors pumped into his Momentum Production Corp. for his own use. Regulators also alleged that Plato did not tell investors he had a criminal record, or that Momentum was in debt to the tune of $1 million, the Business Journal added. Indicted along with Plato were Michael Derek Walker, his partner, and Tammy Renee Norris. The Business Journal said the indictment identified Norris as Plato's “long-time mistress.” Plato was first indicted in April, but the new indictment replaces the first one, the publication added.

Illinois Ponzi Case Sees Second Suspect Indicted

11/4/2011 9:10:55 AM

Federal officials have charged a second Illinois man with operating a foreign currency trading Ponzi scheme that took in more than $105 million and lost $34 million for investors, The Daily Herald reported. Albert Gerebizza, 56, of Crystal Lake, Ill., has been indicted for running “Kenzie Funds,” which he claimed made investments in the U.S. Virgin Islands, the newspaper said. But the feds say he and his alleged partner, 51-year-old Daniel Spitzer, lied to investors about the performance of the funds, and diverted “a significant portion” of the money they took in for their own use, The Daily Herald explained. In 2009, the two allegedly claimed to 400 victims that their funds held $250 million, while the real balance sheet showed about $4 million, the newspaper added. Spitzer had already been charged with 10 counts of mail fraud; now, Gerebizza has been indicted for tax fraud and mail fraud, The Daily Herald said.

 

Former Briscnet CEO Gets $1.5 Mil Fine, Plus Prison

11/4/2011 9:07:56 AM

The $200,000 per year he made as CEO of a San Francisco-based software company just wasn't enough for Ethan Farid Jinian, so he strong-armed a company employee into paying him extra - to the tune of more than a million bucks. Now, he has been convicted at trial on 13 wire fraud counts, is going to prison for 64 months, and must pay more than $1.5 million in restitution, Financialfraudlaw.com reported. Jinian, 51, had been CEO of Bricsnet FM America, Inc., a privately-held company. The FBI alleged that from 2006-2008, he told a company employee he had been verbally promised extra compensation beyond his salary, and had wired transfers made into his personal accounts. It was a scam, the FBI said, and it fell apart when a former company employee went to a lawyer and dropped a dime on Jinian. He was convicted in federal court on May 25 and sentenced on Oct. 27, according to the FBI.

 

Nicholson Victims Still Await Ponzi Restitution

11/4/2011 9:04:42 AM

Investors who got caught up in James Nicholson's $141 million Ponzi scheme will be getting at least some of their money back, but no one knows exactly when, reported The Record in New Jersey. In October 2010, Nicholson was sentenced to 40 years in prison for running the scam through his Westgate Capital Management. He had pleaded guilty to lying to investors about the nature and returns of stock market ventures. Now, the newspaper said, a federal judge has ordered that Nicholson's victims begin getting their share of $19.6 million officials recovered from the scam. That would give them a return of about 14 cents on the dollar, The Record figured. But the newspaper said the U.S. Attorney's Office has refused to give a time line on when distributions can be expected. Neither will the U.S. District Court in Manhattan, The Record added. Apparently, anxious investors can just keep waiting until the spirits move the government to cough up the cash.

Canadian Broker Is Fined In U.S. Penny Stock Scam

11/4/2011 9:01:46 AM

Vancouver broker Doug Garrod has agreed to a settlement with Canadian regulators, who said he failed to properly supervise two employees involved in selling more than six million shares of GTX Global Corp., which turned out to be a fraudulent U.S. penny stock, The Vancouver Sun reported. The employees - Carol Zosiak and John Brighten - traded the shares for clients in the Bahamas, leading to more than $25 million in proceeds for one of the Bahamian accounts, The Sun said. The Industry Regulatory Organization of Canada then went after Garrod, saying he should have prevented the incidents from occurring. He has agreed to pay a $65,000 fine, and a separate disciplinary action is pending against Zosiak and Brighten, The Sun reported.

 

N.Y. Judge Dismisses Suit Against Charles Schwab

11/4/2011 8:58:48 AM

FBI: Mob Looted FirstPlus Financial Group

11/3/2011 7:22:02 AM

Is the Mafia just history? No way, the FBI asserts: Organized crime is alive and well, as evidenced by 13 arrests made for a bust-out scheme that allegedly looted a public company of $12 million. A bust-out occurs when someone gains control of a company and essentially loots it. In this case, the FBI arrested suspects nationwide in the plundering of FirstPlus Financial Group, a publicly-traded Texas firm. Those arrested include Nicodemo S. Scarfo and Salvatore Pelullo, identified by federal agents as associates of the Lucchese crime family. All are charged with taking over FirstPlus and plundering the company “to fund their lavish lifestyles,” the FBI said. The agency alleges that FirstPlus was looted through a series of consulting agreements and acquisitions. A 25-count indictment charges participants with conspiracy, money laundering, obstructing justice, and various species of fraud. “The demise of organized crime has been greatly exaggerated,” said Michael B. Ward, agent-in-charge of the FBI's Newark, N.J. office, when charges were announced. FirstPlus eventually filed for Chapter 11 bankruptcy. Its stock was trading over the counter this week for 2 cents per share.

Goldline Ads Spark Crime Charges From Calif. City

11/3/2011 7:17:52 AM

Local officials in Santa Monica, Calif. have filed a criminal complaint against Goldline International, Inc., charging the heavily-advertised company with using TV commercials to snag investors in a bait-and-switch scam, ABC News reported. Goldline has blanketed the airwaves with endorsements from conservative personalities - including broadcaster Glenn Beck and former presidential candidates Mike Huckabee and Fred Thompson - in efforts to sell gold investments. But the Santa Monica City Attorney's Office is charging that the company advertised sales of gold bullion, then switched interested buyers to more expensive gold coins. Misdemeanor charges filed by the city include theft by false pretenses, false advertising, and conspiracy, ABC said. A prosecutor said some consumers have complained about the bait-and-switch tactic, while others said they received something different than gold products they actually ordered, ABC concluded.

 

Utah Man Ordered To Pay Millions, Serve 7 1/2 Years

11/3/2011 7:13:47 AM

In Salt Lake City, Christopher D. Hales told a federal judge he's a changed man, now that he's off the booze. Problem is, it's too late. The Salt Lake Tribune said Hales is going to prison for 7 ½ years, and can look forward to paying restitution for the remainder of his life. Hales, 30, was indicted last year for money laundering and mail, bank and wire fraud, after leading a ring that inflated property appraisals and ripped off lenders, and also did the same thing with vehicle loans, The Tribune said. So far, only one other man has been sentenced in the case, but the U.S. Attorney's Office said the investigation continues. Hales was ordered to make $12.7 million in restitution, and must pay $500 monthly to a restitution fund after he gets out of prison. His victims, understandably, are probably not very enthusiastic about ever seeing their money again.

A Family Affair Leads To Criminal Case, High Bonds

11/3/2011 7:09:45 AM

Three family members in California face possible years in prison on charges that they fraudulently made at least $2.5 million by selling investments in a phony company, Insurance Journal reported. Anthony Trae Carlson, 42, and his wife, Mariah Waterfall O'Brien, 40, were charged along with the man's mother, Arvina Joyce Carlson, 68, the California Department of Insurance said. They allegedly sold investments in State Bonding California, a bogus company that officials said existed only from a post office box in Hollywood. Insurance Journal said the trio allegedly lied to investors, promising returns of 21 percent and claiming the company made $1 billion annually by selling insurance in 44 states. Anthony Carlson now faces 40 felony counts, while his wife and mom are both charged with 23 counts, Insurance Journal said. Carlson's bond was set at $2.5 million, and the women are both held under $1.9 million bonds. The alleged Ponzi scheme ran from 2005 to 2008, the state said.

 

Like The 5th Amendment? Beats Answering Charges

11/3/2011 7:06:08 AM

Stock promoter Christopher Wheeler is mighty fond of the Fifth Amendment to the U.S. Constitution, according to a news report by Stockwatch. He has failed to answer many allegations in a Securities and Exchange Commission civil suit alleging that he touted four pink-sheet stocks on his Web site, all the while selling the same stocks on the side. They included Infinity Medical Group, Inc. and Cannon Exploration, Inc., Stockwatch said. In answering the SEC suit, Wheeler, 43, of Victor, N.Y., cited the Fifth Amendment in most paragraphs, but did at least admit to his age and place of residence. He has asked that the SEC lawsuit be dismissed and the agency be made to pay costs, Stockwatch added.

The Avon Lady: Was It Door-To-Door Bribery?

11/2/2011 8:31:41 AM

Is nothing sacred any more? Now there are allegations that the Avon Lady, an American institution, has been greasing palms to gain access to foreign markets. The Guardian reported that the Securities and Exchange Commission is investigating whether Avon reps spent millions to bribe officials in China, Brazil, Argentina, Japan, and India. Avon is conducting an internal investigation as well, and thus far the probes have cost an estimated $150 million, The Guardian said. In a regulatory filing, the newspaper reported, Avon disclosed that an SEC investigation was in progress under the Foreign Corrupt Practices Act. Cracking overseas markets is admittedly a tough business, but there are questions over paying bribes for the privilege of selling makeup. One law professor put it to The Guardian this way: “This isn't a company selling fighter jets.”

 

Chinese Ex-Mayor Goes To Jail For Insider Trading

11/2/2011 8:28:26 AM

Dirty investment deals aren't a way of life in the U.S. alone. Bloombereg reports that in China, a woman who previously served as mayor of a southern city has been sentenced to 11 years in prison after being convicted of insider trading, taking bribes, and disclosing private information. Li Qihong, the former mayor of Zhongshan, and members of her family made trades based on information she gained through her public office, officials said. The conviction was part of a government crackdown on public officials who use knowledge of business dealings for personal profit, Bloomberg said. At least two other government officials have recently been sentenced in similar cases, and Bloomberg quoted a Chinese law professor as saying, “what has been exposed must be the tip of an iceberg.” Qihong was also fined the equivalent of $3.1 million, the news service added.

Japanese Company Deal Also Sparks U.S. Inquiry

11/2/2011 8:25:34 AM

Olympus, the Japanese maker of digital cameras and medical devices, is under investigation for paying $687 million to an obscure brokerage firm, The New York Times reported. The newspaper said officials in Japan, as well as the FBI, Securities and Exchange Commission, and Justice Department in the U.S., are poking through the bones of the deal. Olympus paid the money to Axes America, for guidance on acquiring a British medical device manufacturing company, The Times said. Investigators are now mulling whether the fees involved kickbacks to Olympus officials. Michael C. Woodford, a British man who was CEO of Olympus, was fired after confronting company officials over the deal. Most of the $687 million was funneled through Axam Investments, a Cayman Islands firm, The Times said.

'Investment Club' Scammed 1,700 Members For $29 Mil

11/2/2011 8:22:43 AM

A tribunal in Ontario has ruled that as many as 1,700 people - many of them members of Canada's Caribbean community - were defrauded by an investment club, Canadianbusiness.com said. According to the Web site and other news sources, the “club” and three of its principals are accused of suckering investors with promises of returns up to 20 percent monthly. That, of course, was too good to be true. Of the $29 million taken in by the Prosporex Investment Club, only $5.3 million was returned to investors, Canadianbusiness.com said. The tribunal identified the men at the heart of the scheme as Carlton Lewis, Mark Scott, and Sedwick Hill, the Web site said. Penalties will be worked out at a separate hearing.

FBI Seeks Telemarketing Scam Operator Who Fled

11/2/2011 8:19:21 AM

Luis Ferreira apparently couldn't stand the thought of going to prison for helping to conduct a gold telemarketing scam. So he snipped off an electronic monitoring bracelet court officials had placed on him, and disappeared, Financialfraudlaw.com said. Ferreira, 44, had been sentenced to 33 months in prison for his role in Spyker Consulting, a telemarketing scheme based in Deerfield Beach, Fla. Authorities said the company ripped off consumers nationwide through a telemarketing operation that sold bogus investments in gold and other precious metals. The FBI believes the fugitive - who has various aliases, including “Lou Almeida” and “Luis Carlos De Almeida” - may be in Brazil, the Web site reported. He has now also been indicted for failing to surrender, which carries a 10-year prison sentence.

 

Fed Judge Wants Answers In Citigroup CDO Scandal

10/31/2011 7:43:02 PM

Manhattan federal Judge Jed Rakoff is known as a jurist with little patience for foolishness. Now, he has the Securities and Exchange Commission by the neck in its effort to fine Citigroup $285 million in the failure of a collateralized debt obligation, said Financialfraudlaw.com. Readers may recall the SEC recently announced the fine, saying Citigroup selected debts that went into the $1 billion, mortgage-related package, but simultaneously placed short bets that it would collapse (it did). But Rakoff wants answers from the SEC to some pointed questions before he approves the settlement. Among them: What was the total loss to investors, and how was it determined? Why will the fine be paid by the bank and its shareholders, and not by “culpable individual offenders acting for the corporation?” Who are those responsible people who called the shots, anyway? If the SEC doesn't know, why not? Why should the court impose a judgment, when Citigroup won't event admit or deny wrongdoing? Rakoff ordered that the parties have answers when he holds a hearing on Nov. 9. Oh, to be a fly on the wall in his courtroom that day.

Cooking The Books Could Bring 125 Years Hard Time

10/31/2011 7:37:19 PM

Michael T. Rand, who once headed up accounting for a North Carolina homebuilder, has been convicted of cooking the books to make things appear differently than they really were, the Associated Press reported. Rand, 48, of Alpharetta, Ga., was convicted at trial in Charlotte, N.C. of doctoring the records of Beazer Homes USA Inc. for seven years, the news service said. Rand was charged with creating fictional financial books that showed Beazer as a company that thrived in difficult times, and turned a more modest profit when things were good, the AP said. He was convicted on seven counts and could get a maximum sentence of 125 years in prison, according to AP.

 

CFTC Slaps Brakes On Raleigh Capital Management

10/31/2011 7:34:41 PM

Federal regulators issued a notice saying they intend to essentially stop the activities of a Chicago-based commodities trading pool. The U.S. Commodity Futures Trading Commission said Raleigh Capital Management can be disqualified from trading because a federal court injunction was issued against the company last May. The order came after the CFTC charged in an anti-fraud enforcement action that Raleigh and its principal, Richmond Hamilton, Jr., misappropriated more than $1 million from Raleigh Fund, LP, organized by Hamilton. Under the court order, Hamilton and RCM are required to pay a $3 million-plus civil penalty, and are barred from engaging in any further commodity trading activities, the CFTC said. The Raleigh Fund had $8.3 million invested, according to the agency.

Victims Get Chump Change From An $8.7 Million Ponzi

10/31/2011 7:31:58 PM

A receiver is now ready to distribute the remains of an $8.7 million commodities Ponzi scheme that targeted the Chinese community in Oklahoma City, the Edmond (Okla.) Sun reported, but not much is left. The scam was uncovered in a lawsuit filed by the Oklahoma Department of Securities and the U.S. Commodity Futures Trading Commission against two companies and Kenneth Wayne Lee, Simon Yang, and several of Lee's relatives, The Sun said. The suit alleged the defendants took money on the pretext of investing in commodity trading pools. But court records said Lee was accused of giving money from investors to his family and also using it to pay for cars and yacht rentals, the newspaper said. Now, a trustee in the case says that after liquidating all known assets, he came up with only $325,000 to distribute to the scam victims. A judge has ordered Yang to pay $133,000 in restitution, and Lee has been slapped with a $7.2 million civil penalty, The Sun added.

Minn. Accountant Pleads In Mortgage Fraud Case

10/31/2011 7:29:00 PM

Bloomington, Minn. accountant Joseph W. Traxler has pleaded guilty in Minneapolis to aiding and abetting bank fraud in a mortgage scheme that injured innocent home buyers and cheated a bank and its customers out of $8 million, the
U.S. Attorney's Office for the District of Minnesota said. Traxler, 63, was a senior vice president and CFO of Centennial Mortgage and Funding when the scam occurred in 2007-2008, prosecutors said. He was charged with borrowing from bank lines of credit when customers applied for mortgages, but then using the money instead to cover operating costs at Centennial. The government also said Traxler misrepresented the status of mortgages to lenders, covered up loan defaults, and even secured double funding on 23 mortgages. Traxler could get a maximum of 30 years in prison for his guilty plea. A sentencing date has not yet been scheduled, the government said.

 

12-Year Sentence Follows Heart-Breaking Ponzi Tale

10/31/2011 7:49:25 AM

Fraud victim stories are often wrenching. But the tale of Menands, N.Y. Ponzi schemer Christopher W. Bass - who loved expensive liquor, but invoked the name of God when reeling in victims - is something else. The Times-Union said Bass was recently sentenced in Albany to 12 years in prison for taking $5.3 million from 300 victims, who believed they were investing in overseas mobile power plants through his company, Swiss Capital Harbor/USA. At his sentencing, witnesses told how Bass had wrecked their lives through chicanery, the newspaper said. One woman spoke of her retired parents, who divorced after losing $325,000 to Bass. Another victim invested her dead husband's insurance money and lost it, after Bass wooed her with religious entreaties. The newspaper quoted her as saying: “He stroked my hand and said, 'God will give you his blessings.'” As for the unabashed Bass, he told the sentencing judge: “I fully agree with what the witnesses have said today,” The times-Union said. He was ordered to make restitution, but the chances of that actually happening were unclear.

Illinois Scam Nets Man A Nine-Year Prison Term

10/31/2011 7:44:07 AM

By no stretch is he any Bernie Madoff, but Wauconda, Ill. businessman Paul Joseph Cirigliano, who admitted to cheating investors in a video recording scam, is on the way to prison for nine years, the Daily Herald newspaper reported. Cirigliano - who did business as “Paul Cirano” - had solicited investments to buy and resell analog video recording equipment in the U.S. and South America, prosecutors said. He now admits in a plea bargain to ripping off 40 investors for more than $2 million, according to the newspaper. Cirigilano, 55, never bought any equipment, but used the money to pay personal expenses and make Ponzi payments to early investors. The Daily Herald said that when the scam occurred, he was already sporting a resume that included wire fraud and grand theft convictions in 1991 and 1992. The latest case also calls for him to make more than $1.9 million in restitution, the newspaper added.

SEC Seeks $2.87 Million For 2005 Pump & Dump

10/31/2011 7:40:34 AM

Regulators at the Securities and Exchange Commission are still after Joseph Fernando, a stock promoter in Vancouver, British Columbia, charging that he engineered two penny stock pump-and-dump schemes that led to $3.5 million worth of stock sales in 2005. Stockwatch said the SEC sued Fernando in 2009 and got a default order from a court the next year. Fernando and others were alleged to have bought favorable coverage in three tout sheets on Xpention Group and HS3 Technologies, both OTC Bulletin Board stocks. After the publicity helped jack up prices on the stock, Fernando sold, regulators said. One tout sheet had even predicted Xpention stock would skyrocket from $1 to $100 per share, Stockwatch said. So far, the SEC complains, Fernando has ignored its civil action against him. Including disgorgement, penalties and interest, regulators are now asking a judge to make Fernando pay $2.87 million, Stockwatch said.

Boca Man Arrested; Also Facing SEC Allegations

10/31/2011 7:35:34 AM

A tale of waste and deception has risen from the alleged operations of Boca Raton, Fla. wheeler-dealer Scott Kupersmith, 46, according to the South Florida Business Journal. The newspaper said federal agents recently raided the man's office and arrested him on charges that he ran a phony hedge fund and threw away $500,000 from investors on strip club excursions, limo rentals, and expensive hotels. Investigators said Kupersmith lied to investors, claiming he was worth $5 million and that he operated a $20 million hedge fund. In a separate civil action, the Securities and Exchange Commission also charges that Kupersmith and another man never delivered broker fees on stock sales they made, costing brokerage firms more than $2 million, the newspaper added. In the criminal case, Kupersmith faces a maximum penalty of 20 years in a prison and a $5 million fine, the journal said.

Millions Ordered Paid In N. Carolina Ponzi Scheme

10/31/2011 7:32:17 AM

Federal court orders obtained by the U.S. Commodity Futures Trading Commission will require two North Carolina men and their company to pay millions in fines and restitution for a Ponzi scheme that ran for several years, the News-Record reported in Greensboro. Nicholas T. Cox, Rodney M. Whitney, and Integra Capital Management are all on the hook in the CFTC civil case, the newspaper said. Regulators charged that between 2006 and 2009, Cox and Whitney ran a Ponzi scheme involving a commodity trading pool, lying about Intergra's trading success while they squandered investor money to buy property, enjoy swank dinners, and take trips. A federal judge ordered that Cox pay $2.18 million in restitution and another $2.18 million in civil penalties, the News-Record said, and also ordered that Whitney and Integra pay $3.38 million in restitution and a $3.6 million penalty. Both men, as well as the company, were also permanently banned from commodity-related trading. Neither defendant contested the court orders and both are also facing criminal charges, the News-Record said.

It Took 6 Years, But L.A. Detective Got A Suspect

10/28/2011 6:41:45 AM

They may be writing mystery novels someday about the work of Simeon Plyler, an intrepid detective for the Los Angeles County Sheriff's Department who worked for six years to track down alleged Ponzi scheme artist John Chiyuan Lee on the other side of the globe. Plyler's efforts have now been rewarded with the capture of the 40-year-old Lee, who was recently returned from Asia to California for prosecution in a $1.8 million scam case. Events began in 2005, when a West Hollywood, Calif. resident complained about losing money given to Lee to invest in the stock market. Plyler ultimately discovered Lee had skipped the country in 2006, after ripping off 29 residents in Orange, Los Angeles, and Ventura counties for nearly $2 million. Then he began a dogged search for Lee that led to Taiwan, and eventually to Pataya, Thailand, where the man was found. There, federal agents closed in, and Lee was nabbed. He is now back in California facing 31 felony counts of grand theft. Plyler is on to the next case.

Judge Says 'No Way' To Plea Of Nolo Contendre

10/28/2011 6:38:18 AM

Unusual move in an odd criminal case: A federal judge in Youngstown, Ohio has entered a not guilty plea on behalf of an Amish man who had insisted on pleading “no contest” to charges that he scammed members of his religion in 29 states out of $17 million. The Times-Reporter in New Philadelphia, Ohio said Monroe Beachy, 77, is charged with ripping off Amish and Mennonite investors for many years through his company, A&M Investments, of Sugarcreek, Ohio. The Amish traditionally shun the legal system and take care of their own problems, the newspaper said. Beachy is charged with promising low-risk investments, then losing money through higher-risk ventures and covering up the scam by mailing out phony statements to clients. Perhaps in keeping with the Amish tradition, he had wanted to plead nolo contendre and avoid a public trial - a move that brought protests from even his own lawyer. At his arraignment this week, a federal judge rejected the no-contest notion and entered Beachy's not guilty plea for him, the Times-Reporter said. Accordingly, the case will now proceed under English Common Law, not the Amish way.

One Down, Two Standing In Hill AFB Bribery Case

10/28/2011 6:34:48 AM

Jose Mendez could be going from a cushy federal job with the U.S. Air Force to making license plates in prison, after he pleaded guilty in a bid-rigging case. The Salt Lake Tribune said the 50-year-old Mendez, a manager at Utah's Hill Air Force Base, took $1.2 million in cash and merchandise to help a Florida couple get government contracts. He pleaded guilty in federal court this week to conspiracy, bribery, and procurement fraud, the newspaper said. Here's how the scam worked: Using code names and mysterious messages, Mendez was charged with giving inside information on government bids to Sylvester and Maria Zugrav, a couple in their 60s who owned Atlas International Trading Corp. They, in turn, allegedly showered him with money and gifts and then cashed in on fat federal contracts. Not so, say the Zugravs, who maintain that Mendez threatened to kill them if they wouldn't play bribery ball. “We're not guilty and we'll prove it in court,” Sylvester Zugrav told The Tribune. Mendez will be sentenced in February, the newspaper said.

108-Month Sentence Given For $7 Mil Calif. Ponzi

10/28/2011 6:31:34 AM

Guadalupe Valencia is going to a federal lockup for 108 months after she admitted to operating a Ponzi scheme that took in nearly $7 million over eight years, said the FBI's Los Angeles Division. Valencia, 47, of West Covina, pleaded guilty and was sentenced in L.A. on charges that she defrauded investors through a pair of phony companies beginning in 2001. Victims believed they were buying in two pools: one that made real estate investments and another that loaned money to businesses, the FBI said. In fact, there were no profits, and Valencia issued worthless promissory notes and made Ponzi payments to early investors, to keep the wolf away from the door as long as possible, prosecutors said. She was also ordered to pay $5.2 million - the amount investors actually lost - in restitution, according to the FBI.

Alleged Commodities Scam Brings CFTC Civil Charges

10/28/2011 6:28:06 AM

The U.S. Commodity Futures Trading Commission is in hot pursuit of an Idaho man who allegedly lured investors into a commodity pool with claims of high returns and low risk, then commingled some of the funds with his own money to satisfy credit cards bills, car notes, and loan payments. The agency has already obtained a federal court order freezing assets held by Michael Justin Hoopes, of Rexburg, Idaho, alleging that since 2007, he took in a total of more than $11 million through Aspen Trading, LLC, a commodity pool he operated. Hoopes is charged with telling at least two investors he offered low risk and the chance to make annual returns of 20 percent. He also allegedly told others he had never lost money through trading, and could get them returns as high as 30 percent, the CFTC said. His claims were false, the agency charged. Regulators are seeking restitution for Hoopes' customers, plus civil penalties, trading and registration bans, and other sanctions.

 

Wall Street Kingpin Gupta Named In Trading Scandal

10/27/2011 6:56:06 AM

Rajat Gupta, the native of India who graduated from Harvard and became golden on Wall Street, is now under federal indictment, The New York Times said. The 62-year-old Gupta is charged by a federal grand jury with conspiracy and securities fraud. He allegedly spoon-fed stock tips to his buddy Raj Rajaratnam, the disgraced hedge fund manager who was sentenced to 11 years in prison for illegally making millions through insider trading. The Times paints a picture of Gupta as an investment icon who has served as a director of powerhouse American corporations, including Goldman Sachs and Procter & Gamble. He is by far the largest luminary to be caught up in the expansive federal prosecution of inside traders. But Gupta promises to be no easy adversary: He has the bucks to fight a long legal battle, and the Securities and Exchange Commission already backed off from allegations against him when Gupta sued. The Times quoted one of his lawyers, who indicated Rajat Gupta will not go lightly into any good night: “The facts demonstrate that Mr. Gupta is an innocent man and that he acted with honesty and integrity,” the attorney said.

Defaults Led To Deceit And Now To Plea Deal

10/27/2011 6:52:40 AM

Since 1980, a Seaside, Calif. resident had successfully run Cedar Funding, a company that matched real estate developers with investments, the Silicon Valley/San Jose Business Journal reported. But that's all over now, and David A. Nilsen, 61, has pleaded guilty to deceiving people who put money into his company. Nilsen was originally indicted on multiple conspiracy and fraud counts along with a second man, Manoel Errico, who is now a fugitive, the business journal said. Nilsen finally pleaded to one count of conspiracy to commit mail and wire fraud. In doing so, he also revealed how much damage investors suffered when borrowers began defaulting on loans he made: The plea bargain includes an agreement for Nilsen to pay $69.8 million in restitution, the business publication said.

Title Scam Conviction Causes N.Y. Disbarment

10/27/2011 6:47:37 AM

New York attorney Ted Doumazios has just been disbarred, even though he still awaits sentencing on felony wire fraud and conspiracy charges stemming from a mortgage scam, Financialfraudlaw.com reported. Late last year, Doumazios pleaded guilty to using Clearview Abstract, a company he co-owned, to certify clear titles on properties that were far from clear, the Web site said. In making his plea, Doumazios admitted he knew the bogus titles would be used to defraud banks and other lenders, and that he had faxed fraudulent title documents to bilk funds from financial institutions. Now he is no longer an attorney, because New York law calls for automatic disbarment once a lawyer receives a felony conviction, Financialfraudlaw.com said.

Fat Fine, Slim Time In MCSi Conspiracy

10/27/2011 6:44:47 AM

Observers were expecting 44-year-old Michael E. Peppel to go to prison for as long as 10 years for the crash of MCSi Inc., the company he once headed, the Dayton Daily News said. Instead, a federal judge in Cincinnati handed him a $5 million fine and only seven days in prison. The Daily News said Peppel, a father of five, pleaded guilty to reporting false revenues at MCSi, a computer supply company, to conceal losses. When the company folded, employees lost livelihoods and investors lost millions. But U.S. District Court Judge Sandra Beckwith swept aside federal sentencing guidelines that called for eight to 10 years, and issued the mini-sentence because she was moved by letters of support for Peppel that flooded the court, the newspaper said. The Daily News quoted the widow of another former MCSi chief executive as saying: “All the people he hurt, all the money, the millions … and that's all he got? I am absolutely devastated.” Another former company worker told the Daily News: “What a slap in the face to all the employees.”

N.J. Man Wants $5 Mil He Unknowingly Lost To Scam

10/27/2011 6:39:25 AM

Moshael J. Straus, a lawyer and businessman who invested $5.1 million in hedge fund Ascot Partners LP between 1999 and 2002, is asking the New York Supreme Court to confirm a $7 million arbitration award he won because the hedge fund put his money almost exclusively into the firm run by con man Bernard Madoff, according to Bloomberg Businessweek. Straus claims in court filings that the hedge fund's general manager, J. Ezra Merkin, secretly placed investors' wealth with Madoff, receiving millions of dollars in fees, Bloomberg said. Straus protested in arbitration, where it was decided Merkin intentionally breached his duties to investors, the news service said. Now, Straus wants the court to order the return of his cash. Straus, a New Jersey resident, is a trustee at Yeshiva University in New York, Bloomberg added.

Hitchhiking Lawyer Comes Home Again In Handcuffs

10/26/2011 10:42:34 AM

Three years ago, Long Island attorney Edward Christensen disappeared after allegedly plundering money from client trust accounts, Financialfraudlaw.com reported. Now he's coming home again in handcuffs. Suffolk County, N.Y. prosecutors say the case began in 2007, when participants in a real estate transaction put $1 million into an escrow account under Christensen's care. Over the coming months, other funds were added by more clients, and the lawyer allegedly couldn't resist the temptation. He dropped out of sight on Oct. 17, 2008, after $211,000 disappeared from the account, the Web site said. He resurfaced this month when officials learned he had been found hitch-hiking in Wyoming. Back in Long Island, prosecutors said Christensen is charged with grand larceny and scheme to defraud. He faces a November court date and a maximum penalty of 15 years in prison. There would be no charge for the ride to the hoosegow.

Long Trial Scheduled In New Zealand Fraud Case

10/26/2011 10:38:24 AM

Four former directors of Bridgecorp Holdings, a now-collapsed New Zealand property development company, have a lengthy trial ahead of them in Auckland for allegedly defrauding investors of $459 million. Trial is expected to run well into next year, said Television New Zealand, for Rod Petricevic, Rob Roest, Gary Urwin and Peter Steigrad. The government charged the quartet with continuing to publish rosy financial reports that covered up the company's dire situation. In fact, Bridgecorp was failing to make payments to investors as far back as March 2007, TNZ said, and eventually went into receivership. Petricevic, meanwhile, lost a request for free legal aid because the court said he could pay his lawyer from money in a family trust fund. Trial began this week and will run through Nov. 14, then resumes Jan 23. The company's victims will probably recover less that 10 percent of their losses, TVNZ said.

 

Trial Is Underway For Australian 'Life Coach'

10/26/2011 10:35:27 AM

In years past, Robert Norman Dale packed the house with his seminars in Australia that purported to help people improve their lives. But this week, the former “life coach” is defending himself at trial against charges that he used the seminars to defraud investors of $2 million, Goldcoast.com reported. Dale allegedly suckered investors through a company called Water at Wooyung Pty Ltd., misleading them on the risks of buying into a property development venture, prosecutors have charged. One victim testified that he met Dale at a 2003 seminar, and later invested $1 million in Water at Wooyung. But Dale said he discussed the possibility of losses - which he called the “black hole” - several times with the investor. The alleged victim said he didn't recall any such discussions, Goldcoast.com reported. The trial is expected to run for a month in Southport District Court.

UBS Ignored Warning Of $2 Billion Trading Loss

10/26/2011 10:32:16 AM

In London, banking giant UBS has admitted that even though the company's IT system gave warnings, internal controls were lacking when a rogue trader allegedly lost $2 billion on the derivatives desk, Computerworlduk said. Kweku Adoboli, 31, is charged in an indictment with committing false accounting and fraud. In an internal memo and regulatory filings, the bank has admitted that in late 2010, UBS computers did detect unauthorized trading activities when they occurred. But the problem “was not sufficiently investigated,” and no immediate action was taken, Computerworlduk said. The financial effects of the rogue trading have finally been reflected in the bank's newly-published third-quarter report, Computerworlduk said.

Fed Judge Nixes Fraud Action In Allstate Case

10/26/2011 10:29:01 AM

A U.S. District judge in Los Angeles has ruled that Allstate Corp. can't go after the successor to Countrywide Financial Corp. in a fraud case involving $700 million worth of residential, mortgage-backed securities that were downgraded, Bloomberg said. After collapsing in the mortgage crisis, Countrywide was taken over by Bank of America. But on a jurisdictional technicality, federal Judge Mariana Pfaelzer threw out Allstate's attempt to pursue federal securities law claims stemming from Countrywide's dealings over downgraded bonds in 2007-2008. However, she did say Allstate could pursue the claims in state court, according to Bloomberg. The judge also denied a BOA motion to dismiss Allstate's fraud claims. After the ruling, Allstate said it will consider “all options,” including amending the complaint or appealing the decision. Bank of America, headquartered in Charlotte, N.C., had no comment, the news service said.

Calif. Jury Convicts Man For Senior Home Ripoffs

10/25/2011 7:34:33 AM

A former Christian high school basketball coach in Lodi, Calif. has been convicted after a month-long trial for ripping off elderly victims through a business that sold light bulbs and health-care management programs, The Record newspaper reported. By Wall Street standards, the amounts stolen by Larry Cunningham Kimble, 55, were not large, but the hurt to his victims was immeasurable. He defrauded more than $270,000 from a disabled elderly couple he met at church, convincing them to invest in his business, The Record said. Many of his other scams that occurred from 2003 until 2008 happened in the homes of his victims, officials said. Accordingly, he was tried for elder abuse, securities fraud, and six counts of residential burglary. Prosecutor Stephen Taylor told the newspaper that Kimble - who had coached at a Christian high school for five years - received the burglary charges because he ripped off victims in their own homes. “You can't go into a house with the intent to commit evil,” the newspaper quoted Taylor as saying. “It's burglary. It doesn't matter if you have an appointment.”

Third Plea Entered In Mariner Insider Trades

10/25/2011 7:31:20 AM

Another chip fell in the Mariner Energy insider trading case when a Denver hedge fund manager pleaded guilty in Manhattan federal court. Drew K. “Bo” Brownstein, 35, entered his plea to securities fraud charges and allegations that he made $2.5 million in illegal profits by investing in Mariner Energy, Inc. as the company was on the cusp of being acquired by another firm. Brownstein had gotten the trading tip from Drew Peterson, a Denver financial adviser. He, in turn, learned of the pending acquisition from his own father, H. Clayton Peterson, who had been on the Mariner board of directors. Drew Peterson has also pleaded guilty, but has yet to be sentenced. Clayton Peterson recently received a light sentence of two years probation and three months under house arrest, but will also pay a $400,000 fine. Manhattan U.S. Attorney Preet Bharara said Brownstein was “the latest example of a privileged professional to find out he was woefully mistaken” in making illegal trades.

Intermediary Scam Is Road To Federal Lockup

10/25/2011 7:27:29 AM

Ezri Namvar, described by the FBI as a prominent Los Angeles businessman and real estate developer, is going to federal prison for seven years after being convicted at trial of wire fraud. Namvar, 59, had ripped off investors who put $25 million into his “qualified intermediary” fund, believing their money would be held in safekeeping until it was used for real estate investments. Instead, Namvar rolled the cash into another of his companies, using it to prop up the second operation and pay creditors, prosecutors said. The “intermediary” company, Namco Financial Exchange Corp., went bankrupt in 2009. His controller, 61-year-old Hamid Tabatabia - described by the FBI as Namvar's “right-hand man” - was also sentenced to 21 months in prison.

Boiler Room In Brooklyn Ends In Federal Guilty Plea

10/25/2011 7:24:16 AM

A New York boiler room investment scam that ran for five years has resulted in a guilty plea from one of the people involved, said the U.S. Attorney's Office for the Eastern District of New York. Alan Labiner, 52, pleaded before a federal judge to conspiracy to commit securities, mail and wire fraud. An indictment charged that from 2004 to 2009, Labiner and three co-defendants operated a boiler room in Brooklyn, fleecing 50 or more investors out of $6 million by selling them stock in Manhattan North Real Estate Investment Trust, Next Point USA, Inc., Grant Boxing, Inc., and Exposure Management Group. The phony stocks were in private companies purported to be involved in real estate, credit card investments, boxing equipment and clothes, and promoting musicians, actors, and models, the government said. The defendants were accused of squandering their profits on strip clubs and tanning salons. Labiner is the second to plead guilty in the case thus far, according to prosecutors. Many of his investors were elderly people who were stripped of their retirement savings.

'Black Pete' Sentenced In Canadian Pump And Dump

10/25/2011 7:21:09 AM

Petar Vucicevich, the Ontario stock impresario who helped bilk investors out of millions by promoting a phony hotel construction project in the Middle East, has been sentenced to three years in a Canadian prison. The Ontario Star said a judge also ordered the Vucicevich, 43 - dubbed “Black Pete” because of his constantly dark wardrobe - to repay $5.6 million to Canadian regulators. Vucicevich was a major player in a 2006 fraud, in which he and others raised money for the hotel project undertaken by now-defunct construction company Sulja Brothers. The project was never built, The Star said. Vucicevich ultimately pleaded guilty in September to fraud counts in the scheme, which had temporarily catapulted prices of the company's stock. The Ontario Securities Commission had already fined Black Pete $775,000 and banned him from participating in the stock market ever again, The Star said. No word on what they're wearing in Canadian prisons these days.

Citigroup Pays $285 Mil Penalty In CDO Fiasco

10/24/2011 7:38:35 AM

There's now more evidence of how intense the greed became on Wall Street, as the U.S. was sliding into a mortgage crisis in 2007. Citigroup Global Markets, the banking firm's main domestic broker-dealer subsidiary, has consented to a Securities and Exchange Commission demand that it be punished to the tune of $285 million for its actions in a mortgage-related debt package that collapsed, Compliance Week reported. Regulators said the company played a major role in selecting assets for the $1 billion collateralized debt obligation portfolio, then profited by placing short positions and betting the package would be a flop. It was, and Citigroup raked in its chips while investors suffered. They “were not informed that Citigroup had decided to bet against them,” the SEC's enforcement director said in announcing the penalty. The Citigroup settlement breaks down like this: The company will pay $160 million in disgorgement, $30 million in pre-judgment interest, and penalties of $95 million. The money will be given back to investors through a fair fund distribution, Compliance Week said.

Judge Takes High Road In Ponzi Case Repayment

10/24/2011 7:34:35 AM

Even when Ponzi schemers get caught and convicted, some of them squawk when it's time to pay the piper. Such is the case of Edward May, 75, of Michigan, who was sentenced earlier this month to 16 years in federal prison, Crain's Detroit Business reported. Prosecutors say he owes victims $49.4 million in restitution. However, Crain's said, May insists he only owes $17 million. May was convicted for swindling 720-plus people in a $350 million limited liability corporation scam, believed to be the biggest Ponzi in Michigan history. But he and his lawyers say victims only substantiated $17 million in losses, Crain's said. There actually were only about 250 victims, the defense maintains, and all those shouldn't be compensated because they didn't properly document their losses. A federal judge in Detroit disagreed, and stuck to the restitution figure of nearly $50 million, Crain's said.

 

Poor Marian Morgan Has A New, Expensive Lawyer

10/24/2011 7:30:45 AM

When she was convicted of securities fraud in September, former Florida socialite Marian Morgan had enjoyed the free services of a court-appointed lawyer for almost two years, the Herald Tribune reported in Sarasota. Now she has hired a high-priced legal gun to handle her appeal, leading observers to wonder: Where's the money coming from? Morgan and her husband took $28 million from investors and spent $11 million on themselves - for luxuries including a boat, cars, and two waterfront homes, the Herald Tribune said - before she pleaded poverty and got a free lawyer. But her latest legal maneuver, a motion for a new trial, has been filed by Barry Cohen, part of a firm the newspaper described as “one of the best known and best paid defense firms in the state.” Cohen refused to discuss the issue with the Herald Tribune, which quoted him as saying: “That is not any of the public's concern as far as I am concerned.” One sources said Cohen's retainer alone would likely run $100,000, the newspaper said.

 

Clawback Suits Filed Over Rothstein 'Toys' Profits

10/24/2011 7:27:19 AM

Imagine paying $57,000 for cigars, nearly $10 million for watches and love trinkets, or $1.5 million for a car, and you'll get a portrait of how good life was for Scott Rothstein, the South Florida lawyer and Ponzi artist. Five clawback lawsuits have now been filed against retailers who received millions that Rothstein squandered, the Sun-Sentinel reported. Federal law allows bankruptcy trustees to go after those who profited off Rothstein- even if they were unaware the money came from illegal activities - and pass the profits along to his scam victims. Rothstein sold wealthy investors “shares” in lawsuit settlements that didn't exist, earning millions and a 50-year prison sentence. Retailers now being sued by Rothstein trustees include Brauman Motors, of Miami ($1.5 million); Levinson Jewelers in Fort Lauderdale ($9.8 million); other auto and motorcycle dealers; and Muhammad Sohail's Ultimate Cigars ($57,500), the Sun-Sentinel said. An attorney for the jewelry store dismissed the clawback lawsuit as “baseless,” the newspaper said.

CFTC Gets $6.8 Mil Fine In Bottolfson Ponzi Game

10/24/2011 7:22:40 AM

The U.S. Commodity Futures Trading Commission has lowered the boom on former California trader Scott Bottolfson and two of his companies, obtaining a court order with penalties of more than $6.8 million, plus permanent trading and registration bans, Futures Magazine reported. Bottolfson, who has already been sentenced to 60 months in prison, was charged by the CFTC and the FBI with operating a commodity pool Ponzi scheme through his companies, Spirit Investments of Encinitas, Calif., and Increase Investments, of Reno, Nev. Bottolfson and his companies took in $14 million from investors and misappropriated $11 million in clients funds, regulators said. He actually invested only $2.97 million in trading accounts and lost a big chunk of that, the CFTC said. The rest went to cover personal expenses and make Ponzi payments to early investors. Bottolfson was found guilty on the criminal charges last February.

Chen Yi Liang Pleads Guilty To FDA-Insider Trades

10/21/2011 8:00:07 AM

The saga of Chen Yi Liang is almost over, with the Food and Drug Administration chemist pleading guilty to insider trading and making a false statement, the Associated Press reported. The 57-year-old Liang admitted that for five years, he bought and sold thousands of shares of pharmaceutical company stocks, based on insider knowledge of pending drug approvals that he stole from FDA computers. He and his son, Andrew Liang, used the $2.3 million they illegally made to take trips and buy luxury cars, prosecutors said. Insider trading charges against Andrew Liang have now been dropped, but he still faces charges in a child pornography case. Chen Yi Liang faces possible fines in the millions, as well as forfeiture orders, and could go to prison for more than 20 years. However, the AP said, under federal sentencing guidelines, he's more likely to get about seven years at his sentencing in January.

 

Adviser Loved Dancers, But He Won't Love Jail

10/21/2011 7:56:30 AM

Michigan financial adviser Keith Epstein had a taste for gambling and strippers, and stole from elderly investors to finance his quirks, according to Crain's Detroit Business. Now he has been sentenced to eight years and one month in prison, and must repay his victims $4.1 million, the business publication said. The sentence for Epstein, 56, was handed down by a federal judge in Detroit, after investigators determined that he coerced at least 15 clients - many of them elderly people - to liquidate other investments and write checks to him or his company, Crain's said. The money was used to make Ponzi payments to earlier investors, underwrite gambling junkets and adult entertainment, and support “multiple exotic dancers,” prosecutors charged. It was unclear whether Epstein would get credit for 12 months of jail time already served in a related case, the newspaper added.

Search Is On For Alleged Ohio Broker-Ponzi Artist

10/21/2011 7:52:46 AM

First he was there, and then he wasn't. Now, a number of people in Central Ohio are looking for stock broker Jeffrey Kelly, alleging he convinced them to invest in several “funds” he claimed to be starting, the Columbus Dispatch reported. The FBI is investigating, and victims have complained to the Financial Industry Regulatory Authority, the newspaper said. One investor, a doctor, told the newspaper he sunk almost $200,000 into Kelly's funds, and lost it all. He had previously used Kelly's services at three different brokerage firms, and was lured into the new investments with promises of annual returns up to 10 percent, the Dispatch said. Other victims said they came to know Kelly through mutual friends, church, or other religious groups. “The financial industry is complicated,” a lawyer representing the cheated investors told the newspaper. “We are taught to trust people with experience in certain areas.” Kelly is now thought to have abandoned the chilly climes of Ohio for Florida, the Dispatch said.

Need Money? Don't Call This Fellow Up In Maine

10/21/2011 7:49:01 AM

Distressed business owners who couldn't get conventional financing may have appreciated help they thought they found from Donald Shields, of Augusta, Maine, according to a story byMainebiz. Telling them he had magic pull with investors, Shields took payments from companies that believed he could help them procure loans to stay afloat or grow. But it was a scam, the Maine Attorney General's Office said. Shields has now been sentenced to nearly a year in prison on a count of felony theft, Mainebiz said. He pleaded guilty in 2010, but sentencing was deferred until now, to allow time to make restitution to victims. Before conning the business owners, Shields had racked up previous convictions for forgery and mail fraud, Mainebiz added.

Back-Scratching Partners Targeted By Fed Charges

10/21/2011 7:45:14 AM

As the feds tell it, Sylvester and Maria Zugrav and Jose Mendez allegedly had a sweet deal going from 2008 until 2011, courtesy of the U.S. taxpayers. Mendez, 49, of Farr West, Utah, worked for the Air Force Foreign Materials Acquisition Support Office, which buys materials from outside the United States. Sylvester Zugrave, 68, and Maria Zugrav, 66, of Sarasota, Fla., were principals in Atlas International Trading Corp. - a firm permitted to sell goods to the office where Mendez worked. A new federal indictment returned in Salt Lake City alleges they took marvelous care of Mendez, giving him cash and valuables worth more than $1.2 million. In return, Mendez cared tenderly them, allegedly passing along information on government budgets and bids by competitors. Much like insider traders in the stock market, the ring is charged with using covert e-mail addresses, false names, and code words. When communicating, they referred to cash as “literature,” said the Department of Justice. Members of the trio are now variously charged with conspiracy, procurement fraud and bribery, the government said.

 

Alleged Investment Scam Results In Assets Freeze

10/20/2011 7:30:00 AM

A court has issued an order freezing the assets of a Texas man accused by the Securities and Exchange Commission of using his company to entice investors out of $35 million, with allegedly false claims that he was raising the money to buy and restructure pools of bad home mortgages. Courthouse News reported that 42-year-old James G. Temme, of Plano, is charged with fraudulently raising money for at least three years through his company, the Stewardship Fund. Temme and Stewardship, the SEC said, “made multiple material misrepresentations and have misappropriated investors funds,” according to Courthouse News. Adding that Temme had constructed “a web of deceit,” the SEC also said in its complaint that he “was just pocketing the investments and using the proceeds for his own illicit purposes.” A U.S. District Court judge issued the freeze order on assets held by Temme and his company, and is expected to hear the SEC's request to appoint a receiver and issue an injunction, Courthouse News added.

Enron CEO's Future Still Hanging In The Balance

10/20/2011 7:26:55 AM

As he sits in a Colorado federal prison, the future still lies undecided for Jeffry Skilling, whose actions helped cause the collapse of Enron, The Houston Chronicle said. Depending on what happens, Skilling could serve his entire 292-month sentence, or … maybe not. The confusion comes from various rulings on appeals and interpretations of federal sentencing guidelines. In 2006, Skilling was convicted on multiple counts of securities fraud, making false statements, and insider trading, and was sentenced to more than 24 years in prison. That would see him released at age 74. However, Skilling's lawyers have engaged in various legal machinations, at one point managing to have his sentence vacated by an appeals court, although another court later upheld sentencing. Bottom line: He now needs to be re-sentenced, but no sentencing date has been set. Depending on what happens, The Chronicle said, Skilling could get out of prison “well before” his expected time, “and still in the prime of life - or he might serve what amounts to a life sentence,” the newspaper concluded.

Top EU Official Calling For Stiff Finance Laws

10/20/2011 7:23:35 AM

The top official in the European Commission is calling for personal criminal penalties against financial sector wrong-doers whose actions lead to problems in the general economy, The Telegraph reported in the United Kingdom. The newspaper quoted statements given to a French newspaper by Jose Manuel Barroso, who wants such legislation from EU member nations that don't yet have it. “We have seen abusive behavior on the markets, some of which has provoked the current crisis,” the newspaper quoted Barroso as saying. “We are going to regulate these practices. Those who violate them will incur criminal penalties.” The move comes as criminal sanctions in the U.S. keep getting stiffer, as evidenced by the recent 11-year sentence given to hedge fund kingpin Raj Rajaratnam for insider trading. In Europe, a current debt crisis has already led to massive bailouts for Portugal, Ireland and Greece, the Telegraph noted.

Former CEO Of SemGroup Settles Complaint By SEC

10/20/2011 7:20:17 AM

A civil complaint filed against the former CEO of SemGroup LP by the Securities and Exchange Commission was resolved with lightning speed, the Tulsa World reported. The same day it was filed, the newspaper said, Tom Kivisto consented to the complaint and agreed to pay fines of $225,000 and give up $1.2 million in stock. The issue stemmed from 2007-2008, when regulators said Kivisto lured investors into a SemGroup subsidiary, with promises their money was secured by $100 million flowing annually from SemGroup's trading in oil futures, the World said. But SGLP's stock plummeted by 50 percent in 2008, after the company's trading strategy caused a $2.7 billion loss. The SEC said Kivisto “should have known that SemGroup was not successfully managing commodity price risk,” according to the World. However, as often happens, Kivisto took his financial licks without having to admit or deny wrongdoing, the newspaper said.

 

Felony Charge Dropped In Outraged Ponzi Victim Case

10/20/2011 7:14:37 AM

Next month, Kurt Barton, who formerly ran a Ponzi scheme through his Triton Financial in Austin, Texas, will be sentenced on 39 counts of securities fraud and money laundering. But he could have just as easily wound up dead, the Austin
American-Statesman said. In December 2011, a woman named Christine Cayton went to the Triton offices, trying to recoup $125,000 she had invested with Barton, who was ultimately convicted of taking $75 million from investors in a Ponzi scheme. Cayton was later accused of pulling a handgun on Barton, before it was wrestled away by another client who was there trying to recover his own stolen money, the Statesman-American said. Cayton was charged with aggravated assault, a felony with a maximum punishment of 20 years in prison, the newspaper added. Now, that charge has been lowered to a misdemeanor count of unlawfully carrying a weapon. The newspaper quoted a prosecutor as saying that, “based on all the circumstances,” he believed the lower charge - which carries a maximum one-year term, if any at jail time all - “will serve the ends of justice.”

SEC-Deloitte Duel Still Rages In Longtop Issue

10/19/2011 9:23:30 AM

Accounting giant Deloitte Touche Tohmatsu continues to resist efforts by the Securities and Exchange Commission to acquire the company's records on Longtop Financial Technology Ltd., a firm based in the Cayman Islands, Law.com reported. Regulators have been trying for weeks to get their hands on books held by Deloitte's Shanghai unit, which audited Longtop for several years until allegations of fraud by Longtop arose. DTT has protested that its U.S. counsel is not authorized to accept service on certain court documents. Instead, the company insists that service be made through a roundabout international method, which the SEC said will cause “a substantial delay and a waste of resources,” Law.com said. A federal judge is now deciding whether she can issue a show-cause order, which would trigger subpoena enforcement action against DTT. At stake in the battle is the fate of what could become a billion-dollar fraud investigation of Longtop, Law.com said.

 

Former NAPFA Chief Is Target Of An FBI Search

10/19/2011 9:20:04 AM

Mark F. Spangler, a former president of the National Association of Personal Financial Advisors, recently had his home searched by FBI agents, who said in an affidavit that they were looking for evidence of money laundering and mail, wire, and securities fraud, InvestmentNews said. The search occurred in September, the newspaper said, at Spangler's home in the Seattle area. He had been president of The Spangler Group, Inc., an advisory firm that managed $106 million before lurching into receivership last June, InvestmentNews said. An FBI affidavit filed in the case also said Spangler had told investors their money was going into the stocks of publicly traded companies, but he had invested in “high risk private companies” without the consent of clients, InvestmentNews explained. Spangler was known to have personal and business interests in at least two of the companies, one of which closed and cost investors $50 million, InvestmentNews added. Spangler was president of the NAPFA in 1999.

Lawyer: U.K. Hedge Fund Sold Worthless Securities

10/19/2011 9:16:32 AM

In a London civil trial, a lawyer for administrators of a collapsed hedge fund has accused Magnus Peterson, the firm's founder, of orchestrating a scam that led to the loss of “hundreds of millions of dollars,” Bloomberg reported. Attorney Robert Anderson told a court that Peterson, founder of Weavering Capital (UK) Ltd., promised investors annual returns up to 12 percent, and told them the low-risk fund could be easily liquidated, Bloomberg said. But Anderson said the fund's assets consisted mostly of interest rate-sensitive “swaps,” which he described as “worthless.” Following the financial crisis of 2008, the $600 million hedge fund went under, and investors lost. Peterson and another man were initially arrested by British fraud officials, who later decided not to bring charges because they lacked the ammunition for a criminal conviction, Bloomberg said. Arguments from the defense will come later in the trial, the news service added.

Jailhouse Scam Partner Gets 33-Month Sentence

10/19/2011 9:13:33 AM

Kapua Keolanui, who was an accomplice in the Perry Griggs scheme to defraud inmates behind prison walls, has received a 33-month sentence, reported KITV in Honolulu. Griggs infamously concocted a phony investment scheme that defrauded fellow inmates from Hawaii when he was incarcerated on a previous case in a mainland prison. Officials charged Keolanui with wire fraud, for bilking victims through an operation called Paradise Trading. She was charged with sending part of the profits to Griggs, and pleaded guilty last year. In addition to her prison term, she was ordered to make $837,000 in restitution to six families, KITV reported. As for Griggs, he is serving 87 months for his jailhouse scam.

Picard Sues Jewish Group In Madoff Clawback Case

10/19/2011 9:10:53 AM

It's well known that Jewish investors were among the chief targets of Bernard Madoff's $65 billion Ponzi scheme, which landed him in federal prison for a 150-year sentence. Now, the trustee in his firm's bankruptcy has filed a lawsuit to recoup $5.2 million in Ponzi money from a Jewish organization that cashed in on Madoff investments, reported JTA, a Jewish news organization. Trustee Irving Picard has filed one of his many “clawback” lawsuits against the Jewish Association for Services for the Aged, saying the money was withdrawn from Madoff accounts over a six-year period. The organization believed the withdrawals came from legitimate profits, JTA said. Picard's lawsuit, filed with the bankruptcy court for The Southern District of New York, may or may not be wholly successful: In a recent similar case filed against the owners of the New York Mets, a judge limited Picard to clawing back only money that had been withdrawn from Madoff accounts over the last two years of the Ponzi scam.

First Pegasus Defendant Jailed In Wireless Fraud

10/17/2011 9:34:57 PM

Stephen Durland, a partner in a $30 million-plus fraud that ran for five years, has been sentenced in San Francisco to 33 months in prison, the Wenatchee World reported in Wisconsin. Durland had been an executive along with East Wenatchee businessman Jasper “Jay” Knabb, when the two sold shares in Pegasus Wireless Corp, the newspaper said. The shares were sold to cover non-existent debt and the two pocketed the profits, the World explained. Knabb pulled in about $29 million and Durland made $2.1 million, prosecutors said. Durland had cooperated with investigators in the case. Knabb has pleaded guilty to securities fraud and other related charges, and will be sentenced in San Francisco on Nov. 3, the newspaper added.

'Mini Madoff' Defendant Gets 25 Years In Prison

10/17/2011 9:31:55 PM

A con man was been sentenced in New York to serve 25 years in federal prison and repay $170 million to thousands of investors who bought his promises of returns up to 80 percent, Reuters reported. Although his victims were mostly working-class and military people instead of millionaires, 40-year-old Nicholas Cosmo had been nick-named “the Mini-Madoff” by the press after his Ponzi scheme collapsed, because it resembled the giant Ponzi run by Bernard Madoff. Through two companies called Agape World Inc. and Agape Merchant Advance, Cosmo had peddled what he presented as investments in commercial loans to small businesses. When the feds caught up with him, he pleaded guilty in 2010 to mail and wire fraud. Reuters quoted Loretta Lynch, the U.S. Attorney for the Eastern District of New York, as saying Cosmo “crushed the hopes and dreams of everyday citizens.”

'Sex and Stocks' Figure Receives A Trading Ban

10/17/2011 9:29:18 PM

Richard Hansen, the 71-year-old ex-investment banker who did a short jail stint after the “sex and stocks” insider trading case, has been banned from the brokerage business and from serving as an officer or director of a publicly traded company, according to Stockwatch. Hansen already received three months in jail after trading on insider tips he got from a woman he met through a Web site catering to people looking to cheat on their spouses. The woman, Donna Murdoch, had tipped Hansen on two corporate takeovers, netting him and a friend $215,000 in illegal trading profits, Stockwatch said. Murdoch made $350,000 from the trading tips herself, pleaded guilty in 2008, and spent six months under house arrest. She had traded on multiple takeover tips she received on the same Web site from a partner with the accounting firm Ernst and Young. Although not enormous in scope, the case titillated Wall Street, and was named the “sex and stocks” case by the New York Post. Along with the bans, Hansen also agreed to pay $30,816 to settle with the Securities and Exchange Commission, Stockwatch added.

Dec. Sentencing Set For Australian 'Robin Hood'

10/17/2011 9:26:26 PM

Simon Finnegan, once a high-flying investor and multi-millionaire in Australia, will be sentenced in December on nine charges that he flim-flammed victims out of $1.8 million, the Herald newspaper reported in that country. The newspaper said investors poured money into Finnegan's ventures, including a miracle product made by Biotech Solutions, which he claimed could be used for anything from cleaning drinking water to purifying gold. Meanwhile, Finnegan, 49, threw lavish parties - one of his “networking” parties reportedly cost $100,000 - and spent most of the money from his victims to pay off Visa card bills for worldwide travel and other expenses, the Herald reported. “He said he was true to his investors and he was like Robin Hood to all of us,” one victim was quoted as saying in court. After Australian regulators caught up with him, Finnegan pleaded guilty to nine of 14 charges filed against him. The maximum possible price is 45 years in prison and fines of nearly $2 million, the Herald said.

Defendant To Court: 'SEC Needs To Leave Me Alone'

10/17/2011 9:23:49 PM

Luis Sanchez wants off the hook in a Securities and Exchange Commission insider trading case that he maintains should be put to rest, Stockwatch said. Things began in August 2010, when Sanchez, a 37-year-old stock trader, allegedly received insider information that Potash Corp. of Saskatchewan Inc. would receive an acquisition offer from another company. Sanchez and stock analyst Juan Garcia put $61,168 into Potash options, which quickly became worth more than $1.1 million after the news was announced, according to Stockwatch. Sanchez cooperated with the SEC in a subsequent investigation, and last May, he agreed to settle by disgorging more than $626,000 in illegal profits - without admitting to wrongdoing. Now, in a federal court motion he filed in the Northern District of Illinois, Stockwatch said, Sanchez maintains there is no evidence to prove he actually had advance personal information on the buyout proposal. His trading decision was based on experience, analyst reports, and trading patterns, the court filing maintains. Adding that the SEC still has not produced evidence of insider trading, Sanchez is asking the court for a summary judgment to get rid of the federal complaint.

'Insidious' Ponzi Artist Gets 10 Years In Prison

10/16/2011 12:20:30 PM

A Troy, N.Y. crook whose financial victims included his boyhood wrestling coach, neighbors, and a volunteer fire department, is gong to prison for 10 years and a month, The Times-Union reported. Matthew J. Ryan, 46, used his American Integrity Financial Co. as a Ponzi scheme to rip off 53 investors for $5 million between 2002 and 2010, the newspaper said. He promised guaranteed, three-year, fixed-rate investment contracts, but actually used the money to refinance a real estate business, make Ponzi payments to early investors, and buy luxury cars, federal prosecutors said. One victim who lived near Ryan testified to watching him tool around in his Mercedes-Benz while he was free on bond. Another victim told how Ryan ripped off a volunteer fire company for $364,000, leaving the department penniless. At sentencing in Albany, N.Y., Ryan told Chief U.S. District Judge Norman Mordue that he was sorry for his actions. Mordue, the Times-Union said, replied to Ryan this way: “How can I define you? Insidious.”

24 Are Charged In Fla. Medicare Drug Scheme

10/16/2011 12:16:38 PM

A federal crackdown on Medicare fraud is continuing in South Florida, with charges issued against 24 people accused of using the federally-funded health-care system to fraudulently prescribe powerful narcotics and then sell them on the street, said the South Florida Business Journal. The newspaper said those named in a federal indictment included a pharmacist, a doctor, and two pain clinic operators. The government is charging that from 2007 to 2011, pain clinics in Broward and Miami-Dade counties fraudulently prescribed oxycodone and oxymorphone to sham patients. The prescriptions were then filled by unscrupulous pharmacies, the FBI said, and the drugs were ultimately sold on the black market. Federal officials said oxycodone, a potent pain-killer, causes more drug overdoses that heroin and cocaine combined, the Business Journal reported. Others arrested in the case included the phony patients and those who recruited them, as well as drug distributors, the government said.

 

Light Sentence Given For Insider Trading Tip

10/16/2011 12:12:32 PM

A former CPA who pleaded guilty to violating his trust as a board member and leaking information on a pending corporate acquisition won't be going to prison, Finalternatives.com said. H. Clayton Peterson was a director of Mariner Energy when he tipped his son, a hedge fund manager, on Mariner's pending acquisition by another company. The son, Drew Peterson, then tipped another fund manager, who made trades based on the tip, prosecutors said. Father and son both pleaded guilty to securities violations. While Drew Peterson has not yet been sentenced, a federal judge has let H. Clayton Peterson off with three months of house arrest, two years of probation, and a $400,000 fine. The judge said he considered Person's service in the Vietnam War and long business career in deciding the sentence, Finalternatives.com said. The Web site quoted the elder Peterson as saying: “I will live with this stigma for the rest of my life.”

Fed Class Action Suit Alleges Ponzi Actions

10/16/2011 12:09:00 PM

A federal class action lawsuit filed in Raleigh, N.C. is going after Ephren Taylor - a self-described man of God, entertainer, motivational speaker, and business pioneer - claiming he engineered Ponzi schemes that have stripped minority investors of millions of dollars, Courthouse News reported. Many of Taylor's alleged victims, believing they were buying promissory notes in socially conscious investments, have lost their life savings and retirements, said lead plaintiff William Lee in the lawsuit against Taylor and several other people and corporations associated with him. On the Web, Taylor, the CEO of City Capital Corp., promotes himself as a spiritually-driven entrepreneur who is the youngest-ever African-American to serve as CEO of a publicly-traded company. But the lawsuit charges that Taylor has persuaded many church-going minorities to invest in his ventures, often leaving them penniless in the end. “There is no evidence that Taylor ever generated any type of profit” for his clients, Courthouse News quoted the lawsuit as saying.

Former N.J. Cheese Exec Challenges His Sentence

10/16/2011 12:06:20 PM

A former New Jersey businessman who was convicted of securities fraud in 2007 - after organized crime allegedly took control of his company and looted it - is challenging his sentencing again, this time through a civil lawsuit,The Record newspaper reported. Mark Cocchiola, the former CEO of cheese manufacturer Suprema Specialties, Inc., is alleging that his former lawyer did not properly argue at his criminal trial that the failure of the company was the result of a “bust out” scheme, when outsiders seize control of a company and loot it. Suprema fell apart in 2002, after the firm faked $568 million in sales and secured a bank loan of $99 million, and also sucked investors into a $41 million secondary public offering, The Record said. Cocchiola went to prison for 15 years, and others also got jail time in the case. Now, the former cheese whiz contends in his new lawsuit that his attorney botched the case and the federal trial court judge also refused to allow expert witness testimony that may have cleared him. Cocchiola has already lost two criminal court appeals in the case, The Record added.

Sentence For Rajaratnam: 11 Years In Fed Slammer

10/14/2011 5:55:27 AM

Raj Rajaratnam, the biggest insider trading fish landed by federal prosecutors, is going to prison for 11 years - the longest term handed out in the expansive probe, but far less than the government wanted, according to USA Today. When sentencing Rajaratnam on Thursday, federal Judge Richard Holwell also fined him $10 million. The judge said the 54-year-old Galleon Group hedge fund mogul, who was born in Sri Lanka, had made more than $50 million through illegal trades based on insider corporate information. Rajaratnam's actions, the judge said, “reflect a virus in our business culture that needs to be eradicated.” But he also cited Rajaratnam's charitable acts and his medical maladies that include diabetes and the need for a kidney transplant. Rajaratnam was convicted at trial last May, in the most highly visible securities fraud courtroom drama in recent memory. Prosecutors had sought a minimum sentence of 19 ½ years. At sentencing, USA Today said, Assistant U.S. Attorney Reed Brodsky called Rajaratnam “arguably the most egregious inside trader to face sentencing in a courthouse in the United States.” He will report to prison Nov. 28, the newspaper said.

Here's The Scorecard On Insider Sentencings

10/14/2011 5:51:53 AM

Now that Raj Rajaratnam has gone down in criminal court, it's time for a scorecard on others who have been nailed in the U.S. Government's extensive insider trading crackdown. Herewith, a “fact box” on major insider cases, as compiled by Reuters: The Goffer boys, Zvi and brother Emanuel, were sentenced to 10 and three years in prison, respectively. Craig Drimal, who made more than $7 million by trading on insider tips, was sentenced to 5 ½ years and ordered to pay $11 million in restitution. Daniele Chiesi, an ex-beauty queen and trader, got 2 ½ years. Hedge fund manager Mark Kurland, Chiesi's former boss and lover, was sentenced to two years and three months. Winifred Jiau, a Taiwan-born “expert network” researcher in California who peddled insider information for cash and gifts, was sentenced to four years. At sentencing, she apologized to her dog.

 

Kimelman Sentenced A Day Ahead Of Ratjaratnam Case

10/14/2011 5:48:36 AM

Michael Kimelman, a lawyer-turned-stock trader who was convicted of insider trading along with brothers Zvi and Emanuel Goffer, has been sentenced to 2 1/2 years in prison and ordered to forfeit $289,000, Bloomberg Businessweek reported. The action came the day before Raj Rajaratnam was sentenced. Kimelman had been convicted of a scheme to bribe two lawyers for insider information used to make illegal stock trades on companies including 3Com Corp., Axcan Pharma Inc., and Hilton Hotels. His co-defendants, Zvi and Emanuel Goffer, had already been sentenced to 10 and three years, respectively. At his New York sentencing by federal Judge Richard Sullivan, Kimelman displayed considerably more pluck that Zvi Goffer, who cried at his own sentencing. Although he continues to insist he was innocent, Kimelman told the judge he had been aware conviction was a possibility when he elected to stand trial. “Now that has happened. I am ready to pay the price and face the consequences of my decision,” Bloomberg quoted Kimelman as saying.

SEC Files Complaint In California Oil-Gas Scam

10/14/2011 5:43:42 AM

A fraudulent oil investment scheme that allegedly ran for five years, ended in 2005, and took investors for more than $3.2 million, has resulted in a Securities and Exchange Commission complaint filed in California. Regulators charge that Jerry L. Aubrey and his brother, Timothy J. Aubrey, solicited investments and promised annual returns of 50 percent-plus from oil and gas ventures in West Virginia. Their company, Progressive Energy Partners, LLC, made cold calls and used high-pressure sales tactics, while the firm “never engaged in any profitable business operations,” the SEC said. Instead, the Aubreys took the money and lived an extravagant lifestyle in a huge Orange County, Calif. home with sharks swimming in giant fish tanks, a pool, tennis courts, extensive vacations, and limousine rides to their reserved seats at Los Angeles Lakers games. The SEC is charging the brothers and two of their former salesmen with securities violations and seeks disgorgement, penalties and interest, plus permanent injunctions. Jerry Aubrey is already serving a five-year prison term in Florida from another securities fraud case, the SEC added.

CFTC Decrees Demand $19 Million From Texans

10/14/2011 5:39:57 AM

The U.S. Commodity Futures Trading Commission has obtained consent decrees ordering two Texas men and their companies to pay more than $19 million for defrauding investors who thought they would get sky-high returns from a foreign currency exchange trading scheme. The orders are against Ray M. White and CRW Management LP, and Christopher R. White and Hurricane Motor Sports LLC, all of Mansfield, Texas, the CFTC said. Orders require Ray White to pay more than $9.5 million in civil penalties, while all the defendants are ordered to pay an equal amount in disgorgement. The CFTC said that between 2006 and 2008, the Whites solicited $11.9 million from 411 customers, promising annual returns as high as 416 percent through foreign exchange trading investments. “However, CRW never traded forex,” and the deal was a Ponzi scheme, the CFTC said. Ray White and his son, Christopher, used investor money to buy homes and property and pay unrelated expenses, the feds said. Ray White has already pleaded guilty to related criminal charges and was sentenced to 10 years in federal prison.

Second Goffer Going To Prison For Extended Term

10/12/2011 8:51:31 PM

The other shoe has fallen in the case of the Goffer brothers, with one now following the other to federal prison for a three-year sentence on insider trading charges, Stockwatch said. Emanuel Goffer, 33, was sentenced in New York by federal Judge Richard Sullivan in the government's expansive insider trading case. His older brother, Zvi Goffer, had already been sentenced to a 10-year term. Prosecutors charged that the brothers made as much as $2.4 million by trading stocks based on insider tips on corporate takeovers. Emanuel Goffer had pleaded for a light sentence because he said his lawyer wife would be forced to take care of their two children. One child has a development disability and the other is an infant. The judge was apparently largely unmoved, although the three years in prison falls below the five-year maximum prosecutors had sought. Emanuel Goffer was also ordered to forfeit $761,623. Still pending is a Securities and Exchange Commission civil suit against him and others, according to Stockwatch.

Good Advice To Seniors: Check Before Investing

10/12/2011 8:45:50 PM

In case after case, older people are the ones who suffer the most from securities fraud. Almost daily, thestreetsweeper.org reports on cases of senior citizens losing their homes, retirements, and other assets to investment scoundrels who promise them the moon. Now, the Utah Division of Securities has issued a warning to seniors, as reported by the Salt Lake Tribune, specifying areas that should raise red flags. Watch out for claims that investing in distressed real estate can make you rich quick, the division said. Also look long and hard before buying into energy or oil and gas schemes, gold investments, promissory notes, or “life settlement contracts,” which take your money and promise huge payouts by investing in life insurance policies that pay off when other people die. Be aware of affinity fraudsters, who prey on members of a particular race, religion, nationality or organization. Ask to see proof from any securities sales person whose educational or licensing claims seem exaggerated. Deal only with licensed investment advisers or securities brokers. And if in doubt, contact your state's securities regulatory agency. Bottom line: Make a check before writing the check.

 

Last Of Madoff's Empire Closes The Doors In N.Y.

10/12/2011 8:39:48 PM

Nearly three years ago, Bernard L. Madoff Investment Securities collapsed, and its founder soon went to prison. Now, Finalternatives.com has reported, the last piece of the Madoff empire that was left intact has closed. Surge Trading was formed to buy Madoff's market-making business for $1 million, and had operated one floor above the Ponzi king's former New York fiefdom. But the new business labored under huge costs, and had recently been seeking a buyer or new financing. That never happened, Finalternatives.com said, and the company recently notified clients to start sending their orders somewhere else. Surge had opened in June 2009, the same month Madoff received a 150-year prison term, Finalternatives.com said.

Feds: Former Executives Caused 'Frisco Bank Fall

10/12/2011 8:36:49 PM

Two former executives at the now-defunct United Commercial Bank in San Francisco are facing criminal charges, while they and a third man have also been accused by regulators of hiding massive real estate loan losses, the Silicon Valley/San Jose Business Journal reported. The newspaper said Thomas Yu, a senior bank officer, and Ebrahim Shabudin, the bank's ex-COO, were indicted for lying to auditors and conspiring to commit securities fraud, after actions they allegedly took in 2008. Thomas Wu, the bank's CEO, was also named in a Securities and Exchange Commission complaint against the three, but not in the criminal charges, the business journal said. United Commercial had financed numerous Silicon Valley real estate projects, including a San Jose retail complex. But for 2008, the men understated bank operating losses by at least $65 million, the SEC said, hiding information on phony property appraisals and worthless loan collateral. The bank was shuttered and thrown into receivership in late 2009, causing the FDIC's insurance fund to lose $2.5 billion, the business newspaper said. Yu and Shabudin are free on $500,000 secured bonds.

'Boy Toys' Costly For Former NFL Lineman

10/12/2011 8:33:22 PM

A one-time NFL pro who played on offensive line for the San Diego Chargers and the New Orleans Saints will be sentenced Dec. 20 on charges that he took money from investors to build a resort in China, but instead squandered the money on boy toys. Jeffrey L. Walker, 48, pleaded guilty to tax evasion and wire fraud charges in federal court in Jackson, Miss.,
 CBS Sports reported. The government said Walker had fraudulently taken $2.2 million from investors in Mississippi, Tennessee, Arizona, and Florida, no doubt aided by his reputation as a pro football player in the late 1980s. But instead of building a resort as promised, prosecutors said, Walker spent the money on goodies including a luxury motor home and a boat. He eventually pleaded guilty to only two of the original 12 charges against him, but could still possibly get a maximum penalty of 23 years in prison, CBS said.

The Unwritten Story: Madoff's Trail Of Tears

10/12/2011 7:39:21 AM

Years after the Bernard Madoff Ponzi scam collapsed and he went off to prison, a trustee has finally begun distributing recovered money to 1,230 victims. And while their private stories have largely gone untold, The New York Post has tracked down some Madoff victims who lived in a high-rise tower in Queens. An industrious reporter followed a trail of heartbreak and tears suffered by the Ponzi victims, who averaged 88 years in age. An elderly man, once wealthy, went to back work sacking groceries after being stripped by Madoff, the newspaper found, while a 94-year-old woman and her late husband lost $850,000 and she now lives by tapping into her children's inheritance. Another woman lost $2.5 million to the giant Madoff scam, while the repayment she's now getting through bankruptcy Trustee Irving Picard equals about 4.6 cents per lost dollar. “It's a beginning. It's something,” the elderly victim told The Post.

Seattle Genetics Trades Bring 18-Month Sentence

10/12/2011 7:35:24 AM

The brother of a deceased man who had obtained insider information on a pending pharmaceutical approval has been sentenced to 18 months in prison and three years of supervised release in a plea bargain arrangement, the Puget Sound Business Journal reported. Zishen Fan, 38, of Chino Hills, Calif., had received a tip that a cancer drug made by Seattle Genetics, Inc. was about to be approved for marketing, the business journal said. Fan and his brother Zizhong Fan, a former program manager at the company, traded on the information and made $700,000, prosecutors charged. Zizhong Fan later committed suicide at an airport parking garage, the business newspaper said. Last January, the feds froze bank and brokerage accounts after Zishen Fan attempted to wire several hundred thousand dollars to a Chinese bank.

Of $1.7 Million Ponzi, Only $1,500 Remaining

10/12/2011 7:31:28 AM

Utah resident Frederick H.K. Baker, who pleaded guilty to conspiracy and wire fraud in a currency trading Ponzi scheme, is leaving behind a wife and five young children and packing off for 41 months in federal prison after stealing $1.7 million - of which he said only $1,500 remains, according to the Durango Herald in Colorado. From 2006-2008, Baker and another man, Mark Akins, promised hapless investors returns as high as 12 percent monthly on the scheme. But prosecutors said the two invested the money instead in other Ponzi schemes. The Herald quoted a federal prosecutor as saying letters from Baker's 79 victims are “heart-breaking to read,” adding: “The actions of Mr. Baker have destroyed families, caused divorces,” and driven people to bankruptcy. At sentencing, Baker told a judge he is sorriest over the fact that as a convicted felon, he can no longer vote or bear arms, and his family will likely end up on welfare, the Herald said. Perhaps whimsically, he was ordered to pay $776,000 in restitution to his victims. A trial for Akins is scheduled Jan. 3.

New Public Company Gets Battered By Suit And Probe

10/12/2011 7:27:43 AM

It's been rough sledding for Imperial Holdings, the South Florida Business Journal reported. Last February, the life insurance finance company launched an initial public offering. Then recently, it became the subject of a securities class action lawsuit. Now, the company's offices in Boca Raton, Fla. have been raided by the FBI and other agencies, and Imperial has announced formation of a special committee, apparently to investigate why it's being investigated, the business publication said. No formal charges have been filed against the firm, and Imperial has not disclosed any information on specific allegations against it, in connection with an investigation by the U.S. Attorney's Office for the District of New Hampshire. Imperial has named one law firm to head its own investigation, and another to defend the company in the government probe, the Business Journal said. The securities lawsuit was filed against Imperial, its top-level execs, and three investment firms involved in the IPO, according to the journal.

SEC Gets Fines, Ban In Stock-Touting Exercise

10/12/2011 7:23:12 AM

The Securities and Exchange Commission announced a $300,000 settlement and penny stock bans against principals of Wall Street Capital Funding LLC, which spewed out millions of spam e-mails promoting dubious stocks, reported Stockwatch. Philip Cardwell and Roy Campbell, owners of the Florida company, both agreed to pay $125,000 in disgorgement and civil penalties, the SEC reported. A third man, Aaron Hume, will pay $50,000 in disgorgement. The agency also got an order banning them from promoting stocks with markets caps below $50 million, Stockwatch said. Regulators accused the company of sending out “Wall Street News Alerts” touting stocks including PrimeGen Energy, which falsely claimed to have profitable oil and gas operations in Russia, and was deemed by the SEC to be “a complete scam.” Wall Street Capital Funding sent out 50 misleading investment opinions as spam e-mails, Stockwatch said, and PrimeGen stock soared from about a penny to 38 cents a share. None of the defendants admitted to wrongdoing in the settlement agreement. Wall Street Capital Funding filed an answer saying it was not required to investigate stocks it touted, and any losses investors suffered were the fault of “external market factors,” Stockwatch said.

Mom, Son Team Jailed For TN Baptist Church Ripoff

10/11/2011 7:57:20 AM

Michael Dean Whitt, 44, of Morristown, Tenn., will spend the next 51 months in a federal prison for conspiring with his mother to rip off a Baptist church for more than $1.5 million, according to a release from the U.S. Attorney's Office in the Eastern District of Kentucky. Whitt's mother, Barbara Whitt, had already been sentenced to 44 months for conspiring with her son and stealing money when she worked as financial secretary for First Baptist Church of Morristown. For 34 months beginning in July 2007, Barbara Whitt stole money by persuading church members to sign checks made out to “cash,” prosecutors said. The money found its way into accounts controlled by mother and son, and was used to remodel their home and buy motorcycles, trucks, and a boat, prosecutors said. In the end, both Whitts entered guilty pleas. Aside from serving prison time, they have been ordered to make restitution for more than $1.52 million, the government said.

N. Carolina Adviser Is Fined $25 Mill, Jailed

10/11/2011 7:53:57 AM

Former North Carolina investment adviser and ex-high school basketball coach Stan Kowalewski has been thrown in jail and fined $25 million following a lengthy probe by the Securities and Exchange Commission. The News-Record in Greensboro reported that Kowalewski, 39, was jailed indefinitely by a federal judge for contempt of court after stripping away parts of his home and selling the fixtures at “estate sales.” He then refused to tell the SEC who bought the goods, the newspaper said. Kowalewski had already been under investigation for ripping off investment clients for $8.6 million through his SJK Investment Management. Saying that the case “shocks the conscience,” Atlanta federal Judge Timothy C. Batten ordered Kowalewski to compensate his victims, then added civil penalties, bringing the man's total tab to more than $25 million, the News-Record said. He won't be leaving the lockup until the judge and the SEC are satisfied.

'Frisco Developer Pleads In $25 Mill Ponzi Scheme

10/11/2011 7:49:55 AM

In San Francisco, real estate developer Maher Talal Muhawieh has pleaded guilty to a Ponzi scheme that took 80 investors for $25 million, the San Francisco Examiner reported. Muhawieh originally faced 12 counts of wire fraud for taking money from investors with promises to buy, renovate, and resell residential properties. Instead, The Examiner said, he later admitted to using the money to pay interest on loans and cover personal expenses. After pleading guilty to a single count of wire fraud in a plea deal, Muhawieh faces fines and a possible 20 years in prison, the newspaper said. Sentencing is scheduled for March 7.

Alleged PermaPave Scam Ends With 3 N.Y. Arrests

10/11/2011 7:45:25 AM

New York federal authorities have broken up an alleged Ponzi scheme that took 140 small business people in the landscaping and construction industries for $26 million from 2006-2010, according to the Long Island Business News. A court order was issued to stop the operations of the PermaPave Cos., charged with promising high returns to investors who paid for water-filtering stone pavers to be imported from Australia and resold in the U.S., the newspaper said. Investors were promised returns as high as 33 percent, when prosecutors say there was actually little demand for the product, and the cost of the pavers was far higher than profits from resales. In addition, criminal charges have been filed against PermaPave executives Eric Aronson, Vincent Buonauro, Jr., and Robert Kondratick, the Business News reported. Officials allege that PermaPave operated a classic Ponzi scheme, paying original investors with money from later ones. Investigators also allege the defendants used investor money to underwrite fancy cars, jewelry, and Las Vegas gambling trips. Aronson, who already had a felony record, is also charged with using PermaPave income to make restitution to victims from an earlier scam, the Business News said.

 

Banner Enforcement Year Equates 'Caveat Emptor'

10/11/2011 7:41:59 AM

Note to investors: How big a problem has fraud become in the securities arena? A pretty large one, judging from actions taken in the last year by the U.S. Commodity Futures Trading Commission. A new report on the agency's Fiscal Year 2011 actions showed the CFTC conducted 99 enforcement actions - a 74 percent increase over the prior year. The federal agency went after companies and individuals for a wide range of offenses, from commodity price manipulations and Ponzi schemes, to trading abuses, unsupervised broker activities, accounting failures, and outright fraud. More than 450 new investigations were opened during the year, while nearly $300 million in civil penalties were issued and $160 million-plus rolled in from disgorgement and restitution payments. In other words, the wolves are out there in packs. For investors hoping to do better than the suffering economy will currently allow, the bottom line boils down to just two words: Caveat Emptor.

 

Penn. Planner Pleads To $2.5 Million Client Scam

10/10/2011 6:59:49 AM

John D. Wosotowsky, a 51-year-old former financial planner for MetLife Securities in Pennsylvania, has pleaded guilty to building a scheme that took $2.5 million from 25 clients, the Beaver County (Penn.) Times said. Federal prosecutors charged that Wosotowsky, of Center Township, conducted the scam for a decade, falsely telling investors it was part of the MetLife system. But their cash actually went into accounts controlled by the financial planner and the money was never really invested, the newspaper said. Meanwhile, Wosotowsky fabricated client statements, omitted the profits from his income tax returns, and used phony changes of addresses in making disbursements, the government said. He faces maximum punishment of up to 23 years in prison and a half-million dollar fine when he is sentenced in January, the newspaper said.

Calif. Fraud Defendant Must Get Psych Exams

10/10/2011 6:55:33 AM

A California judge has temporarily halted proceedings against a 39-year-old man accused of participating in a mortgage and securities fraud ring that crumbled in 2009, leaving many victims in financial ruin, the Riverside Press-Enterprise reported. A judge has ordered the defendant, Hendrix Montecastro, to be examined by two court-appointed doctors who will evaluate whether he is mentally competent to stand trial, the newspaper said. Montecastro's attorney - the fourth lawyer to represent him in the case thus far - requested the competency examinations, the newspaper said. Montecastro and six co-defendants were arrested for engineering a mortgage fraud scheme that ultimately pushed 201 Riverside homes into foreclosure. Montecastro's latest lawyer said that so far, he has received 50,000 pages of legal discovery in the case. The newspaper said James B. Duncan, the described mastermind behind the scheme, has already pleaded guilty to multiple counts of securities fraud and corporate identity theft.

StratoComm Execs Face Allegations By The SEC

10/10/2011 6:52:44 AM

The Securities and Exchange Commission has issued charges against executives of StratoComm Corp. for allegedly duping investors by selling them shares in the unregistered firm when it actually had no products. The company posed as a manufacturer of telecommunications equipment for markets in Africa, the SEC said. The defendants, CEO Roger D. Shearer and investment relations executive Craig Danzig, sold about $3 million worth of securities in the company from 2007 until 2009, with Shearer using much of the income to make restitution he owed from “a prior criminal proceeding,” the SEC alleges. Regulators have also charged Stewart A. Merkin, the company's outside counsel, with securities fraud for denying any knowledge of violations committed by the enterprise. The SEC is seeking disgorgement and permanent injunctions, along with penalties and interest from all three men. The feds also want penny stock bans against Shearing and Danzig, the agency said.

Two Face Feb. Trial In 'Guarantee Bonds' Case

10/10/2011 6:47:58 AM

The U.S. Department of Justice has a Feb. 13 trial date in Virginia for two men charged in a reinsurance fraud scheme that allegedly took $670 million from victims internationally. Prosecutors said Minor Vargas Calvo, 60, and Jorge Castillo, 56, were the respective president and auditor for Calvo's company, Provident Capital Indemnity, which was registered in Dominica and operated from Costa Rica. The company peddled so-called “financial guarantee bonds,” which the men purported to eliminate the risk in selling life settlement contracts to investors. It was a scam, the feds say, and the two have been in jail since their arrests early this year. Then last week, they were hit with a superseding indictment in Richmond U.S. District Court. Both are charged with wire fraud, mail fraud and conspiracy, and Vargas is also charged with money laundering, the Justice Department said.

Boiler Room Role Brings Texas Man 10-Year Term

10/10/2011 6:43:31 AM

A Texas man had been imprisoned for a decade for participating in an oil company boiler room scheme that illegally raised $2.6 million from investors,