Monday, April 30, 2012

Jason Keryc, Anthony Massaro, Anthony Ciccone, and Diane Kaylor, former account representatives of Hauppauge, Were Charged in New York with Massive Ponzi Scheme


Source-  http://www.fbi.gov/newyork/press-releases/2012/former-agape-world-inc.-account-representatives-charged-in-new-york-with-massive-ponzi-scheme 

BROOKLYN—A criminal complaint was unsealed today in federal court in Central Islip, New York charging Jason Keryc, Anthony Massaro, Anthony Ciccone, and Diane Kaylor, former account representatives of Hauppauge, New York-based Agape World Inc. and Agape Merchant Advance (AMA), for their participation in a large-scale Ponzi scheme. The defendants’ initial appearances are scheduled this afternoon before U.S. Magistrate Judge E. Thomas Boyle at the U.S. Courthouse in Central Islip.

The charges were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York; Ronald J. Verrochio, Inspector in Charge, New York Division, U.S. Postal Inspection Service (USPIS); and Janice K. Fedarcyk, Assistant Director in Charge, FBI, New York Field Office.

Nicholas Cosmo founded Agape in August 2000 and AMA in November 2007. According to the complaint, between October 2003 and January 2009, Keryc, Massaro, Ciccone, and Kaylor played critical roles in the operation of a Ponzi scheme by soliciting and obtaining hundreds of millions of dollars from investors. To induce investments and discourage withdrawals, the defendants misled the investors by, among other things, (1) assuring investors that their investments would only be used to fund specific, short-term, secured bridge loans to commercial borrowers or to make short-term loans to small businesses; (2) promising to pay investors unusually high rates of returns; and (3) representing that investing in Agape and AMA carried little or no risk of loss. The defendants allegedly raised significantly more money than was needed for the loans and lied to the investors when they assured them that their money would specifically be used to fund only a particular loan. For their efforts, Keryc, Massaro, Ciccone, and Kaylor received commissions of approximately $16 million, $6.5 million, $10.7 million, and $4.75 million, respectively.

As alleged in the complaint, the defendants actually ran a Ponzi scheme, paying returns to Agape and AMA investors not from any profits earned on investments, but rather from existing investors’ deposits or money paid by new investors. In addition, unbeknownst to the investors, approximately $100 million of their money was used to trade high risk futures and commodities. Despite the fact that the defendants knew that Agape and AMA did not produce or earn rates of return that could support the exorbitant returns promised to investors, they allegedly continued to solicit money from investors. For example, on June 26, 2008, the defendants received an e-mail from Agape’s loan underwriter informing them that the interest rate that a bridge loan borrower had agreed to pay Agape was only 16 percent for one year, at the same time the defendants had promised to pay their investors 12 percent for 60 days for this investment, or 73 percent for the year. The defendants raised approximately $32.5 million for this bridge loan, although the loan was never made.

As the scheme began to unravel, the defendants allegedly lied to investors about the status of various of Agape’s bridge loans. For example, in November 3, 2008, the defendants learned that all of Agape’s 2007 bridge loans were in default or on extension but allegedly failed to disclose that information to existing or new investors. Rather, according to the complaint, they actively continued to solicit money from investors, totaling nearly $17.4 million.

As investors became increasingly concerned about their investments, the defendants allegedly offered them a fictitious insurance policy, promising that those who purchased the insurance plan would own a portion of liens that purportedly secured repayment of the bridge loans. In fact, there was no insurance policy, but the defendants nonetheless raised approximately $865,000 for the bogus insurance.

During the course of the Ponzi scheme, approximately 5,000 individuals invested a total of more than $400 million in Agape and AMA. Although some investors succeeded over the years in making full or partial withdrawals, particularly before the Ponzi scheme began to unravel, approximately 4,100 investors sustained actual losses totaling approximately $179 million.

On October 14, 2011, Cosmo was sentenced to a term of 25 years in prison for his role in the scheme.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Sunday, April 29, 2012

Pastor Anthony C. Morris Sentenced to 40 Months in Prison for Ponzi Scheme


Source-  http://www.fbi.gov/seattle/press-releases/2012/pastor-sentenced-to-40-months-in-prison-for-ponzi-scheme 
A Seattle area pastor who defrauded two dozen victims, some of them his own parishioners, out of more than $1.8 million was sentenced today in U.S. District Court in Seattle to 40 months in prison, three years of supervised release, and $1,843,932 in restitution for wire fraud and money laundering, announced U.S. Attorney Jenny A. Durkan. Anthony C. Morris, 48, the pastor of New Covenant Christian Center, pleaded guilty in January 2012, admitting that his fraud was a Ponzi scheme where early investors were paid off from the money taken from later investors. At sentencing U.S. District Judge Richard A. Jones said the defendant “did not resist temptation and left a trail of victims.”

According to the plea agreement and charges filed in the case, between 2003 and April 2011, Morris convinced various investors to provide him money based on false and fraudulent representations. Morris told various investors that their money would be placed in an overseas trading program or used to invest in property for his church. Morris represented that the investments would provide a high rate of return in a short period of time. Morris promised to return investor money in as little as a few days or a few weeks, with returns of as much as 400 percent. All these representations were false, and, in fact, Morris simply used the funds from later investors to pay off earlier investors. Some of the money went for Morris’ expenses and for the expenses of his church. In one 2007 instance described in the plea agreement, a victim provided Morris with a $30,000 loan for investment purposes on the promise that Morris would repay him, with interest, in 30 days. Despite repeated promises, the money was never repaid.

In asking for a four-year prison term, prosecutors noted that Morris betrayed those who trusted him. “...[I]n dealing with the defendant, they were dealing with someone they believed they could trust. The defendant preyed on those least likely to suspect him, demand collateral, and seek other assurances present in arms-length business transactions. Moreover, in several cases the defendant falsely represented that the funds solicited were intended to benefit church-related purposes,” prosecutors wrote in their sentencing memo.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Saturday, April 28, 2012

Robert G. Tunnell, Jr. Sentenced to Prison for Running Multi-Million-Dollar Ponzi Scheme


Source-  http://www.fbi.gov/sanfrancisco/press-releases/2012/san-francisco-man-sentenced-to-prison-for-running-multi-million-dollar-ponzi-scheme 

SAN FRANCISCO—Former attorney Robert G. Tunnell, Jr. was sentenced late Friday afternoon to almost five years in prison after pleading guilty to mail fraud and wire fraud resulting from his operation of a multi-year investment fraud scheme through which he defrauded his victims out of more than $7 million, United States Attorney Melinda Haag announced.

Tunnell, 73, was an attorney until he resigned from the State Bar of California while charges that he diverted approximately $300,000 from his law firm to his own account were pending against him. According to court documents, Tunnell held himself out as a successful investor, promising substantial returns while representing that he would invest funds in a conservative, safe, and cautious manner. Tunnell, however, engaged in risky trading activity with his investors’ money, losing approximately $7 million of the approximately $10 million investors—mostly family members and personal friends—entrusted to him from at least as early as January 2006 through his arrest in June 2011. Tunnell used most of the remaining money from his investors to repay other investors. Despite these substantial losses and other dissipation of funds, Tunnell consistently and falsely reported gains to his investors.

A criminal complaint was filed against Tunnell on June 22, 2011. He was arrested on June 23, 2011. On June 24, 2011, Tunnell was released on bail. He pleaded guilty to mail fraud and wire fraud on November 22, 2011.

After Tunnell’s arrest, the victims in this case received reimbursement of their losses—a total of approximately $8.6 million—from a family member of Tunnell’s. That family member had no involvement in or knowledge of Tunnell’s scheme.

The sentence was handed down by U.S. District Court Judge Charles R. Breyer. Judge Breyer also sentenced Tunnell to a three-year period of supervised release, including as a condition that after his release from prison, Tunnell must spend six months on home detention with electronic monitoring. Judge Breyer ordered Tunnell to surrender by June 19, 2012 to begin serving his prison sentence.

Doug Sprague is the Assistant U.S. Attorney who prosecuted the case with the assistance of legal assistant Rayneisha Booth. The prosecution is the result of a three-month investigation by the Federal Bureau of Investigation, with assistance from the United States Commodity Futures Trading Commission.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Friday, April 27, 2012

SEC Charges Garth R. Peterson with FCPA Violations and Investment Adviser Fraud


Source-  http://www.sec.gov/news/press/2012/2012-78.htm 

Washington, D.C., April 25, 2012 — The Securities and Exchange Commission today charged a former executive at Morgan Stanley with violating the Foreign Corrupt Practices Act (FCPA) as well as securities laws for investment advisers by secretly acquiring millions of dollars worth of real estate investments for himself and an influential Chinese official who in turn steered business to Morgan Stanley’s funds.

The SEC alleges that Garth R. Peterson, who was a managing director in Morgan Stanley’s real estate investment and fund advisory business, had a personal friendship and secret business relationship with the former Chairman of Yongye Enterprise (Group) Co. – a Chinese state-owned entity with influence over the success of Morgan Stanley’s real estate business in Shanghai. Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder’s fees that Morgan Stanley’s funds owed to third parties. Peterson also secretly arranged for him, the Chinese official, and an attorney to acquire a valuable Shanghai real estate interest from a Morgan Stanley fund. Peterson was acquiring an interest from the fund but negotiated both sides of the transaction. In exchange for offers and payments from Peterson, the Chinese official helped Peterson and Morgan Stanley obtain business while personally benefitting from some of these same investments. Peterson’s deception, self-dealing, and misappropriation breached the fiduciary duties he owed to Morgan Stanley’s funds as their representative.

Peterson agreed to a settlement of the SEC’s charges in which he will be permanently barred from the securities industry, pay more than $250,000 in disgorgement, and relinquish his interest in the valuable Shanghai real estate (currently valued at approximately $3.4 million) that he secretly acquired through his misconduct. The U.S. Department of Justice has filed a related criminal case against Peterson.

“Peterson crossed the line not once, but twice. He secretly bribed a government official to illegally win business for his employer and enriched himself in violation of his fiduciary duty to Morgan Stanley’s clients,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This case illustrates the SEC’s commitment to holding individuals accountable for FCPA violations, particularly employees who intentionally circumvent their company's internal controls.”

Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “As a rogue employee who took advantage of his firm and its investment advisory clients, Peterson orchestrated a scheme to illegally win business while lining his own pockets and those of an influential Chinese official.”

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Peterson’s violations occurred from at least 2004 to 2007. His principal responsibility at Morgan Stanley was to evaluate, negotiate, acquire, manage and sell real estate investments on behalf of Morgan Stanley’s advisers and funds. He was terminated in 2008 due to his FCPA misconduct.

The SEC alleges that Peterson led Morgan Stanley’s effort to build a Chinese real estate investment portfolio for its real estate funds by cultivating a relationship with the Chinese official and taking advantage of his ability to steer opportunities to Morgan Stanley and his influence in helping with needed governmental approvals. Morgan Stanley thus partnered with Yongye on a number of significant Chinese real estate investments. At the same time, Peterson and the Chinese official expanded their personal business dealings both in a real estate interest secretly acquired from Morgan Stanley as well as by investing together in Chinese franchises of well-known U.S. fast food restaurants. Peterson failed to disclose these investments in annual disclosures that Morgan Stanley required him to make as part of his employment.

According to the SEC’s complaint, Peterson openly credited the Chinese official with helping obtain approvals required from other Chinese government entities for a deal to close. He wrote to several Morgan Stanley employees in response to an e-mail discussing the terms of one of Yongye’s purported investments, “Everyone pls keep in mind the big picture here. YY gave us this deal. ... So we owe them a favor relating to this deal. ... This should be very easy and friendly.” In another e-mail a week later, Peterson described “YYI” as “our friends who are coming in because WE OWE THEM A FAVOR.”

The SEC alleges that a Morgan Stanley compliance officer specifically informed Peterson in 2004 that employees of Yongye, a Chinese state-owned entity, were government officials for purposes of the FCPA. Peterson also received at least 35 FCPA compliance reminders from Morgan Stanley, but nonetheless committed the FCPA violations.

The SEC’s complaint charges Peterson with violations of the anti-bribery, books and records and internal control provisions of the FCPA, and with aiding and abetting violations of the anti-fraud provisions of the Investment Advisers Act of 1940. Peterson consented to a court order requiring him to disgorge $254,589 and relinquish to a court-appointed receiver the interest he secretly acquired from Morgan Stanley’s fund in the Jin Lin Tiandi Serviced Apartments. Peterson’s interest has a current estimated value of approximately $3.4 million. The proposed settlement is subject to court approval. Peterson also has consented to permanent industry bars based on the anticipated entry of the injunctions against him and his criminal conviction.

The SEC acknowledges the assistance of the Fraud Section of DOJ’s Criminal Division, the U.S. Attorney’s Office for the Eastern District of New York, and the Federal Bureau of Investigation. Morgan Stanley, which is not charged in the matter, cooperated with the SEC’s inquiry and conducted a thorough internal investigation to determine the scope of the improper payments and other misconduct involved.





************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Thursday, April 26, 2012

Attorney, Wall Street Trader, and Middleman Settle SEC Charges in $32 Million Insider Trading Case


Source-  http://www.sec.gov/news/press/2012/2012-77.htm 

Washington, D.C., April 25, 2012 — The Securities and Exchange Commission today announced a settlement in a $32 million insider trading case filed by the agency last year against a corporate attorney and a Wall Street trader.

The SEC alleged that the insider trading occurred in advance of at least 11 merger and acquisition announcements involving clients of the law firm where the attorney — Matthew H. Kluger — worked. He and the trader — Garrett D. Bauer — were linked through a mutual friend now identified as Kenneth T. Robinson, who acted as a middleman to facilitate the illegal tips and trades. Kluger and Bauer used public telephones and prepaid disposable mobile phones to communicate with Robinson in an effort to avoid detection. Robinson, now also charged, cooperated in the SEC’s investigation.

Bauer, Kluger, and Robinson each agreed to give up their ill-gotten gains plus interest in order to settle the SEC’s charges. Those amounts under the terms of their consent agreements are approximately $31.6 million for Bauer, $516,000 for Kluger, and $845,000 for Robinson.

"Bauer, Kluger and Robinson schemed to outsmart law enforcement by structuring their relationships and communications to avoid detection and frustrate insider trading detection mechanisms," said Robert Khuzami, Director of the SEC's Division of Enforcement. "They were ultimately unsuccessful due to the SEC's sustained efforts to combat hard-to-detect insider trading, particularly among lawyers and other gatekeepers who have solemn duties to maintain the confidentiality of information entrusted to them."

In parallel criminal actions brought by the U.S. Attorney’s Office for the District of New Jersey, Bauer, Kluger, and Robinson have all pled guilty and are scheduled to be sentenced on June 4, 2012.

Acknowledging the facts to which they have admitted as part of their guilty pleas, Bauer, Robinson, and Kluger consented to final judgments in the SEC’s civil actions that are subject to court approval. In the proposed final judgments, Bauer would be ordered to disgorge $30,812,796 plus prejudgment interest of $859,135; Kluger would be ordered to disgorge $502,500 plus prejudgment interest of $14,010; and Robinson would be ordered to disgorge $829,129 plus prejudgment interest of $16,106. They also would be permanently enjoined from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3 thereunder. Each of the orders of disgorgement will be deemed partially satisfied and offset on a dollar-for-dollar basis by assets seized at the direction of the U.S. Attorney’s Office for the District of New Jersey based upon orders of forfeiture.

Bauer also has agreed to settle a related SEC administrative proceeding by consenting to the entry of an order that would bar him from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock. Kluger agreed to settle a related administrative proceeding by consenting to the entry of an order which would permanently suspend him from appearing or practicing before the SEC as an attorney pursuant to Commission Rule of Practice 102(e).

The terms of the proposed settlement with Robinson reflect credit given to him by the SEC for his substantial assistance and cooperation in the investigation.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Wednesday, April 25, 2012

H&R Block Subsidiary Agrees to Pay $28.2 Million to Settle SEC Charges Related to Subprime Mortgage Investments


Source-  http://www.sec.gov/news/press/2012/2012-76.htm 

Washington, D.C., April 24, 2012 — The Securities and Exchange Commission today charged H&R Block subsidiary Option One Mortgage Corporation with misleading investors in several offerings of subprime residential mortgage-backed securities (RMBS) by failing to disclose that its financial condition was significantly deteriorating.

Option One, which is now known as Sand Canyon Corporation, agreed to pay $28.2 million to settle the SEC’s charges.

The SEC alleges that Option One promised investors in more than $4 billion worth of RMBS offerings that it sponsored in early 2007 that it would repurchase or replace mortgages that breached representations and warranties. But Option One did not tell investors about its deteriorating financial condition and that it could not meet its repurchase obligations on its own.

“Option One’s financial condition deteriorated significantly as its large subprime mortgage lending business suffered from the collapse of the U.S. housing market,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “The company nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its RMBS portfolios.”

Kenneth Lench, Chief of the SEC Division of Enforcement’s Structured and New Products Unit, added, “We will take action against those who fail to disclose or downplay important facts that make an investment riskier, even if those risks do not materialize. We remain committed to uncovering misconduct involving complex financial instruments including RMBS.”

According to the SEC’s complaint filed in U.S. District Court for the Central District of California, Option One was one of the nation’s largest subprime mortgage lenders with originations of $40 billion in its 2006 fiscal year. Option One originated subprime loans and sold them in the secondary market through RMBS securitizations or whole loan pool sales.

According to the SEC’s complaint, Option One was generally profitable prior to its 2007 fiscal year. However, when the subprime mortgage market started to decline in the summer of 2006, Option One experienced a decline in revenues and significant losses, and faced hundreds of millions of dollars in margin calls from its creditors. At the time Option One offered and sold the RMBS, it needed H&R Block, through a subsidiary, to provide it with financing under a line of credit in order to meet its margin calls and repurchase obligations. But Block was under no obligation to provide that funding. Option One did not disclose this information to investors. The SEC further alleges that Block never guaranteed Option One’s loan repurchase obligations and that Option One’s mounting losses threatened Block’s credit rating at a time when Block was negotiating a sale of Option One.

Without admitting or denying the SEC’s allegations, Option One consented to the entry of an order permanently enjoining it from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and requiring it to pay disgorgement of $14,250,558, prejudgment interest of $3,982,027, and a penalty of $10 million. The proposed settlement is subject to court approval.

The SEC has now charged 102 individuals and entities in financial crisis-related enforcement actions, including 55 CEOs, CFOs, and other senior corporate officers. These enforcement actions have resulted in more than $1.98 billion in penalties, disgorgement, and other monetary relief for investors.

The SEC also is a co-chair of the Residential Mortgage-Backed Securities Working Group formed under the Financial Fraud Enforcement Task Force in January 2012. The Working Group is marshaling parallel efforts on the state and federal levels to collaborate on current and future investigations, pooling resources and streamlining processes to investigate in a comprehensive way those responsible for misconduct in the RMBS market. In addition to the SEC, other co-chairs of the Working Group include representatives from the Civil and Criminal Divisions of the U.S. Department of Justice, the Attorney General of the State of New York, and the United States Attorney’s Office.





************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Tuesday, April 24, 2012

SEC Charges Chinese Company and Executives with Lying About Asset Values and Use of IPO Proceeds


Source-  http://www.sec.gov/news/press/2012/2012-74.htm 

Washington, D.C., April 23, 2012 — The Securities and Exchange Commission today charged a China-based oil field services company and two senior officers involved in a scheme to intentionally mislead investors about the value of its assets and its use of $120 million in IPO proceeds. The SEC additionally charged the company’s chairman of the board involved in a separate $40 million theft from the company.

The SEC alleges that SinoTech Energy Limited grossly overstated the value of its primary operating assets in financial statements, specifically the lateral hydraulic drilling (LHD) units that are central to its business. The company’s IPO registration statement in November 2010 promised investors it would spend $120 million raised in the IPO to acquire LHD units, but the company’s purchase contracts and other documents otherwise show it acquired far fewer LHD units, lied about the number it acquired, and grossly overstated the value of the units. SinoTech CEO Guoqiang Xin and former CFO Boxun Zhang were responsible for the fraud.

Meanwhile, the company’s chairman Qinzeng Liu is accused of secretly siphoning at least $40 million from a SinoTech bank account in the summer of 2011. He then stood silently by as SinoTech – attempting to counter negative Internet reports that the company was potentially fraudulent – falsely assured investors that the company had that money and more in the bank. Liu later admitted his theft to SinoTech’s auditor and board of directors, but he retained his position and investors were not informed of the incident.

“SinoTech’s brief life as a public company in the U.S. markets has been rife with falsehoods,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “Investors deserve the utmost honesty and transparency from companies and their officers when they tap public markets in the United States.”

According to the SEC’s complaint filed in U.S. District Court for the Western District of Louisiana (Lake Charles Division), SinoTech’s public filings certified by both Xin and Zhang represented that the company had purchased 16 LHD units worth $94 million. In fact, the company only acquired 11 such units worth less than $17 million. SinoTech continually misled investors about the value of its equipment in press releases and SEC filings between December 2010 and November 2011. Xin went so far as to try (unsuccessfully) to convince SinoTech’s LHD unit supplier to issue public statements verifying the company’s false valuations to investors. The supplier refused.

The SEC’s complaint alleges that Liu’s admitted theft of $40 million in company funds occurred sometime between June 30 and August 17. Liu withdrew the money from SinoTech’s primary bank account at the Agricultural Bank of China. SinoTech did not record Liu’s withdrawal in the company’s books and records, and it retained Liu as its chairman despite his confession.

The SEC alleges that the theft remained hidden when SinoTech attempted to rebut an Internet report alleging fraud in August 2011. In an effort to persuade investors that SinoTech was legitimate, the company issued a press release stating that SinoTech’s bank balances totaled more than $93 million and included $54 million on deposit at the Agricultural Bank of China. Liu knew this claim was false due to his earlier theft from that account.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Monday, April 23, 2012

John Arthur Apple, Jr., Sentenced to 10 Years in Federal Prison for Fraud and Conspiracy in Offerings of Western Pipeline Corporation Securities


Source-  http://www.fbi.gov/dallas/press-releases/2012/oil-and-gas-executive-sentenced-to-10-years-in-federal-prison-for-fraud-and-conspiracy-in-offerings-of-western-pipeline-corporation-securities 

DALLAS—John Arthur Apple, Jr., 53, of Lewisville, Texas, was sentenced today by U.S. District Judge Sam A. Lindsay to 10 years in federal prison and ordered to pay more than $53 million in restitution, following his guilty plea in January 2012 to one count of conspiracy to commit securities fraud and one count of securities fraud stemming from his involvement in offerings of Western Pipeline Corporation securities. Judge Lindsay ordered Apple to surrender to the Bureau of Prisons on June 12, 2012. Today’s announcement was made by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.

According to documents filed in the case, from October 2006 to July 2007, Apple was the majority owner of Western Pipeline, and through Western Pipeline, he raised money from investors by selling and causing others, including co-conspirators Christopher Scott Jent, Clifford Duane Stahl, Mickey Glen Horn, and James Timothy “J.T.” Nealy, to sell investments in purported oil and gas development projects. Apple and his co-conspirators misled, deceived, and defrauded prospective investors by misrepresenting and failing to disclose material facts. As part of their roles, the co-conspirators assumed false identities when communicating with prospective investors, and, in the guise of those false identities, claimed to be investors in past Western Pipeline oil and gas development projects that supposedly had been successful.

Jent, Stall, Horn, and Nealy have separately pleaded guilty to securities fraud or conspiracy charges based on their involvement with Western Pipeline. Stahl and Nealy have each been sentenced to four years in federal prison. Stahl was ordered to pay $2 million in restitution, and Nealy was ordered to pay approximately $53 million in restitution. Jent and Horn are scheduled to be sentenced next month.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Sunday, April 22, 2012

Former NutraCea CEO Bradley David Edson Indicted for Securities Fraud


Source-  http://www.fbi.gov/phoenix/press-releases/2012/former-nutracea-ceo-indicted-for-securities-fraud 

PHOENIX—Bradley David Edson, 51, of Scottsdale, Arizona, was indicted by a federal grand jury on April 11, 2012, for one count of conspiracy to commit securities and wire fraud, one count of securities fraud, nine counts of wire fraud, five counts of false certification on periodic reports, four counts of false statements to auditors of a publicly traded company, and seven counts of transactional money laundering. Edson is to be arraigned on the charges on May 2, 2012 at 10:30 a.m. before U.S. Magistrate Judge Edward C. Voss.

“The SEC was created during the peak of the Great Depression to restore investor confidence in our nation’s capital markets by requiring publicly traded companies to provide investors truthful and reliable information about their businesses,” said Acting U.S. Attorney Ann Birmingham Scheel. “The U.S. Attorney’s Office will continue to work with our law enforcement partners to dismantle and prosecute complicated securities fraud schemes designed to hide the truth from investors who rely on the financial markets to help secure their futures.”

“This indictment is an example of the complex, white-collar cases our agency has a reputation for investigating. The case against Mr. Edson involves a number of entities and a variety of complicated financial transactions. IRS Special Agents have the training and expertise to unravel these types of activities,” said Dawn Mertz, Special Agent in Charge of the Phoenix Field Office of Internal Revenue Service, Criminal Investigation.

FBI Special Agent in Charge James L. Turgal, Jr., Phoenix Division stated, “The indictment of Bradley Edson for Securities Fraud is based on the investigative efforts by the Internal Revenue Service and the FBI. These alleged schemes led to numerous investors being defrauded. This indictment illustrates the investigative expertise of the IRS and the FBI to address complex securities fraud cases. The FBI will continue to work with our law enforcement partners and the U.S. Attorney’s Office in combating sophisticated securities fraud matters.”

The indictment alleges that, from December 2005 to March 2009, Edson served as the president and chief executive officer of NutraCea, a publicly traded Arizona neutraceutical company that developed, manufactured, and distributed different forms of stabilized rice bran. The indictment also alleges that, as a publicly traded company, NutraCea was required to comply with the rules and regulations of the United States Securities and Exchange Commission (SEC), which required it to: (1) make and keep books, records, and accounts that accurately and fairly reflected NutraCea’s transactions and the disposition of its assets; (2) devise and maintain a system of internal accounting controls that provided reasonable assurances to the investing public that its transactions were recorded in a way that would permit accurate preparation of financial statements; and (3) file quarterly and annual reports with the SEC that accurately and fairly presented NutraCea’s financial condition, which were to be certified by certain NutraCea executives.

The indictment alleges that Edson, as NutraCea’s CEO, perpetrated a scheme to defraud investors, the SEC, and NutraCea’s auditors in order to inflate NutraCea’s stock price, to obtain proceeds from the sale of inflated NutraCea stock, and to obtain financial and other compensation from NutraCea. The indictment alleges that Edson furthered the scheme as follows:


In 2006, Edson executed sham agreements so that NutraCea could report an additional $750,000 in sales, which artificially inflated its net income from approximately $750,000 to approximately $1,500,000;
In 2007, Edson engaged in sham transactions to artificially inflate NutraCea’s income by $3.6 million;
In early 2008, Edson deceived NutraCea’s auditors into approving and recording a 2007 sale of its “Rice ‘n’ Shine” product, worth $1.9 million;
Edson falsely certified to the SEC that NutraCea’s public filings were fairly presented, even though he knew that NutraCea’s revenues were artificially inflated; and
Edson covertly received a $600,000 kickback from a debt acquisition deal, thereby depriving NutraCea and its investors of their rights to Edson’s honest and faithful services as the CEO.

A conviction for securities fraud carries a maximum penalty of 25 years in prison, a $250,000 fine, or both. A conviction for false certification on a periodic report carries a maximum penalty of 20 years in prison, a $5,000,000 fine, or both. Convictions for conspiracy to commit securities and wire fraud, wire fraud, and false statements to an auditor each carry a maximum penalty of 20 years in prison, a $250,000 fine, or both. A conviction for transactional money laundering carries a maximum penalty of 10 years in prison, a $250,000 fine, or both. In the event Edson is convicted of any of these offenses, U.S. District Judge James A. Teilborg will consult, but is not bound by, the U.S. Sentencing Guidelines in determining a sentence.

An indictment is simply a method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Saturday, April 21, 2012

CPA Daniel Wise Indicted for Operating $66 Million Ponzi Scheme


Source-  http://www.fbi.gov/phoenix/press-releases/2012/scottsdale-man-indicted-for-operating-66-million-ponzi-scheme 

PHOENIX—On April 17, 2012, a federal grand jury in Phoenix returned a 102-count indictment against former CPA Daniel Wise, 55, of Scottsdale, Arizona, for mail fraud, wire fraud, and transactional money laundering.

“The U.S. Attorney’s Office will continue to work with our law enforcement partners to investigate and prosecute those who prey on the public for personal financial gain,” said Acting U.S. Attorney Ann Birmingham Scheel. “This scheme serves as an unfortunate reminder that all investors, both novice and experienced, should exercise caution before committing their hard-earned money to investment opportunities that promise high-yield returns with little or no risk.”

FBI Special Agent in Charge James L. Turgal Jr., Phoenix Division, stated, “The indictment of Daniel Wise for mail fraud, wire fraud, and transactional money laundering has been the culmination of investigative efforts by the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Department of Labor, and the FBI. The success of investigating these types of complex fraud cases is contingent upon our established relationships with our law enforcement partners. The FBI will continue to work with our law enforcement partners and the U.S. Attorney’s Office in combating various fraud matters.”

“This indictment is the result of a team effort by several federal agencies and the U.S. Attorney’s Office. Sophisticated white-collar financial crimes such as Ponzi schemes are often best investigated by pooling the resources, training, and expertise of numerous agencies,” said Dawn Mertz, Special Agent in Charge of the Phoenix Field Office of Internal Revenue Service, Criminal Investigation.

“Certified Public Accountants are entrusted to properly handle their clients’ financial affairs,” stated Pete Zegarac, Inspector in Charge of the U.S. Postal Inspection Service’s Phoenix Division. “The joint investigation with our partners at the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation Division; and the U.S. Attorney’s Office highlights just how devastating these types of investment fraud cases can be for the victims.”

The indictment alleges that from June 2005 through December 2008, through a web of entities and bank accounts he created and operated, Wise fraudulently induced victims to “invest” approximately $66 million with false promises that he could earn victims high-yield rates of return by making short-term, high-interest hard money loans in real estate ventures. The indictment also alleges that Wise did not make the investments he promised to victims, but instead operated a Ponzi scheme by using money obtained from newer victims to pay off older victims. The indictment further alleges that Wise retained for his own use more than $1 million in tax funds from investor victims who were also his tax clients. During this Ponzi scheme, the indictment alleges, Wise greatly enriched himself by siphoning off around $7 million in victim funds for his own personal use and enjoyment.

Convictions for mail and wire fraud carry a maximum penalty of 20 years, a $250,000 fine, or both. A conviction for transactional money laundering carries a maximum penalty of 10 years in prison, a $250,000 fine, or both. In determining an actual sentence, U.S. District Court Chief Judge Roslyn O. Silver will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. Chief Judge Silver, however, is not bound by those guidelines in determining a sentence.

An indictment is simply a method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Friday, April 20, 2012

Steven Bartko Sentenced to 24 Months in Prison or His Role in a Ponzi Scheme That Defrauded Investors of Over $5 Million


Source-  http://www.fbi.gov/sandiego/press-releases/2012/ponzi-scheme-operator-sentenced-to-24-months-in-prison 

United States Attorney Laura E. Duffy announced that today United States District Court Judge Michael M. Anello sentenced Steven Bartko to serve 24 months in custody for his role in a Ponzi scheme that defrauded investors of over $5 million. Bartko was also ordered to pay $5,362,765 in restitution and was ordered to serve three years’ supervised release.

According to court documents, Bartko pled guilty on September 8, 2011 to a criminal information charging him with mail fraud and filing false income tax returns. According to court records and admissions in the plea agreement, Bartko, through his entity Starfire Technologies, operated a Ponzi scheme and induced investors to send money to Starfire by falsely representing that Starfire was in the business of providing circuit boards and other electronic parts to government contractors. In addition, Bartko promised monthly returns to investors ranging from 5 percent to 8 percent; falsely represented that Starfire was making in excess of 20 percent returns within 60 days on electronic parts that he supplied to government contractors; issued false account statements to investors indicating that they were routinely earning substantial positive returns; and created false invoices indicating that Starfire had deals with major government contractors.

Bartko also admitted that he defrauded the United States by filing fraudulent tax returns resulting in over $123,000 in tax loss.

U.S. Attorney Duffy emphasized that financial fraud prosecutions remain an important priority for the Department of Justice. She stated that “the court’s sentence and the significant restitution penalty will help bring justice and a sense of closure to the defendant’s victims.”




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Wednesday, April 18, 2012

SEC Charges optionsXpress and Five Individuals Involved in Abusive Naked Short Selling Scheme


Source-  http://www.sec.gov/news/press/2012/2012-66.htm 

Washington, D.C., April 16, 2012 – The Securities and Exchange Commission today charged an online brokerage and clearing agency specializing in options and futures as well as four officials at the firm and a customer involved in an abusive naked short selling scheme.

The SEC’s Division of Enforcement alleges that Chicago-based optionsXpress failed to satisfy its close-out obligations under Regulation SHO by repeatedly engaging in a series of sham “reset” transactions designed to give the illusion that the firm had purchased securities of like kind and quantity. The firm and customer Jonathan I. Feldman engaged in these sham reset transactions in a number of securities, resulting in continuous failures to deliver. Regulation SHO requires the delivery of equity securities to a registered clearing agency when delivery is due, generally three days after the trade date (T+3). If no delivery is made by that time, the firm must purchase or borrow the securities to close out the failure-to-deliver position by no later than the beginning of regular trading hours on the next day (T+4).

The former chief financial officer at optionsXpress – Thomas E. Stern of Chicago – was named in the SEC’s administrative proceeding along with optionsXpress and Feldman. Three other optionsXpress officials – head of trading and customer service Peter J. Bottini and compliance officers Phillip J. Hoeh and Kevin E. Strine – were named in a separate administrative proceeding and settled the charges against them for their roles in the scheme.

"Feldman and optionsXpress used sham reset transactions to avoid, sometimes for months, compliance with Reg. SHO's stock delivery requirements," said Robert Khuzami, Director of the SEC's Division of Enforcement. "In effect, they 'kited' shares of stock, thus depriving buyers of the benefit of their bargain - prompt delivery of their shares."

Daniel M. Hawke, Chief of the Division of Enforcement’s Market Abuse Unit, added, “Reg. SHO compliance continues to be a high enforcement priority. Broker-dealers, their employees, and their customers must ensure that they comply with the close-out requirements of the short sale rules and regulations.”

According to the SEC’s order, the misconduct occurred from at least October 2008 to March 2010. In September 2011, optionsXpress became a wholly-owned subsidiary of The Charles Schwab Corporation.

The SEC’s Enforcement Division alleges that the sham reset transactions impacted the market for the issuers. For example, from Jan. 1, 2010 to Jan. 31, 2010, optionsXpress customers including Feldman accounted for an average of 47.9 percent of the daily trading volume in one of the securities. In 2009 alone, the optionsXpress customer accounts engaging in the activity purchased approximately $5.7 billion worth of securities and sold short approximately $4 billion of options. In 2009, Feldman himself purchased at least $2.9 billion of securities and sold short at least $1.7 billion of options through his account at optionsXpress.

According to the SEC’s order, by engaging in the alleged misconduct, optionsXpress violated Rules 204 and 204T of Regulation SHO; Feldman willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 and 10b-21 thereunder; optionsXpress and Stern caused and willfully aided and abetted Feldman’s violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rules 10b-5 and 10b-21 thereunder; and Stern caused and willfully aided and abetted optionsXpress’s violations of Rules 204 and 204T.

In the separate settled administrative proceeding, Bottini, Hoeh, and Strine consented to a cease-and-desist order finding that they caused optionsXpress’s violations of Rules 204 and 204T of Regulation SHO and ordering them to cease-and-desist from committing or causing violations of Rule 204. They neither admitted nor denied the SEC’s findings.

The SEC’s investigation was conducted by Deborah Tarasevich, Jill Henderson, and Paul Kim. Market Surveillance Specialist Brian Shute, Market Abuse Unit Trading Specialist Ainsley Fuhr, and Financial Economist Michael P. Barnes provided assistance with the investigation. The litigation will be led by Frederick Block.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Tuesday, April 17, 2012

SEC Shuts Down Ponzi Scheme Targeting Persian-Jewish Community in Los Angeles


Source-  http://www.sec.gov/news/press/2012/2012-64.htm 

Washington, D.C., April 13, 2012 –The Securities and Exchange Commission today obtained an emergency court order to halt an ongoing Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles.

The SEC alleges that for the past two years, Shervin Neman raised more than $7.5 million from investors by claiming to be a hedge fund manager. Neman told investors that his purported hedge fund – Neman Financial L.P. – invested in foreclosed residential properties that would be quickly flipped for profit as well as in Facebook shares obtained in private transactions and other highly anticipated initial public offerings including Groupon, LinkedIn, and Angie’s List. Although Neman promised investors exorbitant returns resulting from his investing acumen and access to pre-IPO shares of well-known companies, what they actually received was simply other investors’ money in hallmark Ponzi scheme fashion.

Additional Materials
SEC Complaint

“Neman deceived members of his own community to raise money in this fraudulent Ponzi scheme,” said Michele Wein Layne, Associate Regional Director of the SEC’s Los Angeles Office. “By exploiting investors’ trust in him, Neman was continually able to raise more money to pay back existing investors and finance an extravagant lifestyle.”

The Honorable Jacqueline H. Nguyen for the U.S. District Court for the Central District of California granted the SEC’s request for a temporary restraining order and asset freeze against Neman and the entities he controlled.

According to the SEC’s complaint, Neman raised funds from at least 11 investors in the fraudulent securities offering. Most of the investors are members of the Los Angeles Persian-Jewish community along with Neman, who lives in the Century City area of Los Angeles. More than 99 percent of the money Neman raised was used either to pay existing investors or fund his lavish lifestyle. Neman spent nearly $1.6 million of investor funds to buy jewelry and high-end cars as well as to finance his wedding and honeymoon, other vacations, and VIP tickets to sporting events.

The SEC’s investigation was conducted by Cindy Eson of the Los Angeles Regional Office. Molly White will lead the litigation. Joshua Bauder, Harden Sooper, and Yanna Stoyanoff conducted the SEC examination that prompted the investigation.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net 

Monday, April 16, 2012

SEC Charges Ponzi Schemer Ephren W. Taylor II, Targeting Church Congregations


Source-  http://www.sec.gov/news/press/2012/2012-62.htm 

Washington, D.C., April 12, 2012 — The Securities and Exchange Commission today charged a self-described “Social Capitalist” with running a Ponzi scheme that targeted socially-conscious investors in church congregations.

The SEC alleges that Ephren W. Taylor II made numerous false statements to lure investors into two investment programs being offered through City Capital Corporation, where he was the CEO. Instead of investor money going to charitable causes and economically disadvantaged businesses as promised, Taylor secretly diverted hundreds of thousands of dollars to publishing and promoting his books, hiring consultants to refine his public image, and funding his wife’s singing career.

The SEC also charged City Capital and its former chief operating officer Wendy Connor, who lives in North Carolina and along with Taylor received hundreds of thousands of dollars from investors in salary and commissions.

“Ephren Taylor professed to be in the business of socially-conscious investing. Instead, he was in the business of promoting Ephren Taylor,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office. “He preyed upon investors’ faith and their desire to help others, convincing them that they could earn healthy returns while also helping their communities.”

According to the SEC’s complaint filed in federal court in Atlanta, Taylor strenuously cultivated an image of a highly successful and socially conscious entrepreneur. He marketed himself as “The Social Capitalist” and touted that he was the youngest black CEO of a public company and the son of a Christian minister who understands the importance of giving back. He authored three books and appeared on national television programs, and promoted his investment opportunities through live presentations, Internet advertisements, and radio ads. For instance, Taylor conducted a multi-city “Building Wealth Tour” during which he spoke to church congregations including Atlanta’s New Birth Church and at various wealth management seminars.

The SEC alleges that Taylor and City Capital offered two primary investments: promissory notes supposedly funding various small businesses, and interests in “sweepstakes” machines. In addition to promising high rates of return, Taylor assured investors that he had a long track record of success and that investor funds would be used to support businesses in economically disadvantaged areas. A portion of profits were to go to charity. Taylor devoted considerable time to denigrating traditional investment vehicles such as CDs, mutual funds, and the stock market, labeling them as “foolish” and “money losers.” He told audiences they could make far greater returns using their self-directed IRAs for investments in small businesses and sweepstakes machines offered by City Capital.

In reality, according to the SEC’s complaint, more than $11 million that Taylor and City Capital raised from hundreds of investors nationwide from 2008 to 2010 was instead used to operate the Ponzi scheme. Investor money was misused to pay other investors, finance Taylor’s personal expenses, and fund City Capital’s payroll, rent, and other costs. City Capital’s business ventures were consistently unprofitable, and no meaningful amounts of investor money were ever sent to charities.

The SEC’s complaint seeks disgorgement, financial penalties and permanent injunctive relief against City Capital, Taylor, and Connor as well as officer and director bars against Taylor and Connor.




************************************************************************
Report Securities Fraud by Calling 1-888-482-6825 or by visiting
www.reportsecuritiesfraud.net