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Ex-CFO Is Latest SpongeTech Exec To Avoid Prison For Fraud

By Pete Brush
http://www.law360.com/articles/594554/ex-cfo-is-latest-spongetech-exec-to-avoid-prison-for-fraud

Law360, New York (November 7, 2014, 2:12 PM ET) -- Steven Moskovitz, the former chief financial officer of SpongeTech Delivery Systems Inc., on Friday joined the company's former CEO in ducking prison for a $21 million penny stock pump-and-dump scheme after a Brooklyn federal judge cited Moskovitz's "extensive cooperation" with prosecutors and his poor health.

U.S. District Judge Dora Lizette Irizarry sentenced Moskovitz to three years' probation and ordered him to pay back some 6,000 victims of the fraud more than $12.6 million.

Former SpongeTech CEO Michael Metter got probation last year after prosecutors were ruled by the judge to have failed to timely examine evidence from his computer.

Even though many victims of the fraud urged a prison sentence for Moskovitz, Judge Irizarry sided with his defense counsel, Benjamin Brafman, and with prosecutors who did not object to probation despite sentencing guidelines that called for a prison sentence of more than 20 years.

Addressing victims, the judge said, “I want them to understand that their pain and their loss is understood by the court.” But, she said, restitution would be within reach of Moskovitz, who works in marketing, were he allowed to keep working.

“That certainly is not going to be accomplished by putting you in jail,” she said.

He also is said to have spent the last four and a half years helping investigators sort through the SpongeTech fraud and was credited with saving other potential fraud victims from losses.

Moskovitz, said to be battling a life-threatening ailment and also needing surgeries after a recent car accident, told the court he feared prison not only because of his health but because of his cooperation with the government.

“I'm terribly frightened of going to prison,” he said. He also apologized to investors, creditors of SpongeTech and his family.

“They're wonderful people and I did a terrible thing,” he said.

While Metter too avoided prison, he “has not quite gotten off Scot-free,” said the judge, noting he is subject to a disgorgement order in a related civil case brought by the U.S. Securities and Exchange Commission.

Both Metter and Moskovitz initially pled not guilty to the fraud in August 2010 but changed their pleas.

Investors also have brought a securities fraud class action against the company, which is in the latter stages of a bankruptcy.

Moskovitz is represented by Benjamin Brafman and Mark M. Baker Brafman & Associates PC.

Appearing for the prosecution was Nathan D. Reilly.

The case is USA v. Metter et al., case number 1:10-cr-00600, in the U.S. District Court for the Eastern District of New York.

--Editing by Rebecca Flanagan.

http://www.law360.com/articles/594554/ex-cfo-is-latest-spongetech-exec-to-avoid-prison-for-fraud