Lyric Jeans (LYJN)

[BayCityNights]

It certainly looks like the Judge is upholding the FELONY FRAUD CHARGES.

http://www.law360.com/articles/798600/larceny-doesn-t-fit-290m-securities-fraud-case-judge-says



?


Law360 - The Newswire for Business Lawyers



?

Advanced Search ?














































Larceny Doesn't Fit $290M Securities Fraud Case, Judge Says


By Stewart Bishop
Law360, New York (May 20, 2016, 9:52 PM ET) -- A New York judge has thrown out grand larceny and stolen property charges in a case over a purported $290 million pump-and-dump stock manipulation scheme, saying the position of Manhattan prosecutors would impose “a significant and unjustified expansion of the larceny statutes.”
Manhattan District Attorney Cyrus R. Vance Jr. has accused three stock promoters and five alleged co-conspirators of defrauding investors in penny stocks by using deceptive email “blasts” to investors to juice up the stock of certain public companies that were often almost worthless and then cashing out at artificially high share prices.

All eight defendants faced charges of scheme to defraud and securities fraud, while the stock promoters were also hit with grand larceny and stolen property charges, but in an order posted Thursday, New York Supreme Court Judge Daniel P. Conviser held that with respect to one promoter, Anthony Thompson, 40, of Bethesda, Maryland, the grand larceny charges were legally insufficient, saying they weren’t meant to apply to such securities fraud cases.

“Taking a hammer to a few selected market manipulations through statutes a half-step removed from centuries old prohibitions on trespassory takings would certainly have the salutary effect of further punishing and deterring such frauds,” Judge Conviser said in a written opinion. “But New York's larceny statutes were not designed to regulate the securities markets. They were enacted to punish the modern-day equivalents of common law thefts.”

Thompson was charged alongside fellow promoters Eric Van Nguyen, 32, of Quebec, and Jay Fung, 42, of Delray Beach, Florida. The others charged in the alleged scheme are Hanna Schmieder, 40, of Los Angeles; Joseph Dervali, 56, of Pembroke Pines, Florida; Kenneth Oxsalida, 60, of Sebring, Florida; Luz Rodriguez, 49, of Miramar, Florida; and Christopher Balseiro, 33, of North Bay Village, Florida.

According to prosecutors, the conspirators acquired shell companies with available shares in advance of the promotional activity and merged them with newly created private companies, while corporate insiders issued and transferred millions of shares to themselves and associates in order to drive up the price during stock promotion campaigns.

As demand for the stock increased and drove up the market price, the conspirators would sell all of their holdings and cease the promotional drive. Consequently, the stock price tanked, leaving investors with nearly worthless shares, prosecutors said.

Dervali, Thompson, Schmieder and Rodriguez moved to dismiss the charges on various grounds, and while Judge Conviser upheld most of the fraud counts, he found the larceny charges problematic. New York’s larceny statutes, he said, require that property be stolen from an owner.

“Here, the defendants sold their stock and realized significant profits. There was no evidence these profits came directly from the victims, however. Rather, at some point the victims purchased stock and suffered losses,” Judge Conviser said. “That does not mean the defendants' conduct was not criminal. But the evidence did not indicate the defendants committed the crime of larceny.”

The judge also dismissed the criminal possession of stolen property counts, reasoning that such charges cannot be sustained where there is no larceny.

An attorney for Thompson, Maranda E. Fritz of Thompson Hine LLP, told Law360 the ruling was a fabulous result, since everything above an E felony charge for her client has now been dismissed. She predicted Judge Conviser’s comprehensive opinion will have a significant impact on New York prosecutors.

“I do think it’s a tough decision for them, because the implications of this for any securities fraud prosecution are very significant,” Fritz said. “The judge really tackled a tough issue and said, no, these larceny charges that you want to use for a securities fraud case are just not applicable.”

A spokeswoman for Vance’s office, Joan Vollero, said they are in the process of reviewing the decision.

“[We] remain committed to continuing the prosecution of this case in which thousands of investors were victimized through a highly deceptive stock market manipulation scheme,” Vollero said.

In the opinion, Judge Conviser said the issue here is that the securities fraud and scheme to defraud charges are class E felonies, the least serious class, rather than the class D, C and B felonies charged in the larceny and stolen property counts.

“But if the penalties for the frauds the defendants allegedly committed are too low, that is an issue for the legislature. It cannot be remedied by shoehorning the defendants' conduct into larceny statutes which do not apply to them,” Judge Conviser said.

A lawyer for Schmieder, Marc Agnifilo of Brafman & Associates PC, said Judge Conviser’s thoughtful and scholarly decision accurately limits the reach of state larceny statutes and appropriately concluded they do not apply to the conduct alleged here.

“For many years, the DA has been forcing a round peg into a square hole when it comes to larceny, and Judge Conviser reminded us that the statute doesn't fit in many instances, including this one,” Agnifilo said in an email.

Attorneys for Dervali and Rodriguez did not immediately respond to requests for comment Friday.

Judge Conviser also found several of the fraud counts to be multiplicitous of other charges in the 85-count indictment, but left it up to prosecutors to determine which counts or groups of counts would be dismissed, consistent with his order.

Thompson is represented by Maranda E. Fritz and Eli B. Richlin of Thompson Hine LLP. Dervali is represented by Verena C. Powell. Schmieder is represented by Marc Agnifilo of Brafman & Associates PC. Rodriguez is represented by Edward V. Sappone.

The government is represented by Brian A. Kudon and Sean Pippen.

The case is the People of the State of New York v. Anthony Thompson et al., case number 3853/2014, in the Supreme Court of the State of New York, County of New York.

--Editing by Aaron Pelc.



Related Articles

NYC DA Indicts 8 In $290 Million Stock Pump & Dump Scheme