TALK about the wolf guarding the hen house...Our tax payer dollars being spent...
Fraud Lauderdale and Boca "Boiler Room" Raton are just a few of the names coined for a region infamous for investor scams.
There's a constant problem with white-collar crime in South Florida, said Mark Mathosian, who is in charge of the financial investigative unit in South Florida for the Florida Department of Financial Services.
"The reason the crooks are here is the same reason you and I are here: the sunshine, the beaches and the money. It's the land of milk and honey. All their dreams are gonna come true. It just doesn't happen," he said.
What is happening is a surge of securities fraud headlines.
Last Halloween's conviction of fraud artist Paul Johnson of Link Express showed state, local and federal law enforcement they could cooperate to step up their level of pursuit. Dozens of criminal and civil actions have been filed in recent months.
Mortgage and securities fraud, particularly private placement scams, are the hot crimes being monitored and prosecuted, according to the Florida Department of Law Enforcement and the Florida Department of Financial Services.
Johnson was convicted of bilking more than 400 investors out of nearly $19 million by using private placements. The U.S. attorney's office teamed up with the Florida Department of Law Enforcement, SEC, IRS and Florida Department of Regulation, ultimately resulting in a guilty verdict that sent the Canadian entrepreneur to jail for 20 years.
"In essence, corporate fraud and securities fraud are one and the same," said Eric Bustillo, deputy chief of the economic crimes unit at the U.S. attorney's office in Miami, whose lawyers in the unit he supervises are currently prosecuting three former senior executives at Hamilton Bancorp in an alleged accounting fraud scheme.
Some of the cases reaching fruition now go back to 2001, when the U.S attorney's office launched a securities fraud initiative using a number of federal agencies with the help of the National Association of Securities Dealers' criminal prosecution assistance group.
At the end of the summer of 2002, Bustillo's office completed a two-year undercover operation known as Operation Bermuda Short, charging more than 50 individuals (some from South Florida) in 23 separate cases. Most of those defendants were charged with violations of the federal securities laws.
Most recently, a defendant charged in conjunction with Bermuda Short pleaded guilty to that case and a second case that had been charged on July 13.
"Last week was a very busy week," Bustillo said. Another guilty plea was garnered in a mutual fund market timing and late trading violations case, "the first ever to have pleaded guilty to these crimes nationwide."
The SEC often appoints special prosecutors to assist in the criminal cases while pursuing civil actions, Bustillo said.
"We are seeing more [fraud] in unregistered securities," said Mathosian, something that is allowed under Regulation D in the Securities Act of 1933. "With the legal exemptions, they [con artists] don't have to go through the government red tape to raise the money. "
One sales pitch is that no money will be used toward commissions, but investors fail to look at documents stating 90 percent is used for commissions.
"It's hard to say it wasn't [disclosed] when you signed the document that stated clearly that it is," Mathosian said.
"The burden of protecting your assets falls on you," he said, noting the same South Florida residents who cut coupons at Publix will fork over their entire retirement savings to an unknown entity promising big returns on an investment.
Ask hard questions, Mathosian suggested, such as whether the principals are registered, have ever filed bankruptcy, were ever sued or served time in prison. The more you ask, the less likely you'll be perceived "as an easy mark," he said.
Bustillo said federal and state agencies will continue their aggressive efforts.
"From a broker to a big executive, if you cross the line and violate the law, there will be severe consequences," he said. "Our collaborative efforts are yielding substantial results. Hopefully, the message is going out there that, chances are, you are going to get caught."
E-mail Senior Reporter John T. Fakler at firstname.lastname@example.org.