US charges Xybernaut, Ramp ex-officials with fraud
Fri Oct 19, 2007 4:16pm EDT Email | Print | Digg | Reprints | Single Page | Recommend (0) [-] Text [+]
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powered by SphereNEW YORK, Oct 19 (Reuters) - U.S. prosecutors charged six people on Friday, including former top officials at Xybernaut Corp. and Ramp Corp. (RCOCQ.PK: Quote, Profile, Research) and two investors, in a multimillion dollar scheme that used discounted shares to cover short sales.
The indictment alleges that top officials at Xybernaut and Ramp got the companies to issue hundreds of millions of heavily discounted shares to offshore entities secretly controlled by two investors who live in Israel, U.S. attorney's office in Brooklyn, New York said.
The two investors sold the shares short and covered their positions with the discounted stock, prosecutors said.
The scheme generated about $55 million in illegal profits, prosecutors said.
The six people include Edward Newman, Xybernaut's former chief executive; Steven Newman, Xybernaut's former chief operating officer; Martin Weisberg, a lawyer who served on Xybernaut's board; Andrew Brown, Ramp's former president; and investors Zev Saltsman and Menachem Eitan.
They face securities fraud and money laundering charges, prosecutors said.
The U.S. Securities and Exchange Commission also filed civil charges against the defendants in a separate case.
Ramp, which developed software for healthcare industry, and Xybernaut, which developed wearable computers, both filed for bankruptcy protection in 2005, prosecutors said.
The indictment also alleges that Saltsman and Eitan paid kickbacks to their co-defendants, including a $1 million payment to Steven Newman made from a Swiss bank account and $50,000 in cash delivered to Brown in a paper bag, prosecutors said.
Brown was scheduled to be arraigned on Friday in Brooklyn federal court. Steven Newman was arrested in Virginia. Saltsman was arrested in London on Thursday, and the United States is seeking his extradition. Prosecutors said they also plan to seek the extradition of Eitan from Israel.
Warrants have been issued for the arrests of Weisberg and Edward Newman, prosecutors said.
The Federal Bureau of Investigation was also involved in the probe. (Reporting by Paritosh Bansal)