Scammers, Spammers, and Slammers

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Financial fraud crackdown lands in Miami

http://www.bizjournals.com/southflorida/news/2010/12/06/miami-cases-are-part-of-massive.html


The Department of Justice highlighted its financial fraud enforcement actions in press conferences around the country, including a Miami announcement that outlined 21 cases involving $424 million in losses. Those cases have resulted in 18 guilty pleas and nine sentencing hearings so far.

At the same time, the U.S. Attorney’s Office in South Florida announced the creation of a South Florida Securities and Investment Fraud Initiative. The effort includes a who's who list of law enforcement agencies in the region from the federal, state and local levels.

The national initiative dubbed "Operation Broken Trust" included investigations by members of the federal Financial Fraud Enforcement Task Force established a year ago.

The national effort has involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes involving more than 120,000 victims. The operation’s criminal cases involved more than $8.3 billion in estimated losses and the civil cases involved estimated losses of more than $2.1 billion.

Cases included Ponzi schemes, investment scams, business opportunity fraud, “pump and dump” stock schemes, foreign exchange frauds and false bankruptcy petitions to avoid claims by victim-investors.

Attorney General Eric Holder said the operations were intended to warn both the public and perpetrators – promising "we will use every tool at our disposal to find you, to stop you, and to bring you to justice.” (For Holder's full remarks, click here.)

Some victims lose only thousands of dollars while others lose their life savings, said U.S. Attorney Wifredo A. Ferrer of Miami. “While the victims of fraud are financially ruined, the fraudsters live a life of luxury. Together with our law enforcement and regulatory partners, we hope to help put an end to this type of fraud.”

Two of the cases involve those who helped forensic accountant Lewis B. Freeman of Miami, who was sentenced to eight years, and disgraced attorney Scott W. Rothstein of Fort Lauderdale, who is serving a 50-year term for his billion-dollar Ponzi scheme.

A Justice Department press release noted that Debra Villegas, former COO of Rothstein, Rosenfeldt and Adler, assisted Rothstein by helping fabricate names for fictitious plaintiffs and defendants and preparing false documents. Villegas pleaded guilty and was sentenced on Oct. 8 to 120 months’ in prison and was ordered to pay $363 million in restitution.

The press release noted actions by Jose Wong and Steven Jockers, who worked for Freeman, saying they helped with the misappropriation of funds from fiduciary accounts. It is estimated that Freeman stole more than $6 million from fiduciary accounts he was responsible for safeguarding.

Wong and Jockers both pleaded guilty. In September, Jockers was sentenced to 18 months of home confinement and Wong was sentenced to 24 months of home confinement.

Below are summaries of the Southern District of Florida’s securities and investment fraud prosecutions and case activity, organized into the categories of public company, business opportunity and investment schemes, based on information from the press release. (For the full press release, including cases where the plea status wasn't clear, click here.)

Public company manipulation
South Florida has been an historic epicenter of penny stock fraud and the department took action against multiple schemes:

Bruce Palmer was engaged in a scheme to manipulate the publicly quoted share price and trading volume of Accesskey IP, resulting in a potential loss of $1 million. A notice to the court indicates Palmer will enter a guilty plea.
Tzemach David Netzer Korem and Jean R. Charbit were charged with conspiring to manipulate the publicly quoted share price and trading volume of ZNext Mining Corp., resulting in a loss of $300,000. Both pleaded guilty. Sentencing for Charbit is scheduled for Jan. 14 and sentencing for Korem is scheduled for Feb. 4.
Larry Wilcox, of West Hills, Calif., was the CEO, owner and controller of millions of shares of publicly traded UCHB. He was charged with conspiring to pay kickbacks to a pension fund fiduciary to induce the fiduciary to misappropriate money from a pension fund, resulting in a $40,000 loss. He has pleaded guilty and sentencing is scheduled for Jan. 2.
Steven Humphries and John Buckeye Epstein were charged with engaging in a scheme to pay kickbacks to a pension fund fiduciary to induce the fiduciary to misappropriate money from a pension fund in order to buy restricted common stock at inflated prices, resulting in a $40,000 loss. On Oct. 7, both defendants pleaded guilty. Epstein is scheduled for sentencing Jan. 18 and Humphries is scheduled for sentencing Jan. 24.
Scott Sand was charged with engaging in an alleged scheme to pay kickbacks to a pension fund fiduciary to induce the fiduciary to misappropriate money from a pension fund in order to buy restricted common stock at inflated prices. He pleaded guilty on Dec. 2.
Jeffrey Galpern was charged Nov. 19 with engaging in a scheme to manipulate the publicly quoted share price and trading volume of Crystal Properties Holdings of which he owned and controlled millions of shares in stock, which resulted in an intended loss of $250,000. The parties filed a notice informing the court of Galpern’s intention to plead guilty.
Anthony Mellone, president and CEO of publicly traded TSHL was charged Nov. 16 with engaging in a scheme to pay kickbacks to a pension fund fiduciary to induce the fiduciary to misappropriate money from a pension fund in order to buy restricted common stock at inflated prices, resulting in an intended loss of $120,000. The parties filed a notice informing the court of the Mellone’s intention to plead guilty.
Pedro De Sousa and Guillermo Rosario were charged in connection with their operation of businesses called FX Professional Solutions and FX Professional International Solutions. The defendants lost all of their investors’ money and concealed their fraud by paying old investor debts with new investor money. Both pleaded guilty and are scheduled to be sentenced Feb. 4.
Business opportunity
Among the most common business opportunity schemes in South Florida are those involving vending machines. Among those involved and their sentences:

Seth Lehrenbaum, 78 months in prison and $950,000 in restitution.
Donald Williams (also beverage and greeting card business opportunities with $4 million in losses) 78 months in prison.
Julio Camacho, 24 months in prison and more than $200,000 in restitution to victims.
Corina Guillott has entered a guilty plea, but hasn't been sentenced. Several others are charged in the case as well.
Investment schemes
Schemes involved the selling of notes and an investment in an oil well:

Luis Felipe Perez lived a lifestyle that included a multimillion-dollar home, expensive cars, and international travel as he promised annual returns of 24 percent to 120 percent for his New York jewelry businesses and pawn shop. The Ponzi scheme resulted in $37 million in losses and he was sentenced to 121 months.
Michael Geraud set up a boiler room company called Global Petroleum Strategies Management, which purportedly sold $966,000 in interests for a dry oil well. Geraud got five years.
Ronnie Bass and other conspirators raised more than $12 million by selling unsecured notes issued by Homepals Investment Club LLC and Homepals LLC., which prosecutors allege is a Ponzi scheme. Bass pleaded guilty Oct. 25.


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