UPDV’s Ex-CEO Convicted Of Securities Fraud Submitted by Steven Meyerowitz on Wed, 03/09/2011 - 12:48pm Following three weeks of trial, a federal jury in Brooklyn returned guilty verdicts against Kamal Z. Abdallah, the former chief executive officer at Universal Property Development and Acquisition Corp. (“UPDV”), on charges of securities fraud, wire fraud, and conspiracy to commit securities and wire fraud. These charges arose out of his participation in a scheme to artificially inflate UPDV’s stock price. When sentenced by U.S. District Judge Joseph F. Bianco on June 17, 2011, Abdallah faces a maximum sentence of 25 years’ imprisonment on the most serious charge.
The government’s proof at trial established that:
Abdallah served as UPDV’s chief executive officer from 2005 to 2008. During that time, he obtained hundreds of millions of shares of UPDV stock, some of which he received at no cost as part of his compensation. Shortly before Abdallah left UPDV, the company defaulted on over $14 million in loans, and one of its subsidiaries bounced approximately $2.5 million in checks to its suppliers. Neither Abdallah nor anyone else at UPDV disclosed these financial problems to UPDV’s shareholders or the investing public.
Beginning in June 2009, Abdallah orchestrated a scheme to unload as many of his UPDV shares as possible before the company went out of business. Due to a lack of demand for UPDV’s stock, Abdallah paid cash kickbacks to a co-conspirator in exchange for the coconspirator’s creating false demand for UPDV’s stock, which, in turn, increased UPDV’s share price and allowed Abdallah and another conspirator to sell tens of millions of UPDV shares at artificially high prices. Abdallah’s co-conspirator created the false demand by fraudulently inducing several stock brokerage houses to purchase a total of more than 200 million shares of UPDV. The co-conspirator telephoned each of these brokerage houses, falsely identified himself as a representative of an actual client of the broker, and placed orders to buy large blocks of UPDV common stock. After the brokerage houses purchased the stock, the co-conspirator ceased contact with the brokerage houses and failed to pay for the shares he had caused the brokerage houses to purchase.
The false demand enabled Abdallah and another conspirator to sell over 70 million UPDV shares for approximately $300,000. In exchange for the creation of the false demand, Abdallah paid his co-conspirator approximately $40,000 in secret kickbacks from his UPDV sale proceeds.
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