LOS ANGELES—A San Francisco man who made approximately $192,000 in profits by purchasing Marvel Entertainment Inc. stock options immediately prior to its acquisition by The Walt Disney Company in August 2009 pleaded guilty this morning to a federal securities fraud charge.
Toby G. Scammell, 29, pleaded guilty today to one count of securities fraud before United States District Judge S. James Otero.
According to a plea agreement filed in federal court, Scammell learned that Disney planned to acquire another company “that people would recognize right away” from his then-girlfriend, who was an extern at Disney in the summer of 2009 and who worked on the deal to acquire Marvel. Scammell later learned from a supervisor at his then-employer—which had periodically provided corporate consulting services to Disney and had confidentiality obligations to Disney—that Disney had previously been interested in acquiring Marvel. Scammell admitted that he learned the planned acquisition by Disney was estimated to close by Labor Day 2009, based on his observations of his girlfriend’s work schedule at Disney and their own travel plans at the time.
Scammell used the information that he learned from his girlfriend to acquire 659 call options to purchase Marvel stock for $5,465. He purchased more than half the options in his brother’s account. Scammell did not tell his girlfriend or his brother about the purchases of the Marvel call options.
Marvel’s stock rose approximately 25 percent after the deal with Disney was announced on August 31, 2009. After the acquisition was publicly disclosed by Disney, Scammell immediately sold his options, realizing more than $192,000 in profits. Scammell transferred $100,000 of the profits out of his brother’s account to conceal the trading and profits from his brother.
As a result of the guilty plea, Scammell faces a maximum statutory sentence of 25 years in federal prison when he is sentenced by Judge Otero on July 28, 2014.
Today’s guilty plea resolves a case filed in October 2013 when a federal grand jury returned an indictment that named Scammell.
Scammell was previously charged with securities fraud by the Securities and Exchange Commission in a civil lawsuit filed in August 2011. He was later ordered to disgorge his trading profits and pay civil penalties and interest totaling $800,985 in that case.
This case was investigated by the Federal Bureau of Investigation, which received assistance from the Securities and Exchange Commission.
Showing posts with label securities fraud. Show all posts
Showing posts with label securities fraud. Show all posts
Tuesday, April 22, 2014
Thursday, March 20, 2014
Law Clerk, Stock Broker Charged in New Jersey with Trading on Inside Information Stolen from Prominent New York Law Firm
NEWARK, NJ—The managing clerk of the New York office of Simpson Thacher & Bartlett LLP—a prominent, international law firm—and a professional stock broker who worked at Oppenheimer & Co. and Morgan Stanley were arrested today and charged with participating in a multi-year insider trading scheme that allegedly netted more than $5.6 million in illicit profits, New Jersey U.S. Attorney Paul J. Fishman announced.
Steven Metro, 40, of Katonah, New York, and Vladimir Eydelman, 42, of Colts Neck, New Jersey, are both charged by complaint with one count of conspiracy to commit securities fraud and tender offer fraud, as well as multiple counts of securities fraud and tender offer fraud: Metro is charged with nine counts of securities fraud; Eydelman is charged with eight counts of securities fraud; and each defendant is charged with four counts of tender offer fraud. FBI agents arrested Metro in Katonah and Eydelman in Colts Neck this morning. Both men are scheduled to appear this afternoon before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.
“These defendants are charged with using confidential information that Metro stole from his employer to reap huge illegal profits,” U.S. Attorney Fishman said. “They allegedly rigged the system by exploiting sensitive information that was not available to other investors. This kind of activity undermines the integrity of our financial markets and weakens investor confidence.”
“As alleged in the complaint, Metro, Eydelman, and another engaged in a lengthy insider trading scheme that reaped more than five million in illicit profits,” said FBI Special Agent in Charge Aaron T. Ford. “The FBI is committed to investigating allegations of insider trading and will hold violators accountable to ensure the integrity of the financial markets. We will continue to work with our partners to identify securities fraud so investors maintain a high level of confidence in the markets.”
According to the complaint unsealed today:
Metro, Eydelman, and a third person who subsequently became a cooperating witness—referred to in court documents as “the CW”—engaged in an insider trading scheme that began in 2009. The conspirators invested more than $33 million and reaped more than $5.6 million in illicit profits over the life of the scheme.
Starting in November 1999, Metro worked at the New York office of Simpson Thacher & Bartlett LLP, one of the nation’s premier mergers and acquisitions law firms. During the period of the trading scheme, he was the firm’s managing clerk, responsible for, among other things, filing pleadings on behalf of attorneys. Eydelman was a broker-dealer employed first at Oppenheimer & Co. and most recently by Morgan Stanley, both renowned investment firms.
While at the law firm, Metro repeatedly obtained inside information regarding anticipated corporate mergers and acquisitions on which his firm was working. He disclosed the material, non-public information to his friend, the CW. Metro would arrange to meet the CW in person and would disclose inside information, including the stock exchange ticker symbol of the company in which to invest and the pricing and/or timing of the planned transaction. The CW would write the information on a small piece of paper or napkin.
The CW would then meet with Eydelman, usually the same day, to divulge the stolen information. These meetings usually occurred at an agreed-upon location near the large clock in New York City’s Grand Central Terminal. The CW would show Eydelman the paper or napkin on which the CW had written the ticker symbol of the company whose securities should be purchased. After Eydelman memorized the ticker symbol, the CW then would place the paper or napkin into his mouth and chew it until it was destroyed.
Eydelman purchased securities for himself, family members, friends, and clients, including the CW. Eydelman quickly sold the shares and covered any options positions once the relevant deal was publicly announced and the stock price rose.
Over the four-year period, the CW reinvested approximately $7,000 in profits that Metro made on the first deal and updated Metro on the running balance of his profits from the insider trading scheme. As of October 2013, by which time the conspirators had traded ahead of at least 13 planned corporate transactions, Metro’s share of the profits had reached approximately $168,000.
The complaint specifically identifies the 12 transactions and one uncompleted transaction ahead of which Eydelman, Metro, and the CW traded between February 2009 and February 2013.
The complaint also details a number of recorded meetings among the conspirators. During the course of one meeting with the CW on January 28, 2014, Metro expressed his desire to cash out his share of the illicit profits. Metro stated to the CW, “You gotta try to liberate some cash, somewhere, or I’m going to be freakin’ flat out.” Metro also promised to let the CW know of any planned M&A deals that he came across in the future, stating that although “right now it’s all been private equity, private equity...I think this year, it’s going to be a good year[.]”
In a meeting on February 6, 2014, Eydelman indicated he would be willing to pay a portion of the cash proceeds owed to Metro. Eydelman stated, “I got seven [thousand]….That’s all I can do, without [my wife] knowing.”
Eydelman came through with the $7,000 in cash for the CW to use to compensate Metro for tipping them inside information. During a recorded meeting with the CW on February 20, 2014, Eydelman handed the CW a small plastic shopping bag with a cigar manufacturer’s logo on it, stating, “Take these cigars, put it to good use.” Eydelman enclosed $7,000 in cash in the cigar bag he handed to the CW.
The conspirators attempted to hide their illegal conduct. In addition to the CW destroying pieces of paper on which he wrote the ticker symbols provided by Metro, Eydelman sent the CW “covering” e-mails that contained false justifications designed to suggest that their trades in the subject securities were based on research, not inside information.
While Metro relied on the CW to reinvest his illicit profits on his behalf, Eydelman realized substantial personal profits on an ongoing basis from the insider trading scheme and used these unlawful proceeds to purchase a new 2011 Maserati Grand Turismo for $117,700 and to spend tens of thousands of dollars on expensive jewelry. Eydelman also used illicit proceeds to purchase his residence and to pay the mortgage on the property.
The conspiracy count with which Metro and Eydelman are each charged carries a maximum potential penalty of five years in prison and a $250,000 fine or twice the aggregate loss to victims or gain to the defendants. On the substantive securities fraud and tender offer fraud charges, they each face a maximum of 20 years in prison and a $5 million fine. The complaint also seeks the forfeiture of Eydelman’s residence.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today’s arrests and complaint. He also thanked the U.S. Securities and Exchange Commission’s Market Abuse Unit, under the direction of Daniel Hawke. He also thanked the New York FBI, under the direction of Assistant Director in Charge George C. Venizelos, for assistance with the investigation.
The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, and Joseph R. Gribko of the U.S. Attorney’s Office in Trenton, as well as Marion Percell, Chief of the of the Office’s Asset Forfeiture and Money Laundering Unit.
The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
These charges are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney’s offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Steven Metro, 40, of Katonah, New York, and Vladimir Eydelman, 42, of Colts Neck, New Jersey, are both charged by complaint with one count of conspiracy to commit securities fraud and tender offer fraud, as well as multiple counts of securities fraud and tender offer fraud: Metro is charged with nine counts of securities fraud; Eydelman is charged with eight counts of securities fraud; and each defendant is charged with four counts of tender offer fraud. FBI agents arrested Metro in Katonah and Eydelman in Colts Neck this morning. Both men are scheduled to appear this afternoon before U.S. Magistrate Judge Madeline Cox Arleo in Newark federal court.
“These defendants are charged with using confidential information that Metro stole from his employer to reap huge illegal profits,” U.S. Attorney Fishman said. “They allegedly rigged the system by exploiting sensitive information that was not available to other investors. This kind of activity undermines the integrity of our financial markets and weakens investor confidence.”
“As alleged in the complaint, Metro, Eydelman, and another engaged in a lengthy insider trading scheme that reaped more than five million in illicit profits,” said FBI Special Agent in Charge Aaron T. Ford. “The FBI is committed to investigating allegations of insider trading and will hold violators accountable to ensure the integrity of the financial markets. We will continue to work with our partners to identify securities fraud so investors maintain a high level of confidence in the markets.”
According to the complaint unsealed today:
Metro, Eydelman, and a third person who subsequently became a cooperating witness—referred to in court documents as “the CW”—engaged in an insider trading scheme that began in 2009. The conspirators invested more than $33 million and reaped more than $5.6 million in illicit profits over the life of the scheme.
Starting in November 1999, Metro worked at the New York office of Simpson Thacher & Bartlett LLP, one of the nation’s premier mergers and acquisitions law firms. During the period of the trading scheme, he was the firm’s managing clerk, responsible for, among other things, filing pleadings on behalf of attorneys. Eydelman was a broker-dealer employed first at Oppenheimer & Co. and most recently by Morgan Stanley, both renowned investment firms.
While at the law firm, Metro repeatedly obtained inside information regarding anticipated corporate mergers and acquisitions on which his firm was working. He disclosed the material, non-public information to his friend, the CW. Metro would arrange to meet the CW in person and would disclose inside information, including the stock exchange ticker symbol of the company in which to invest and the pricing and/or timing of the planned transaction. The CW would write the information on a small piece of paper or napkin.
The CW would then meet with Eydelman, usually the same day, to divulge the stolen information. These meetings usually occurred at an agreed-upon location near the large clock in New York City’s Grand Central Terminal. The CW would show Eydelman the paper or napkin on which the CW had written the ticker symbol of the company whose securities should be purchased. After Eydelman memorized the ticker symbol, the CW then would place the paper or napkin into his mouth and chew it until it was destroyed.
Eydelman purchased securities for himself, family members, friends, and clients, including the CW. Eydelman quickly sold the shares and covered any options positions once the relevant deal was publicly announced and the stock price rose.
Over the four-year period, the CW reinvested approximately $7,000 in profits that Metro made on the first deal and updated Metro on the running balance of his profits from the insider trading scheme. As of October 2013, by which time the conspirators had traded ahead of at least 13 planned corporate transactions, Metro’s share of the profits had reached approximately $168,000.
The complaint specifically identifies the 12 transactions and one uncompleted transaction ahead of which Eydelman, Metro, and the CW traded between February 2009 and February 2013.
The complaint also details a number of recorded meetings among the conspirators. During the course of one meeting with the CW on January 28, 2014, Metro expressed his desire to cash out his share of the illicit profits. Metro stated to the CW, “You gotta try to liberate some cash, somewhere, or I’m going to be freakin’ flat out.” Metro also promised to let the CW know of any planned M&A deals that he came across in the future, stating that although “right now it’s all been private equity, private equity...I think this year, it’s going to be a good year[.]”
In a meeting on February 6, 2014, Eydelman indicated he would be willing to pay a portion of the cash proceeds owed to Metro. Eydelman stated, “I got seven [thousand]….That’s all I can do, without [my wife] knowing.”
Eydelman came through with the $7,000 in cash for the CW to use to compensate Metro for tipping them inside information. During a recorded meeting with the CW on February 20, 2014, Eydelman handed the CW a small plastic shopping bag with a cigar manufacturer’s logo on it, stating, “Take these cigars, put it to good use.” Eydelman enclosed $7,000 in cash in the cigar bag he handed to the CW.
The conspirators attempted to hide their illegal conduct. In addition to the CW destroying pieces of paper on which he wrote the ticker symbols provided by Metro, Eydelman sent the CW “covering” e-mails that contained false justifications designed to suggest that their trades in the subject securities were based on research, not inside information.
While Metro relied on the CW to reinvest his illicit profits on his behalf, Eydelman realized substantial personal profits on an ongoing basis from the insider trading scheme and used these unlawful proceeds to purchase a new 2011 Maserati Grand Turismo for $117,700 and to spend tens of thousands of dollars on expensive jewelry. Eydelman also used illicit proceeds to purchase his residence and to pay the mortgage on the property.
The conspiracy count with which Metro and Eydelman are each charged carries a maximum potential penalty of five years in prison and a $250,000 fine or twice the aggregate loss to victims or gain to the defendants. On the substantive securities fraud and tender offer fraud charges, they each face a maximum of 20 years in prison and a $5 million fine. The complaint also seeks the forfeiture of Eydelman’s residence.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark, for the investigation leading to today’s arrests and complaint. He also thanked the U.S. Securities and Exchange Commission’s Market Abuse Unit, under the direction of Daniel Hawke. He also thanked the New York FBI, under the direction of Assistant Director in Charge George C. Venizelos, for assistance with the investigation.
The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, and Joseph R. Gribko of the U.S. Attorney’s Office in Trenton, as well as Marion Percell, Chief of the of the Office’s Asset Forfeiture and Money Laundering Unit.
The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
These charges are part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorney’s offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Wednesday, February 19, 2014
Former Attorney Pleads Guilty to Securities and Bank Fraud
ANNISTON—A former Birmingham attorney pleaded guilty today in federal court to charges connected with a securities fraud scheme involving the fraudulent taking of more than $2.8 million dollars in investment funds, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Richard D. Schwein, Jr., and Alabama Securities Commission Director Joseph Borg.
Christopher Shawn Linton, 34, of Alabaster, entered his plea before U.S. District Judge Virginia Emerson Hopkins to one count each of wire fraud, mail fraud, securities fraud, and money laundering as part of the investment fraud scheme. He also pleaded guilty to one count of bank fraud arising from the submission of a fraudulent commercial loan application to Iberia Bank for a loan of $908,650.
As part of his plea agreement, Linton is required to pay $2.5 million in restitution to the investors he defrauded and to pay restitution to Iberia Bank in an amount that will be determined at sentencing. Sentencing is scheduled May 29.
“This commission is proud to be able to combine our efforts and resources with those of the U.S. Attorney’s Office, Northern District of Alabama, and the FBI to achieve a just and strong conviction against Linton,” Borg said. “Hopefully, this verdict will provide some relief to victims involved in this case who were defrauded out of their hard-earned dollars.”
According to Linton’s plea agreement, he conducted the securities fraud scheme as follows:
In 2007, Linton became an officer, partner, and part-owner of a business known as Integrity Capital Inc. by purchasing stock in the company. Integrity Capital Inc. was a factoring business located in the greater Birmingham area. Its business was to make advance payments to lawyers who had submitted payment vouchers for work performed for the state of Alabama. Integrity Capital would then receive the voucher payments from the state and keep a percentage as a fee.
In 2009, Linton formed Integrity Capital LLC. Beginning about August 2009, Linton recruited investment advisors to solicit investments in Integrity Capital LLC in order to purchase the assets and capital stock of Integrity Capital Inc. Between September 2009 and December 2011, 12 individuals invested more than $2.8 million in Integrity Capital LLC. The investors mailed, wired, or delivered money to Linton, who deposited the money into one of several bank accounts held by the law firm where he was a partner.
After receiving the investor funds, Linton fraudulently converted them for personal use by writing personal checks to himself and by using the funds for non-investment purposes. The non-investment purposes included, but were not limited to, the purchase of his personal residence, construction projects at the residence, private jet flights, vacations, recreational vehicles, furniture, luxury items, Auburn football tickets, and a donation to the Heisman Trophy Trust.
Linton committed bank fraud in January 2012 when he submitted fraudulent personal financial statements to Iberia Bank and received two commercial loans totaling $908,650, according to his plea agreement. His financial statements inflated the value of his personal residence and falsely stated that he owned the residence and other real property.
The maximum penalty for wire fraud and for mail fraud is 20 years in prison and a $250,000 fine; the maximum penalty for money laundering is 10 years in prison and a $250,000 fine; and the maximum penalty for securities fraud is five years in prison and a $250,000 fine. The maximum penalty for bank fraud is 30 years in prison and a $1 million fine.
The FBI and Alabama Securities Commission investigated the case, which Assistant U.S. Attorney Robin Beardsley Mark is prosecuting along with Assistant Attorney General Greg Biggs with the Alabama Securities Commission.
Christopher Shawn Linton, 34, of Alabaster, entered his plea before U.S. District Judge Virginia Emerson Hopkins to one count each of wire fraud, mail fraud, securities fraud, and money laundering as part of the investment fraud scheme. He also pleaded guilty to one count of bank fraud arising from the submission of a fraudulent commercial loan application to Iberia Bank for a loan of $908,650.
As part of his plea agreement, Linton is required to pay $2.5 million in restitution to the investors he defrauded and to pay restitution to Iberia Bank in an amount that will be determined at sentencing. Sentencing is scheduled May 29.
“This commission is proud to be able to combine our efforts and resources with those of the U.S. Attorney’s Office, Northern District of Alabama, and the FBI to achieve a just and strong conviction against Linton,” Borg said. “Hopefully, this verdict will provide some relief to victims involved in this case who were defrauded out of their hard-earned dollars.”
According to Linton’s plea agreement, he conducted the securities fraud scheme as follows:
In 2007, Linton became an officer, partner, and part-owner of a business known as Integrity Capital Inc. by purchasing stock in the company. Integrity Capital Inc. was a factoring business located in the greater Birmingham area. Its business was to make advance payments to lawyers who had submitted payment vouchers for work performed for the state of Alabama. Integrity Capital would then receive the voucher payments from the state and keep a percentage as a fee.
In 2009, Linton formed Integrity Capital LLC. Beginning about August 2009, Linton recruited investment advisors to solicit investments in Integrity Capital LLC in order to purchase the assets and capital stock of Integrity Capital Inc. Between September 2009 and December 2011, 12 individuals invested more than $2.8 million in Integrity Capital LLC. The investors mailed, wired, or delivered money to Linton, who deposited the money into one of several bank accounts held by the law firm where he was a partner.
After receiving the investor funds, Linton fraudulently converted them for personal use by writing personal checks to himself and by using the funds for non-investment purposes. The non-investment purposes included, but were not limited to, the purchase of his personal residence, construction projects at the residence, private jet flights, vacations, recreational vehicles, furniture, luxury items, Auburn football tickets, and a donation to the Heisman Trophy Trust.
Linton committed bank fraud in January 2012 when he submitted fraudulent personal financial statements to Iberia Bank and received two commercial loans totaling $908,650, according to his plea agreement. His financial statements inflated the value of his personal residence and falsely stated that he owned the residence and other real property.
The maximum penalty for wire fraud and for mail fraud is 20 years in prison and a $250,000 fine; the maximum penalty for money laundering is 10 years in prison and a $250,000 fine; and the maximum penalty for securities fraud is five years in prison and a $250,000 fine. The maximum penalty for bank fraud is 30 years in prison and a $1 million fine.
The FBI and Alabama Securities Commission investigated the case, which Assistant U.S. Attorney Robin Beardsley Mark is prosecuting along with Assistant Attorney General Greg Biggs with the Alabama Securities Commission.
Tuesday, February 4, 2014
Russian National Sentenced to 30 Months in Prison for $1 Million Trading Account Hack, Securities Fraud Scheme
NEWARK, NJ—A Russian national living in New York was sentenced today to 30 months in prison for conspiring with others to hack into retail brokerage accounts and execute sham trades, New Jersey U.S. Attorney Paul J. Fishman announced.
Petr Murmylyuk, 33, of Brooklyn, New York, previously pleaded guilty before U.S. District Judge Esther Salas to an information charging him with conspiracy to commit securities fraud. Judge Salas imposed the sentence today in Newark federal court.
According to documents filed in the case and statements made in court:
Murmylyuk admitted that he participated in a conspiracy to steal from online trading accounts at Scottrade, E*Trade, Fidelity, Schwab, and other brokerage firms. Members of the conspiracy first gained unauthorized access to the online accounts of brokerage firm customers. The conspirators then used stolen identities to open additional accounts—referred to in the information as “profit accounts”—at other brokerage houses. They then caused the victims’ accounts to make unprofitable and illogical securities trades with the profit accounts, leading to losses in the victims’ accounts and gains in the profit accounts. One version of the fraud involved causing the victims’ accounts to sell options contracts to the profit accounts and then to purchase the same contracts back minutes later for many times the price.
The members of the conspiracy recruited foreign nationals visiting, studying, and living in the United States to open bank accounts into which illegal proceeds could be deposited. The conspirators then caused the proceeds of the sham trades to be transferred from the profit accounts into those accounts, where the stolen money could be withdrawn. The scheme caused combined losses to Scottrade, E*Trade, Fidelity, Schwab, and other affected brokerage firms of approximately $1 million.
In addition to the prison term, Judge Salas sentenced Murmylyuk to serve three years of supervised release and ordered him to pay $505,357.79 in restitution.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; Immigration and Customs Enforcement, Homeland Security Investigations, under the direction of Special Agent in Charge Andrew McLees; and IRS-Criminal Investigations, New York Field Office, under the direction of Special Agent in Charge Toni M. Weirauch, with the investigation leading to today’s sentencing. He also thanked the U.S. Securities and Exchange Commission’s Philadelphia Regional Office, under the leadership of its Regional Director Daniel M. Hawke, and the Justice Department’s Computer Crime and Intellectual Property Section for their assistance in the investigation, as well as the Manhattan District Attorney’s Office, under the direction of District Attorney Cyrus R. Vance, Jr., for its contributions and cooperation in coordinating parallel investigations.
The government is represented by Assistant U.S. Attorney Christopher J. Kelly, Chief of the Economic Crimes Unit in Newark.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
Petr Murmylyuk, 33, of Brooklyn, New York, previously pleaded guilty before U.S. District Judge Esther Salas to an information charging him with conspiracy to commit securities fraud. Judge Salas imposed the sentence today in Newark federal court.
According to documents filed in the case and statements made in court:
Murmylyuk admitted that he participated in a conspiracy to steal from online trading accounts at Scottrade, E*Trade, Fidelity, Schwab, and other brokerage firms. Members of the conspiracy first gained unauthorized access to the online accounts of brokerage firm customers. The conspirators then used stolen identities to open additional accounts—referred to in the information as “profit accounts”—at other brokerage houses. They then caused the victims’ accounts to make unprofitable and illogical securities trades with the profit accounts, leading to losses in the victims’ accounts and gains in the profit accounts. One version of the fraud involved causing the victims’ accounts to sell options contracts to the profit accounts and then to purchase the same contracts back minutes later for many times the price.
The members of the conspiracy recruited foreign nationals visiting, studying, and living in the United States to open bank accounts into which illegal proceeds could be deposited. The conspirators then caused the proceeds of the sham trades to be transferred from the profit accounts into those accounts, where the stolen money could be withdrawn. The scheme caused combined losses to Scottrade, E*Trade, Fidelity, Schwab, and other affected brokerage firms of approximately $1 million.
In addition to the prison term, Judge Salas sentenced Murmylyuk to serve three years of supervised release and ordered him to pay $505,357.79 in restitution.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford; Immigration and Customs Enforcement, Homeland Security Investigations, under the direction of Special Agent in Charge Andrew McLees; and IRS-Criminal Investigations, New York Field Office, under the direction of Special Agent in Charge Toni M. Weirauch, with the investigation leading to today’s sentencing. He also thanked the U.S. Securities and Exchange Commission’s Philadelphia Regional Office, under the leadership of its Regional Director Daniel M. Hawke, and the Justice Department’s Computer Crime and Intellectual Property Section for their assistance in the investigation, as well as the Manhattan District Attorney’s Office, under the direction of District Attorney Cyrus R. Vance, Jr., for its contributions and cooperation in coordinating parallel investigations.
The government is represented by Assistant U.S. Attorney Christopher J. Kelly, Chief of the Economic Crimes Unit in Newark.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
Friday, December 20, 2013
SAC Capital Portfolio Manager Michael Steinberg Found Guilty in Manhattan Federal Court of Insider Trading Charges
Preet Bharara, the United States Attorney for the Southern District of New York, announced that Michael Steinberg, a portfolio manager of Sigma Capital Management LLC (Sigma), a division of the Connecticut-based hedge fund SAC Capital, was found guilty today in Manhattan federal court based on his participation in an insider trading scheme. Steinberg was convicted after a five-week jury trial presided over by U.S. District Judge Richard J. Sullivan.
Manhattan U.S. Attorney Preet Bharara said, “The jury has found what the government contended from the outset; in search of an edge, Michael Steinberg crossed the line into criminal insider trading. Like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty.”
According to the superseding indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
Steinberg traded in the securities of two publicly traded technology companies, Dell Inc. (Dell) and NVIDIA Corporation (NVIDIA), based on inside information that his research analyst Jon Horvath obtained from a circle of analyst friends at different investment firms. Horvath previously pled guilty to insider trading, as did analysts Jesse Tortora, formerly of Diamondback Capital; Spyridon “Sam” Adondakis, formerly of Level Global; Danny Kuo, formerly of Whittier Trust; and Sandeep Goyal, formerly of Neuberger Berman. Steinberg’s trading in Dell and NVIDIA resulted in approximately $1.9 million in illegal profits for his hedge fund.
In particular, Tortora provided Horvath and others with inside information related to Dell’s quarterly earnings (the Dell inside information), which Tortora obtained from Goyal who, in turn, had obtained the information from an employee at Dell (the Dell insider). For Dell’s quarter that was announced by Dell on August 28, 2008 (the Dell announcement), the Dell inside information indicated that Dell would report gross margins that were materially lower than market expectations. In advance of the Dell announcement, Horvath reported this negative inside information to Steinberg.
On August 18, 2008, after a series of calls from the Dell insider to Goyal and from Goyal to Tortora and Horvath, Horvath then called Steinberg. Within a minute of the telephone call between Steinberg and Horvath, Steinberg’s portfolio began shorting shares of Dell. One minute later, Horvath wrote an e-mail to Steinberg stating: “Pls keep the DELL stuff especially on the down low...just mentioning that because JT [Jesse Tortora] asked me specifically to be extra sensitive with the info.” By the end of the day on August 18, 2008, Steinberg had accumulated a net short position of over 167,000 shares of Dell. On August 26, 2008, Horvath confirmed in an e-mail to Steinberg and another portfolio manager at Sigma that Horvath’s Dell information had been based on a “2nd hand read from someone at the company.” Steinberg responded: “Yes normally we would never divulge data like this, so please be discreet.” And on August 27, 2008, Steinberg sent an e-mail to Horvath with the subject line, “Dell action,” in which he asked, “Have u double checked [with] JT this week?” Horvath responded, “Yes he [Tortora] checked in [a] couple days ago, same read no change.” The following day, Steinberg executed additional short trades based on the Dell inside information.
On August 28, 2008, before Dell’s announcement, Steinberg executed or caused to be executed additional short trades. Steinberg also executed or caused to be executed options trades in Dell in advance of the Dell announcement.
After the close of the market on August 28, 2008, Dell publicly announced gross margins that were substantially below market expectations. At the end of the next trading day following Dell’s announcement, its stock price dropped by nearly 14 percent. Shortly thereafter, Steinberg covered his short position and closed out his position in Dell option contracts, resulting in an illegal profit for Sigma of approximately $1 million.
In addition, in 2009, Kuo obtained inside information regarding NVIDIA’s financial results (the NVIDIA inside information) in advance of NVIDIA’s quarterly earnings announcements. The NVIDIA inside information indicated, among other things, that NVIDIA’s gross margins would be lower than market expectations. Kuo obtained the NVIDIA inside information from a friend, Hyung Lim, who received it from an employee at NVIDIA (the NVIDIA insider). In advance of NVIDIA’s May 7, 2009 quarterly earnings announcement (the NVIDIA announcement), Kuo provided the NVIDIA inside information, which he had obtained from Lim, to Tortora, Horvath, and others. Horvath, in turn, provided the NVIDIA inside information to Steinberg, who executed or caused to be executed transactions in NVIDIA in advance of the NVIDIA announcement.
On May 7, 2009, NVIDIA publicly announced gross margins that were substantially lower than the market expected. At the end of the trading day following the NVIDIA announcement, NVIDIA’s stock price dropped by more than 13 percent. Shortly thereafter, Steinberg caused Sigma to liquidate its position in NVIDIA, resulting in an illegal profit for Sigma of over $400,000.
Steinberg, 41, of New York, New York, was found guilty of conspiracy to commit securities fraud and four counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense.
Steinberg is scheduled to be sentenced by Judge Sullivan on April 25, 2014.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and Harry A. Chernoff are in charge of the prosecution.
Manhattan U.S. Attorney Preet Bharara said, “The jury has found what the government contended from the outset; in search of an edge, Michael Steinberg crossed the line into criminal insider trading. Like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty.”
According to the superseding indictment filed in Manhattan federal court, other court documents, and the evidence presented at trial:
Steinberg traded in the securities of two publicly traded technology companies, Dell Inc. (Dell) and NVIDIA Corporation (NVIDIA), based on inside information that his research analyst Jon Horvath obtained from a circle of analyst friends at different investment firms. Horvath previously pled guilty to insider trading, as did analysts Jesse Tortora, formerly of Diamondback Capital; Spyridon “Sam” Adondakis, formerly of Level Global; Danny Kuo, formerly of Whittier Trust; and Sandeep Goyal, formerly of Neuberger Berman. Steinberg’s trading in Dell and NVIDIA resulted in approximately $1.9 million in illegal profits for his hedge fund.
In particular, Tortora provided Horvath and others with inside information related to Dell’s quarterly earnings (the Dell inside information), which Tortora obtained from Goyal who, in turn, had obtained the information from an employee at Dell (the Dell insider). For Dell’s quarter that was announced by Dell on August 28, 2008 (the Dell announcement), the Dell inside information indicated that Dell would report gross margins that were materially lower than market expectations. In advance of the Dell announcement, Horvath reported this negative inside information to Steinberg.
On August 18, 2008, after a series of calls from the Dell insider to Goyal and from Goyal to Tortora and Horvath, Horvath then called Steinberg. Within a minute of the telephone call between Steinberg and Horvath, Steinberg’s portfolio began shorting shares of Dell. One minute later, Horvath wrote an e-mail to Steinberg stating: “Pls keep the DELL stuff especially on the down low...just mentioning that because JT [Jesse Tortora] asked me specifically to be extra sensitive with the info.” By the end of the day on August 18, 2008, Steinberg had accumulated a net short position of over 167,000 shares of Dell. On August 26, 2008, Horvath confirmed in an e-mail to Steinberg and another portfolio manager at Sigma that Horvath’s Dell information had been based on a “2nd hand read from someone at the company.” Steinberg responded: “Yes normally we would never divulge data like this, so please be discreet.” And on August 27, 2008, Steinberg sent an e-mail to Horvath with the subject line, “Dell action,” in which he asked, “Have u double checked [with] JT this week?” Horvath responded, “Yes he [Tortora] checked in [a] couple days ago, same read no change.” The following day, Steinberg executed additional short trades based on the Dell inside information.
On August 28, 2008, before Dell’s announcement, Steinberg executed or caused to be executed additional short trades. Steinberg also executed or caused to be executed options trades in Dell in advance of the Dell announcement.
After the close of the market on August 28, 2008, Dell publicly announced gross margins that were substantially below market expectations. At the end of the next trading day following Dell’s announcement, its stock price dropped by nearly 14 percent. Shortly thereafter, Steinberg covered his short position and closed out his position in Dell option contracts, resulting in an illegal profit for Sigma of approximately $1 million.
In addition, in 2009, Kuo obtained inside information regarding NVIDIA’s financial results (the NVIDIA inside information) in advance of NVIDIA’s quarterly earnings announcements. The NVIDIA inside information indicated, among other things, that NVIDIA’s gross margins would be lower than market expectations. Kuo obtained the NVIDIA inside information from a friend, Hyung Lim, who received it from an employee at NVIDIA (the NVIDIA insider). In advance of NVIDIA’s May 7, 2009 quarterly earnings announcement (the NVIDIA announcement), Kuo provided the NVIDIA inside information, which he had obtained from Lim, to Tortora, Horvath, and others. Horvath, in turn, provided the NVIDIA inside information to Steinberg, who executed or caused to be executed transactions in NVIDIA in advance of the NVIDIA announcement.
On May 7, 2009, NVIDIA publicly announced gross margins that were substantially lower than the market expected. At the end of the trading day following the NVIDIA announcement, NVIDIA’s stock price dropped by more than 13 percent. Shortly thereafter, Steinberg caused Sigma to liquidate its position in NVIDIA, resulting in an illegal profit for Sigma of over $400,000.
Steinberg, 41, of New York, New York, was found guilty of conspiracy to commit securities fraud and four counts of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million or twice the gross gain or loss from the offense.
Steinberg is scheduled to be sentenced by Judge Sullivan on April 25, 2014.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Antonia M. Apps and Harry A. Chernoff are in charge of the prosecution.
Wednesday, November 27, 2013
Former Miami Securities Professional Pleads Guilty to Securities Fraud in Connection with Multi-State Investment Scheme
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; and Drew J. Breakspear, Commissioner, State of Florida’s Office of Financial Regulation, Bureau of Financial Investigations, announce that Daniel Paez, 27, of Miami, Florida, pled guilty today to one count of securities fraud before U.S. District Judge William P. Dimitrouleas, in connection with a scheme to defraud investors in Florida and several states. Paez faces a maximum of 20 years in prison and maximum $250,000 fine. Sentencing has been set for February 4, 2014 before Judge Dimitrouleas in Ft. Lauderdale.
According to court documents, Paez was the president of Fly High Investments, Inc., a Miami-Dade investment fund. From in or around September 2010 through in or around April 2012, Paez obtained more than $500,000 in funds from investors via telephone solicitations and through the Internet. Paez told investors that Fly High Investments was a hedge fund that managed more than $50 million, and he promised investors that their money would be invested in safe and secure investments. Paez also promised a fixed rate of return and that investors could withdraw their money whenever they wished. Instead, according to the information, Paez spent the bulk of the money raised from investors at casinos and also withdrew large amounts of cash for his personal benefit. Paez did invest certain investor monies in stocks and other securities, but often in high-risk investments or penny stocks that were materially different than the specific investments promised to investors during their sales pitch.
When investors contacted Fly High Investments and Paez to inquire about the status of their funds, Paez misled investors into believing their money was safe and had been invested profitably. Paez ultimately stopped returning calls and ignored requests for the return of investor funds. According to the Information, there were approximately 17 victim investors who were located in Florida and other states, including California, South Dakota, New Jersey, and Minnesota. None of these investors received any return on their investment and they lost all of the money they invested with Fly High Investments and Paez.
Mr. Ferrer commended the investigative efforts of the FBI and the State of Florida’s Office of Financial Regulation, Bureau of Financial Investigations. This case is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.
According to court documents, Paez was the president of Fly High Investments, Inc., a Miami-Dade investment fund. From in or around September 2010 through in or around April 2012, Paez obtained more than $500,000 in funds from investors via telephone solicitations and through the Internet. Paez told investors that Fly High Investments was a hedge fund that managed more than $50 million, and he promised investors that their money would be invested in safe and secure investments. Paez also promised a fixed rate of return and that investors could withdraw their money whenever they wished. Instead, according to the information, Paez spent the bulk of the money raised from investors at casinos and also withdrew large amounts of cash for his personal benefit. Paez did invest certain investor monies in stocks and other securities, but often in high-risk investments or penny stocks that were materially different than the specific investments promised to investors during their sales pitch.
When investors contacted Fly High Investments and Paez to inquire about the status of their funds, Paez misled investors into believing their money was safe and had been invested profitably. Paez ultimately stopped returning calls and ignored requests for the return of investor funds. According to the Information, there were approximately 17 victim investors who were located in Florida and other states, including California, South Dakota, New Jersey, and Minnesota. None of these investors received any return on their investment and they lost all of the money they invested with Fly High Investments and Paez.
Mr. Ferrer commended the investigative efforts of the FBI and the State of Florida’s Office of Financial Regulation, Bureau of Financial Investigations. This case is being prosecuted by Assistant U.S. Attorney Jerrob Duffy.
Friday, September 20, 2013
Atlantic City Man Admits Conspiring with Alleged Members of Organized Crime Family and Others in Fraud Scheme
CAMDEN, NJ—An Atlantic City, New Jersey man admitted he conspired to defraud FirstPlus Financial Group Inc. (FPFG), a Texas-based financial services company allegedly targeted for extortionate takeover and looting by a group led by alleged Lucchese organized crime family member Nicodemo S. Scarfo, U.S. Attorney Paul J. Fishman announced.
John Parisi, 52, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to a superseding information charging him with conspiracy to commit wire fraud.
According to documents filed in this case and statements made in court:
Parisi and 12 others—including his cousin, Nicodemo S. Scarfo, an alleged member of the Lucchese La Cosa Nostra (LCN) crime family, and Salvatore Pelullo, an alleged associate of the Lucchese and Philadelphia LCN families—were variously charged in a November 2011 indictment with a racketeering conspiracy, including acts of securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of racketeering, money laundering, and obstruction of justice. The indictment charged that FPFG was targeted for extortionate takeover and looting by a group of the conspirators. A substantial part of the enterprise’s activities occurred in New Jersey, including communications and the transfer of money into and out of the state. John Parisi admitted that he joined the conspiracy in April 2007.
Parisi managed a family trust and a limited liability company on behalf of Scarfo as part of the scheme to defraud FPFG. Parisi said Scarfo, his cousin, directed Parisi in the use of various bank accounts through which Scarfo received hundreds of thousands of dollars between July 2007 and April 2008 as part of the scheme. As alleged in the indictment, the money involved proceeds of the fraud that Scarfo allegedly received as part of a fraudulent “consulting” agreement between his shell company, Learned Associates, and one controlled by Pelullo. The money also involved proceeds received from the fraudulent sale of Scarfo and Pelullo’s worthless companies to FPFG in 2007. The receipt of the fraudulent proceeds often occurred in the form of wire transfers from accounts in Pennsylvania to accounts in New Jersey.
Parisi also said that beginning in February 2008 he assisted Scarfo and his then-fiancée, Lisa Marie Scarfo, obtain a mortgage for a $715,000 house in Egg Harbor Township, New Jersey, that the Scarfos intended to purchase. Lisa Marie Scarfo pleaded guilty on September 17, 2013, to a conspiracy to make a false mortgage loan application in connection with the purchase of the Egg Harbor Township house.
Scarfo, Pelullo, and six other defendants charged in November 2011—including attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy, and Donald Manno, as well as John Maxwell—are scheduled for trial beginning October 28, 2013. Todd Stark, also charged in the indictment, previously pleaded guilty to providing ammunition to Scarfo and Pelullo, convicted felons.
The conspiracy count to which Parisi pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for January 17, 2014.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark; the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, New York Region; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, under the direction of Thomas J. Cannon in Newark. He also thanked the FBI under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia for its vital assistance and the U.S. Securities and Exchange Commission for its role.
The government is represented by Assistant U.S. Attorneys Steven D’Aguanno and Howard Wiener of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit and Criminal Division in Camden and Trial Attorney Adam Small of the Organized Crime and Gang Section of the Justice Department’s Criminal Division.
With respect to the defendants awaiting trial, the charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
John Parisi, 52, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to a superseding information charging him with conspiracy to commit wire fraud.
According to documents filed in this case and statements made in court:
Parisi and 12 others—including his cousin, Nicodemo S. Scarfo, an alleged member of the Lucchese La Cosa Nostra (LCN) crime family, and Salvatore Pelullo, an alleged associate of the Lucchese and Philadelphia LCN families—were variously charged in a November 2011 indictment with a racketeering conspiracy, including acts of securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of racketeering, money laundering, and obstruction of justice. The indictment charged that FPFG was targeted for extortionate takeover and looting by a group of the conspirators. A substantial part of the enterprise’s activities occurred in New Jersey, including communications and the transfer of money into and out of the state. John Parisi admitted that he joined the conspiracy in April 2007.
Parisi managed a family trust and a limited liability company on behalf of Scarfo as part of the scheme to defraud FPFG. Parisi said Scarfo, his cousin, directed Parisi in the use of various bank accounts through which Scarfo received hundreds of thousands of dollars between July 2007 and April 2008 as part of the scheme. As alleged in the indictment, the money involved proceeds of the fraud that Scarfo allegedly received as part of a fraudulent “consulting” agreement between his shell company, Learned Associates, and one controlled by Pelullo. The money also involved proceeds received from the fraudulent sale of Scarfo and Pelullo’s worthless companies to FPFG in 2007. The receipt of the fraudulent proceeds often occurred in the form of wire transfers from accounts in Pennsylvania to accounts in New Jersey.
Parisi also said that beginning in February 2008 he assisted Scarfo and his then-fiancée, Lisa Marie Scarfo, obtain a mortgage for a $715,000 house in Egg Harbor Township, New Jersey, that the Scarfos intended to purchase. Lisa Marie Scarfo pleaded guilty on September 17, 2013, to a conspiracy to make a false mortgage loan application in connection with the purchase of the Egg Harbor Township house.
Scarfo, Pelullo, and six other defendants charged in November 2011—including attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy, and Donald Manno, as well as John Maxwell—are scheduled for trial beginning October 28, 2013. Todd Stark, also charged in the indictment, previously pleaded guilty to providing ammunition to Scarfo and Pelullo, convicted felons.
The conspiracy count to which Parisi pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for January 17, 2014.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark; the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, New York Region; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, under the direction of Thomas J. Cannon in Newark. He also thanked the FBI under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia for its vital assistance and the U.S. Securities and Exchange Commission for its role.
The government is represented by Assistant U.S. Attorneys Steven D’Aguanno and Howard Wiener of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit and Criminal Division in Camden and Trial Attorney Adam Small of the Organized Crime and Gang Section of the Justice Department’s Criminal Division.
With respect to the defendants awaiting trial, the charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Thursday, September 19, 2013
Wife of Nicodemo S. Scarfo Admits Conspiring with Him and Others to Defraud a Mortgage Lender to Buy Their House
CAMDEN, NJ—The wife of a reputed mob figure today admitted she conspired to defraud a mortgage lender in order to buy a $715,000 house in Egg Harbor Township, New Jersey, U.S. Attorney Paul J. Fishman and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division announced.
Lisa Marie Scarfo, 34, of Elmer, New Jersey, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to a superseding information charging her with conspiracy to make false statements for the purpose of influencing the actions of the bank on her mortgage loan application.
According to documents filed in this case and statements made in court:
In November 2011, Lisa Marie Scarfo and 12 others—including her husband, Nicodemo S. Scarfo, an alleged member of the Lucchese La Cosa Nostra (LCN) crime family, and Salvatore Pelullo, an alleged associate of the Lucchese and Philadelphia LCN families—were variously charged in a 25-count indictment with a racketeering conspiracy including acts of securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of racketeering, money laundering, and obstruction of justice. The indictment charged that FirstPlus Financial Group Inc. (FPFG), a Texas-based financial services company, was targeted for extortionate takeover and looting by a group of the conspirators. A substantial part of the enterprise’s activities occurred in New Jersey, including communications and the transfer of money into and out of the state.
Lisa Marie Scarfo admitted that she joined the mortgage fraud conspiracy in January 2008 when she worked with her then-fiancé, Nicodemo S. Scarfo, and others to secure a $500,000 mortgage from St. Edmond’s Federal Savings Bank to purchase the Egg Harbor Township house. Drossner previously pleaded guilty and admitted that at the direction of Pelullo, he created false tax returns to help Lisa Marie Scarfo qualify for a mortgage for the house. The indictment alleges that Nicodemo S. Scarfo used money looted from FPFG for the $215,000 down payment on the house. The false tax returns, which exaggerated Lisa Marie Scarfo’s income so that she could qualify for the mortgage without naming her then-fiancé Scarfo, were used to secure the mortgage.
After the FPFG scheme was shut down by federal law enforcement in May 2008, the Scarfos were unable to pay the mortgage, and the house ultimately went into foreclosure. It was sold by the bank in 2010.
Nicodemo S. Scarfo, Pelullo, and eight other defendants charged in November 2011—including attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy, and Donald Manno—are scheduled for trial beginning October 28, 2013. Todd Stark, also charged in the indictment, previously pleaded guilty to providing ammunition to Scarfo and Pelullo, convicted felons.
The conspiracy count to which Lisa Marie Scarfo pleaded guilty is punishable by a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for January 10, 2014.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark; the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, New York Region; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, under the direction of Thomas J. Cannon in Newark. He also thanked the FBI under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia for its vital assistance and the U.S. Securities and Exchange Commission for its role.
The government is represented by Assistant U.S. Attorneys Steven D’Aguanno and Howard Wiener of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit and Criminal Division in Camden and Trial Attorney Adam Small of the Organized Crime and Gang Section of the Justice Department’s Criminal Division.
With respect to the defendants awaiting trial, the charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Lisa Marie Scarfo, 34, of Elmer, New Jersey, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden federal court to a superseding information charging her with conspiracy to make false statements for the purpose of influencing the actions of the bank on her mortgage loan application.
According to documents filed in this case and statements made in court:
In November 2011, Lisa Marie Scarfo and 12 others—including her husband, Nicodemo S. Scarfo, an alleged member of the Lucchese La Cosa Nostra (LCN) crime family, and Salvatore Pelullo, an alleged associate of the Lucchese and Philadelphia LCN families—were variously charged in a 25-count indictment with a racketeering conspiracy including acts of securities fraud, wire fraud, mail fraud, bank fraud, extortion, interstate travel in aid of racketeering, money laundering, and obstruction of justice. The indictment charged that FirstPlus Financial Group Inc. (FPFG), a Texas-based financial services company, was targeted for extortionate takeover and looting by a group of the conspirators. A substantial part of the enterprise’s activities occurred in New Jersey, including communications and the transfer of money into and out of the state.
Lisa Marie Scarfo admitted that she joined the mortgage fraud conspiracy in January 2008 when she worked with her then-fiancé, Nicodemo S. Scarfo, and others to secure a $500,000 mortgage from St. Edmond’s Federal Savings Bank to purchase the Egg Harbor Township house. Drossner previously pleaded guilty and admitted that at the direction of Pelullo, he created false tax returns to help Lisa Marie Scarfo qualify for a mortgage for the house. The indictment alleges that Nicodemo S. Scarfo used money looted from FPFG for the $215,000 down payment on the house. The false tax returns, which exaggerated Lisa Marie Scarfo’s income so that she could qualify for the mortgage without naming her then-fiancé Scarfo, were used to secure the mortgage.
After the FPFG scheme was shut down by federal law enforcement in May 2008, the Scarfos were unable to pay the mortgage, and the house ultimately went into foreclosure. It was sold by the bank in 2010.
Nicodemo S. Scarfo, Pelullo, and eight other defendants charged in November 2011—including attorneys William Maxwell, Cory Leshner, David Adler, Gary McCarthy, and Donald Manno—are scheduled for trial beginning October 28, 2013. Todd Stark, also charged in the indictment, previously pleaded guilty to providing ammunition to Scarfo and Pelullo, convicted felons.
The conspiracy count to which Lisa Marie Scarfo pleaded guilty is punishable by a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense. Sentencing is scheduled for January 10, 2014.
U.S. Attorney Fishman praised special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford in Newark; the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Acting Special Agent in Charge Cheryl Garcia, New York Region; and the Bureau of Alcohol, Tobacco, Firearms, and Explosives, under the direction of Thomas J. Cannon in Newark. He also thanked the FBI under the direction of Special Agent in Charge Edward J. Hanko in Philadelphia for its vital assistance and the U.S. Securities and Exchange Commission for its role.
The government is represented by Assistant U.S. Attorneys Steven D’Aguanno and Howard Wiener of the New Jersey U.S. Attorney’s Office Organized Crime/Gangs Unit and Criminal Division in Camden and Trial Attorney Adam Small of the Organized Crime and Gang Section of the Justice Department’s Criminal Division.
With respect to the defendants awaiting trial, the charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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