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  • DEVELOPING STORY: Standoff Ensues In Alabama After School-Bus Driver Shot And Killed; Suspect Reportedly Holed Up In Private ‘Bunker’ After Taking 6-Year-Old — And Drama Plays Out During Senate Hearing

    recommendedreading1DEVELOPING STORY: A standoff with police is occurring in southeastern Alabama, amid reports that a school-bus driver was shot and killed yesterday after he refused to submit to the demands of an armed man who wanted to remove two children from the bus. The suspected shooter then allegedly fled with a six-year-old and now is holed up with the child in his private “bunker” in Dale County

    The drama is unfolding in the town of Midland. The Dothan Eagle newspaper has identified the suspect as 67-year-old Jimmy Lee Dykes.

    FoxNews.com is reporting that Dykes was scheduled to be in court today on a previous charge of menacing. Local authorities have identified the bus driver as Charles Albert Poland Jr., a 66-year-old employee of the Dale County Board of Education.

    The Senate Judiciary Committee is conducting a hearing today on gun violence in the United States. (NOTE: if you visit the Senate page at the time of this post, you’ll see a link to a live webcast.)

    The Dothan region is known to have had brushes with purported “sovereign citizens.” Whether Dykes holds “sovereign” beliefs is unclear.

    But a neighbor told the Dothan Eagle that Dykes “is the type that thinks the government’s out to get him.”

    In February 2012, James Timothy Turner, a purported “sovereign” and the purported  “President” of the “Republic for the united States of America,” named the Dothan Eagle a defendant in a lawsuit, apparently because he was displeased with the paper’s coverage.

    In September 2012, Turner was indicted on tax charges amid U.S. Justice Department claims he “conducted seminars at which he taught attendees how to file retaliatory liens against government officials and to defraud the IRS by preparing and submitting fictitious bonds to the United States government in payment of federal taxes.”

    In November 2011, Pennsylvania attorney and accused New Jersey thief and Ponzi schemer Michael W. Kwasnik was arrested in Dothan. Police said he was found in possession of “items essential for out of country travel such as passports and maps.”

  • UPDATE: Purported Louisiana ‘Sovereign’ Implicated In Utah False-Liens Case Sentenced To 30 Months In Federal Prison

    americaatrisk4Robert Clifton Tanner, the purported Louisiana “sovereign citizen” implicated in a cross-border plot to file bogus financial judgments against state-court judges and others in Utah, has pleaded guilty to federal charges of mail fraud and has been sentenced to 30 months in prison.

    One of the documents was styled “Petition for Agreement and Harmony in the Nature of a Notice of International Commercial Claim Administrative Remedy,” federal prosecutors in Utah said.

    Tanner is 45. His co-defendant, Maria Melody Fuentes Cecil Mobo, 42, of Spanish Fork, Utah, is scheduled to go on trial Feb. 25. She is charged with four counts of mail fraud.

    Bogus filings by the pair asserted they were owed billions of dollars by judges and others, prosecutors said.

    As part of a plea agreement with the 30-month sentence for Tanner, “other state and federal jurisdictions in Louisiana and Utah had agreed to forgo additional charges against” him.

    The sentence was imposed by U.S. District Judge David Sam.

    UPDATED AT 12:46 P.M. ET JAN. 30

  • URGENT >> BULLETIN >> MOVING: Alarming New Allegations Surface In Cook/Kiley Scheme; Receiver Accuses Associated Bank Of Aiding And Abetting Massive Ponzi Amid Allegations That Mysterious Jordanian Trader Linked To Fraud Has ‘Disappeared’

    The address of this packaging and shipping store in Minneapolis was used by Crown Forex LLC, one of the firms implicated in the $194 million Trevor Cook/Pat Kiley Ponzi scheme. The court-appointed receiver in the case today accused Associated Bank of ignoring key markers of a scam in progress and of aiding and abetting fraud.
    The address of this packaging and shipping store in Minneapolis was used by Crown Forex LLC, one of the firms implicated in the $194 million Trevor Cook/Pat Kiley (et al) Ponzi scheme. The court-appointed receiver in the case today accused Associated Bank of ignoring key markers of a scam in progress and of aiding and abetting fraud.

    UPDATED 9:56 A.M. ET (JAN. 30, U.S.A.) In a heavily redacted complaint, the court-appointed receiver in the Trevor Cook Ponzi scheme has accused Associated Bank of Green Bay, Wisc., of aiding and abetting the massive caper that has led to jail sentences for Cook and multiple Cook pitchmen. Associated Bank also operates branches in Minnesota, the home state of the $194 million fraud aimed mostly at senior citizens and people of faith.

    Among the extraordinary assertions today by receiver R.J. Zayed is that the bank handed $600,000 in cash to Cook, and then allowed Cook “to stuff the cash into a box and walk out the door under the pretext of buying a yacht.”

    The cash, Zayed alleged, belonged to Cook’s fraud victims — and Associated Bank transferred the funds from an account in the name of Crown Forex LLC to an account controlled by Cook.

    Crown Forex was using an address of a packaging and shipping store in Minneapolis, according to a review of records by the PP Blog. One unredacted exhibit filed today by Zayed showed a photo of the store at 5413 Nicollet Ave. in Minneapolis. Crown Forex LLC purported to occupy “Suite 14,” according to a separate exhibit.

    The Cook/Kiley scheme operated in part by using a regal theme and trading on names that mimicked the names of famous financial firms such as UBS. One of the firms identified in court papers is a bankrupt Swiss firm known as Crown Forex SA.

    Cook, Kiley and a Jordanian trader identified as Shadi Swais discussed the purported Forex program with Associated Bank, according to Zayed.

    But Associated Bank advised the trio that opening an account with the name of Crown Forex SA could raise regulatory concerns in the United States, so the bank recommended “opening an account with a similarly named” U.S. domestic LLC.

    That’s how Crown Forex LLC came into being, apparently using the address of the packaging store, according to court records.

    Even though Associated Bank knew the entity was never registered with the state of Minnesota “or any other governmental authority,” Zayed said, the bank nevertheless permitted the “sham” account to be opened.

    A former bank executive — in an affidavit — claimed he told Kiley that he “must send the documentation to me after he completed a Secretary of State filing for Crown Forex LLC.”

    But the former executive said he “did not remember” to follow-up with Kiley about the absent paperwork. Millions of dollars in investor funds were deposited into the account.

    Crown Forex SA’s role in the fraud was to “pretend” it was a facilitator receiving investor funds and holding them in segregated accounts, Zayed alleged.

    Swiss authorities shut down Crown Forex SA in 2009, just prior to the collapse of the Cook/Kiley fraud.

    “Shadi Swais and others who controlled Crown Forex, SA have disappeared along with millions of dollars of investor funds,” Zayed alleged.

    Not a “single penny” of investor funds ever was transferred directly from Crown Forex LLC to Crown Forex SA, despite assertions that the Swiss firm was the American firm’s facilitator, according to court filings.

    But millions of dollars were transferred to Cook’s personal accounts, Zayed alleged.

  • BULLETIN: Now, An Affinity-Fraud Scheme Targeting Lebanese And Druze Communities, SEC Says; Agency Seeks Asset Freeze Against Firas Hamdan And FAH Capital Partners

    From an SEC evidence exhibit.
    From an SEC evidence exhibit.

    BULLETIN: The SEC has gone to federal court in Houston, alleging that Firas Hamdan was conducting an affinity-fraud scheme targeted at the Lebanese and Druze communities. The agency is seeking an asset freeze against Hamdan and his unregistered company, FAH Capital Partners Inc. The scheme is alleged to have gathered about $6 million over five years.

    “Hamdan’s affinity scam preyed upon people’s tendency to trust those who share common backgrounds and beliefs,” said David R. Woodcock, director of the SEC’s Fort Worth Regional Office. “Hamdan raised money by creating the aura of a successful day trader among friends and family in his community, and he continued to mislead them and hide the truth while trading losses mounted.”

    Hamdan is 49. The SEC says he has an address in Houston and previously used an address in Sugar Land.

    “Hamdan is well-known in the Houston-area Lebanese and Druze communities and has enjoyed a reputation as a successful day trader,” the SEC said in its complaint.  “He is also a former treasurer of the Houston branch of the American Druze Society (‘ADS’), a non-profit cultural organization to which many Houston-area members of the Druze religion belong.”

    Falsified records helped drive the scam, the SEC said.

    As has been the case in other scams, Hamdam allegedly claimed he used a “proprietary trading algorithm.”

    “Hamdan explained to investors that his algorithm was ‘plugged into’ his trading account at TD Ameritrade to further minimize investor loss,” the SEC charged. “Hamdan promised investors that, as a result of this algorithm, he could guarantee the fixed monthly return based on the amount they invested with him.”

    As has been the case with other scams, Hamdan also talked about “promissory notes.”

    “Although the precise terms of the notes appear to vary among investors, the notes generally provide for returns of approximately 30% per year,” the SEC charged.

    Read SEC Investor Alert on affinity fraud.

    A snippet (italics added):

    Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud. The group could be a religious group, such as a particular denomination or church. It could be an ethnic group or an immigrant community. It could be a racial minority. It could be members of a particular workforce – even members of the military have been targets of these frauds. Fraudsters target any group they think they can convince to trust them with the group members’ hard-earned savings.

    At its core, affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. Fraudsters use a number of methods to get access to the group. A common way is by enlisting respected leaders from within the group to spread the word about the scheme . . .

    Read the SEC complaint against Hamdan.

     

  • FTC, 3 State Attorneys General Move On Fortune Hi-Tech Marketing (FHTM) Amid Pyramid Allegations; MLM Site Now Resolves To Court-Appointed Receiver’s Page

    breakingnews72BULLETIN: The FTC and attorneys general for the states of Illinois, Kentucky, and North Carolina have moved against Fortune Hi-Tech Marketing (FHTM), alleging it is a pyramid scheme. A federal judge in the Northern District of Illinois has appointed a receiver and ordered an asset freeze. FHTM’s website at FHTM.com now resolves to a site controlled by the receiver, Robb Evans & Robb Evans & Associates.

    “This is the beginning of the end for one of the most prolific pyramid schemes operating in North America,” said Kentucky Attorney General Jack Conway. “This is a classic pyramid scheme in every sense of the word. The vast majority of people, more than 90 percent, who bought in to FHTM lost their money.”

    A top FTC official called FHTM a “rigged game.”

    “Pyramid schemes are more like icebergs,” said C. Steven Baker, director of the FTC’s Midwest Region. “At any point most people must and will be underwater financially. These defendants were promising people that if they worked hard they could make lots of money. But it was a rigged game, and the vast majority of people lost money.”

    Named defendants were FHTM President and Director Paul C. Orberson; FHTM CEO Thomas A. Mills, Fortune Hi-Tech Marketing Inc. of Lexington, Ky.; FHTM Inc. of Lexington, Ky.; Alan Clark Holdings LLC of Danville, Ky.; FHTM Canada Inc. of Ottawa; and Fortune Network Marketing (UK) Limited of Berkshire.

    Among the allegations in addition to the pyramid charge is that FHTM furnished “consumers with false and misleading materials for recruiting more participants.”

    Twitter was used to push the scheme, with one affiliate claiming, “Bring ur friends & learn how 2 make $120K aYR,” the FTC charged.

    “At its 2012 national convention in Dallas, FHTM called its top 30 earners to the stage to present them with a mock-up of a $64 million check, which several of them shared as a photo on social networking websites,” the FTC said.

    In the FTC’s complaint released today, the agency said FHTM has been operating an illegal pyramid scheme “since at least 2001.”

    “FHTM’s complicated and convoluted compensation plan ensures that the vast majority of FHTM’s Reps make little or no money,” the FTC said.

    Evans, the receiver, has broad experience. He is the receiver in the alleged Jeremy Johnson Internet fraud case, and Evans rose to national prominence as a liquidator in the Bank of Credit and Commerce International (BCCI) case in the 1990s.

  • ‘American Greed’ Producing Episode On Trevor Cook Ponzi Fraud; Seniors, People Of Faith Fleeced By Cook And His Pitchmen

    Trevor Cook
    Trevor Cook

    CNBC’s “American Greed” will be in Minneapolis today to begin filming an episode on the massive Trevor Cook Ponzi scheme that was targeted at senior citizens and conservative Christians and rendered some victims penniless, a source told the PP Blog.

    Cook’s scheme gathered about $194 million. It collapsed in 2009. Money that potentially could go to victims is still missing. The scheme was reminiscent of the AdSurfDaily Ponzi case in that it took various bizarre and disturbing turns.

    Earlier this month, Cook pitchman Jason Bo-Alan Beckman was sentenced to 30 years in federal prison. Gerald Durand received 20 years. Christopher Pettengill, who cooperated with prosecutors, received a 90-month sentence. Sentencing for Pat Kiley, a conspiracy theorist and former radio host in his seventies, was put on hold, pending the results of medical and psychological exams.

    Cook, the ringleader, received a 25-year sentence in 2010.

    For what the Cook fraud lacked in dollar volume — indeed, it was significantly smaller than Tom Petters’ epic Ponzi fraud in Minnesota — it more than made up for in pure brazenness. Beckman essentially was accused of taunting victims in his court filings after stealing millions from a senior-citizen couple in their late eighties. Durand told a tale about a submersible submarine Cook allegedly bought on eBay for the waters of Canada before moving it to Panama, where Cook purportedly found the conditions to be more sub-friendly.

    Kiley once tried to have a CFTC lawyer fined $1,000 for filing court papers Kiley deemed “offensive.”

    The Cook scheme also had something in common with AdViewGlobal, the collapsed 1-percent-a-day autosurf linked to the AdSurfDaily Ponzi scheme: a tie to offshore facilitator KINGZ Capital Management Corp.

    AdViewGlobal announced its purported tie to KINGZ on May 4, 2009, the same day the Obama administration announced a crackdown on offshore fraud. KINGZ denied any tie to AVG. But the National Futures Association (NFA) established a tie between KINGZ and Cook.

    AdViewGlobal collapsed during the summer of 2009, amid reports that millions of dollars had been stolen. The purported “opportunity” bizarrely declared itself a “private association” operating in Uruguay, apparently in a bid to evade U.S. regulatory scrutiny even though it was conducting business in the United States. Federal prosecutors tied ASD President Andy Bowdoin to AdViewGlobal in 2012. Bowdoin, now serving a 78-month prison sentence, once claimed that prosecutors were “Satan” and compared the U.S. Secret Service to the 9/11 terrorists. His scheme gathered at least $119 million.

    Prosecutors have evidence that suggests at least some of the AdViewGlobal money was deposited in Switzerland. The Cook Ponzi also did business in Switzerland.

    There also is a tie between Trevor Cook and Peregrine Financial Group Inc., the collapsed fraud scheme of Russell R. Wasendorf Sr., now facing up to 50 years in federal prison. Wasendorf once was a member of NFA’s Futures Commission Merchant Advisory Committee

    Peregrine consumed at least $215 million and conducted a scam for two decades, prosecutors said. “[I]n order for the fraud to be effective and sustainable for years, defendant routinely created and used false certifications and forged documents to deceive his customers, his accounting department, his fellow corporate officers, an outside auditor, and multiple regulatory agencies whose core function was to detect and prevent exactly the type of criminal activity defendant perpetrated,” prosecutors said of Wasendorf.

  • OBAMA IN VIDEO: ‘You Don’t Want To Mess With Mary Jo’; President Announces Nomination Of Mary Jo White To Lead SEC

    UPDATED 5:56 P.M. EDT (U.S.A.) President Obama formally introduced Mary Jo White to the American people today. White, 65, is Obama’s choice to lead the SEC.

    “You don’t want to mess with Mary Jo,” Obama said.

    White is the first woman ever appointed U.S. Attorney for the Southern District of New York. Today marked another first for her: She is the first woman ever to have led a U.S. Attorney’s Office to be nominated to lead the SEC. White, now in private practice as a defense lawyer, has led prosecutions of Mafia figures, terrorists and financial criminals.

    The nomination may signal that the President views the SEC as an increasingly important agency in the context of national security, in addition to its traditional role of policing Wall Street and the securities markets.

    Obama also renominated former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau. Cordray, 53, has been leading the bureau for a year under a recess appointment. Obama today called for an up-or-down vote by the Senate, which has been squabbling over the upstart bureau.

  • URGENT >> BULLETIN >> MOVING: Mary Jo White, Famed Terrorism And Financial-Crimes Prosecutor, Gets Nod From President Obama To Head The SEC

    recommendedreading1UPDATED 12:53 P.M. ET (U.S.A.) In a move that may signal that the White House sees the SEC as an agency that is playing an increasingly important role in matters of national security and economic security, President Obama is set to nominate famed attorney and former federal prosecutor Mary Jo White to head the SEC. The White House is expected to make a formal announcement this afternoon.

    White House Press Secretary Jay Carney confirmed at a gaggle this morning that the President would announce the nomination this afternoon.

    White, currently in private practice, once led the U.S. Attorney’s Office for the Southern District of New York, commonly known as the Manhattan U.S. Attorney’s office. She also has held positions in the Eastern District of New York.

    Over the years, White has led complex white-collar fraud investigations, and made her name prosecuting organized crime and international terrorism cases. She became a national figure in the 1990s, presiding over the prosecution of Ramzi Yousef in the World Trade Center bombing. And White also prosecuted Mafia figure John Gotti.

    Reporters questioned Carney on the White nomination this morning. From the White House press gaggle (italics added/verbatim from transcript):

    Q Jay, which of those regulated by the SEC know about Mary Jo White’s qualifications? And does it suggest a new level of aggressiveness of regulatory enforcement?

    MR. CARNEY: Well, I can confirm that the President, later today, will announce his intention to nominate Mary Jo White to serve as chair of the Securities and Exchange Commission. I’ll obviously leave some of this to the President, but it’s certainly out there and been confirmed.

    Mary Jo White — for those of us, as you were, here in the ‘90s, know of her extraordinary record as a U.S. attorney in the Southern District of New York. I mean, she prosecuted a number of large-scale white-collar crimes in complex securities and financial institution fraud. She brought justice to the terrorists responsible for the bombing of the World Trade Center and for the bombing of American embassies in Africa. She also served as a director of the Nasdaq Stock Exchange.

    As you know, the SEC plays an essential role in the implementation of Wall Street reform and rooting out reckless behavior in the financial industry. The President believes that that appointment and the other one — the re-nomination he’s making today — demonstrate the commitment that he has to carrying out Wall Street reform, making sure that we have the rules of the road that are necessary and that are being enforced in a way that ensures we don’t have the kind of financial crisis that we had that led to the worst economic crisis that we’ve seen since the Great Depression.

    Q Don’t mess with the SEC.

    MR. CARNEY: Look, she’s got an incredibly impressive résumé, and the President is very pleased to be able to nominate her.

  • 3 GOP State Senators In New York Propose Bill In Response To False Liens Filed By ‘Sovereign Citizens’ And Targeted At Public Officials, Police Officers

    Sen. George D. George Maziarz.
    Sen. George D. Maziarz.

    If you file a false lien against public officials and police in New York, you’d be committing a felony under a proposed new law sponsored by three Republican state Senators.

    The Senators have proposed that violators of the new law be punished by a fine of up to $10,000 per instance or serve up to a year in jail — or both.

    Although a federal law is in place to protect federal officials, New York has no corresponding state law to protect state and local officials and police officers from what has been described as “paper terrorism” carried out by purported “sovereign citizens.”

    The principal sponsor of the state bill is Sen. George D. Maziarz. Cosponsors include Sens. John A. DeFrancisco and Michael H. Ranzenhofer.

    The rationale for the bill is discussed on the New York State Senate website. Here is a snippet (italics added):

    In recent years, members of the so called “Sovereign Citizens Movement” have begun to utilize the tactic of filing multiple false or fictitious liens against police officers and public officials as a means to intimidate these individuals and undermine the rule of law. The FBI describes such individuals as anti-government extremists who believe that even though they are in the country they are separate or “sovereign” from the United States. There are multiple examples across New York State of “sovereigns” using false liens as a part of a scheme to destroy the lives of ordinary people who are simply doing their jobs. These bogus liens are meritless, but in multiple cases they were accepted by the Department of State and other entities and began to appear on credit reports and had a significant and negative impact on law abiding citizens.

    There have been uber bizarre cases involving “sovereign citizens” in New York, including one in which an individual who once reportedly stole a tractor trailer full of “canned beans” was convicted of running a tax scam from jail after being influenced by a purported “sovereign citizen” website article attributed in part to “Obi-Wan Kenobi.”

  • BULLETIN: FTC Asks Judge For Permission To Amend IWorks/Jeremy Johnson Fraud Complaint To Include Johnson’s Wife And Parents As Relief Defendants

    breakingnews72BULLETIN: (UPDATED 6:25 P.M. ET U.S.A.) The FTC has asked a Nevada federal judge for permission to amend the complaint in the 2010 IWorks Inc./Jeremy Johnson civil-fraud case to include Johnson’s wife, parents and five corporate entities as “relief defendants” — the alleged recipients of ill-gotten gains from Johnson’s alleged Internet fraud scheme involving hundreds of millions of dollars.

    Utah has been abuzz over Johnson news since the Salt Lake Tribune reported on Jan. 11 that Johnson asserted that Utah’s new Attorney General “helped broker a deal in 2010 in which Johnson believed he was to pay Senate Majority Leader Harry Reid $600,000 to make a federal investigation into Johnson’s company go away.”

    Attorney General John Swallow, who was a Deputy Attorney General under former Attorney General Mark Shurtleff when the alleged bribery bid occurred, has denied wrongdoing and has asked for an investigation by federal prosecutors in Utah. Sen. Reid, of Nevada, has issued a statement through his office that he “has no knowledge or involvement regarding Mr. Johnson’s case,” the Tribune reported.

    Swallow had been Attorney General only days before the Johnson allegations surfaced. Swallow is a Republican; Reid is a Democrat. Johnson effectively made the claim at a hearing during which he was expected to plead guilty to criminal charges earlier this month, triggering a media firestorm in the state.

    Johnson did not enter a guilty plea. He remains free on bond.

    The FTC, a longstanding target of Johnson’s ire, announced today that it wanted to amend the complaint.

    • Sharla Johnson, Johnson’s wife, “received at least $5 million in funds and property” from her husband’s scheme, “including a multi-million-dollar, 20,000-square-foot mansion in St. George, Utah, subsequently used to secure a $3.1 million home equity line of credit,” the FTC said.
    • Kerry Johnson, Johnson’s father, “received at least $1.6 million in funds and property, including about $1 million worth of silver coins and bars,” the FTC said.
    • Barbara Johnson, Johnson’s mother, received at least $77,500, the FTC said.

    Five other businesses with ties to Johnson and/or his family also received ill-gotten gains, the agency said. In all, the FTC is seeking $22 million from the prospective relief defendants.

    Johnson long has denied wrongdoing in a case that, at a minimum, has showcased the logistical nightmares government agencies and court-appointed receivers may confront when they tackle an alleged Internet-based fraud scheme with tentacles all over the world, including shell companies allegedly set up to carry out a fraud scheme. (See Jan. 9, 2012, PP Blog editorial. See Dec. 22, 2011, PP Blog editorial.)

    See the FTC’s proposed amended complaint.

    See Feb. 8, 2012, PP Blog report: Receiver In Jeremy Johnson/IWorks Fraud Case Issues Devastating Report; Incredible Number Of Firms Referenced In 79-Page Court Update; ‘Dozens Of Companies Used As Conduits To Re-Route Revenue And To Commingle And Hide Funds,’ Document Claims

     

     

  • BULLETIN: Prosecutors, FBI Say Man Engineered $28 Million Securities Fraud By Manipulating Court With Aid Of ‘Sham Lawsuits’ Brought By ‘Florida-Based Lawyers’ Who Obtained ‘Pleadings From A Single Manhattan-Based Law Firm’

    breakingnews72BULLETIN: The former president and chief executive officer of Unico Inc. in San Diego has been indicted on federal charges of conspiracy to commit securities fraud and obstruction of justice, amid spectacular allegations of legal chicanery.

    Mark Anthony Lopez was accused of conspiring with New Jersey-based stock trader Mark Allen Lefkowitz to manipulate the share price and volume of Unico’s stock to benefit corporate insiders at the expense of shareholders. Lefkowitz already has pleaded guilty.

    Among the stunning allegations is that Lopez and Lefkowitz manipulated a court in Florida into approving litigation settlements while not revealing they effectively were staging lawsuits as part of a conspiracy to exploit an SEC loophole.

    From a statement by U.S. Attorney Laura E. Duffy of the Southern District of California (italics added):

    To carry out the fraud, Lopez and Lefkowitz exploited Section 3(a)(10) of the Securities Act of 1933 C a little-known provision that allows companies to issue unregistered shares of stock to settle “bona fide” debts. Lopez, on behalf of Unico, would enter into purported loan agreements with various shell corporations owned by Lefkowitz, most of which were based in the Turks and Caicos Islands. It was understood by the conspirators that Unico would purposefully default on the loan agreements so that Lefkowitz’s companies could initiate sham lawsuits against Unico.

    Each and every one of these sham lawsuits would be brought by Florida-based lawyers in a Sarasota, Florida court. The Florida attorneys, even though they represented opposite sides in the lawsuits, would obtain their pleadings from a single Manhattan-based law firm that oversaw the sham lawsuits. Very soon after each lawsuit was filed — and typically within the very same week — Lopez and Lefkowitz would draft a written settlement agreement. The terms of the written settlement agreement would be extremely favorable to Lefkowitz. In short, Lopez would agree to settle Unico’s debt by issuing unregistered shares of stock worth on average seven times the debt that Unico actually owed. According to a secret side-agreement with Lopez, Lefkowitz would sell the shares on the open market to unsuspecting buyers and kick back a portion of the proceeds to Unico. This kickback would take the form of a new loan — which would have the added benefit of continuing the fraud scheme.”

    Lopez, prosecutors said, also sought to obstruct an SEC probe by “refusing to turn over emails, which he printed and concealed in two manila folders marked ‘Files Deleted’ and another marked ‘Not Released to SEC Subpoena (Delete).’”

    More obstruction occurred when Lopez “redacted portions of an email and tried to delete it from his computer, and later lied to the SEC under oath during deposition testimony,” prosecutors said.

    He potentially faces up to 65 years in federal prison, if convicted on all counts, prosecutors said.

    Duffy’s office said that the alleged misdeeds of Lopez attacked “the very heart” of the U.S. financial system.

    “When these corporate leaders ignore that duty and use their positions to enrich insiders, it not only harms shareholders, but also threatens to undermine confidence in our financial markets and slows our country’s ongoing economic recovery,” Duffy said.