A Florida man implicated in a pump-and-dump scheme tied to a Ponzi- and affinity-fraud scheme has been convicted and faces decades in federal prison.
Michael J. Muzio, 46, of Tampa, was convicted on six counts of securities fraud, two counts of substantive wire fraud, two counts of lying to the SEC and the FBI and one count of conspiring to commit wire fraud.
Muzio’s pump-and-dump scheme is linked to the alleged Home Pals Investment Club Ponzi and affinity-fraud scheme involving Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.
Bass, Alabre and Taglieri were accused civilly and criminally of targeting Haitian-Americans in a $14.3 million scheme.
Alabre, 33, of Miramar, Fla., and Taglieri, 39, of Jupiter, Fla., already have pleaded guilty to criminal charges, which were brought in October 2009. Bass and Alabre were accused by the SEC of fooling investors by saying Taglieri was Home Pals’ attorney, but Taglieri is not an attorney, according to records.
Muzio defrauded Haitian-American and other investors in South Florida and elsewhere “by manipulating” the stock price of International Business Ventures Group (IBVG), a Florida shell company “with no assets and virtually no business activities,” prosecutors said.
IBVG purportedly was operated from Palm Beach Gardens. Last month, U.S. Attorney General Eric Holder described the Palm Beach area as the “ground zero” of financial fraud. Holder ventured to Palm Beach to make a speech and introduce the Obama administration’s Financial Fraud Enforcement Task Force.
The manipulation scheme was carried out through “coordinated stock purchases and sales designed to artificially impact share prices,” the FBI said.
“To induce investors to purchase the stock, [Muzio] created a false impression that an active market for the stock existed by engaging in illegal ‘wash trades’ in which he simultaneously entered buy orders through one brokerage account under his control and offsetting sell orders at the same price through another brokerage account under his control.
“These trades had no real economic effect, but the defendant’s brokers unwittingly reported the trading activity and potential investors who saw the online reports were misled into believing that the stock was actively traded at the quoted prices,” the FBI said.
As often is the case in pump-and-dump schemes, Muzio “issued false and misleading press releases” claiming that the company had profitable business dealings.
Muzio claimed IBVG “had deals to provide and offer prepaid debit cards in Haiti,” as well as prepaid calling cards and “exclusive rights to market prepaid electric meters in Haiti,” the FBI said.
“Investors were offered the chance to purchase free-trading shares of stock, but then received certificates for restricted shares which could not be traded and ultimately proved to be worthless,” the FBI said.
Home Pals advised website viewers that the company was “honest†and adhered to “uncompromising ethics,†the SEC said.
UPDATED 1:33 P.M. EDT (U.S.A.) The failure yesterday of San Joaquin Bank in Bakersfield, Calif., brought the total of bank failures in the United States this year to 99.
With weeks remaining in the year, it is a virtual certainty that failures will top the 100 mark. Banks have been failing at an average rate of slightly less than 10 per month in 2009. Last year, 25 banks failed in the United States. In 2007, only three banks failed.
As many as 416 names of other troubled banks appear on a confidential list maintained by the Federal Deposit Insurance Corp. (FDIC). The hemorrhage of bank failures — in large measure caused by a severe recession, consumer and business defaults, a collapse of real-estate prices in many parts of the country, brazen fraud in the mortgage sector and a contraction of development — is not over.
Although banks and the government are working together to find ways to curb an explosion in the mortgage-foreclosure rate, foreclosures continue to suck wealth from the economy.
“Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters,†said James J. Saccacio, chief executive officer of RealtyTrac.
RealtyTrac tracks foreclosure activity in the United States. On Oct. 14, the company said foreclosures in the third quarter set a record and were up 23 percent from the total reported in the third quarter of 2008.
Foreclosure filings, default notices, scheduled auctions and bank repossessions totaled 937,840 in this year’s third quarter, RealtyTrac reported.
Although foreclosure filings in September totaled 343,638 — a 4 percent decrease from August’s total — the number still represented a 29 percent increase from September 2008.
September’s monthly total was among the highest figures reported since January 2005, trailing only July and August of this year.
“REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan modification efforts and high volumes of distressed properties,†Saccacio said.
Florida, California Battered By Foreclosures
Six states — California, Florida, Arizona, Nevada, Illinois and Michigan — accounted for 62 percent of the foreclosure total in the third quarter, RealtyTrac reported. Foreclosures in the six states totaled 579,541.
Foreclosures in California totaled 250,054 in the third quarter; Florida posted 156,924 foreclosures, a 23 percent increase from the total reported in the third quarter of 2008.
Because Florida is an attractive state for retirees — and because those retirees have friends and loved ones in all corners of the United States — the state is an attractive target for scammers.
Florida also has a large population of immigrants, another attractive target of scammers.
Agencies Battle Florida Ponzi Fraud
In the past 72 hours alone, the SEC, the CFTC, the FBI, the U.S. Postal Inspection Service, and federal prosecutors have announced three Florida Ponzi scheme prosecutions, a conviction in a separate Ponzi case — and a conviction in a fraud case in which a Florida man created more than 260 identities on eBay and fleeced customers out of $717,000.
On the Florida Ponzi front:
David F. Merrick, Traders International Return Network (TIRN), MS Inc., GTT Services Inc., MDD Consulting Inc. and Go ! Tourism Inc. were named defendants in emergency actions in U.S. District Court for the Middle District of Florida. Merrick, 61, of Apopka, is accused of operating a $22 million Ponzi scheme with ties to Panama, Mexico, Malaysia, Switzerland and the Netherlands.
HomePals Investment Club LLC, HomePals LLC (Home Pals), Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri were charged in South Florida with securities fraud, conspiracy to commit securities fraud, wire fraud and money laundering. The defendants were accused of targeting Haitian-Americans in a $14.3 million Ponzi scheme that promised investment returns of 100 percent every 90 days. The scheme gathered money from as many as 64 “investment clubs,†the SEC said.
Sean Healy, 38, of Weston, Fla., was charged in a 55-count indictment unsealed in Pennsylvania with multiple counts of wire fraud, mail fraud, money laundering and obstruction of justice. The Florida-based scheme led to at least $14.6 million in losses in Pennsylvania alone, prosecutors said, adding that Healy purchased “numerous exotic vehicles and sport cars, including a Bentley and several Ferraris, Lamborghinis and Porsches worth over $2.3 million.†Healy also bought a $2.4 million waterfront mansion furnished with more than $2 million of home improvements, plus $1.5 million in men’s and women’s jewelry, prosecutors said.
Michael Riolo, 38, of Boca Raton, was sentenced to more than 24 years in prison for bilking investors in a $44 million Ponzi scheme. Prosecutors accused Riolo of cooking the books and sending false statements to investors that reported “consistent trading profits and increasing account balances.” In reality, Riolo “misdirected money he received from some investors to make distributions to other investors who sought to withdraw money from their investment accounts,” prosecutors said.
Andy Bowdoin, 74, of Quincy, Fla., continued his efforts to get back into a Ponzi case in which he had already submitted to the forfeiture of tens of millions of dollars seized last year by the U.S. Secret Service in an international wire-fraud and money-laundering probe. Bowdoin, who submitted to the forfeiture in January, fired his attorneys and began to file as his own attorney in February. In April, federal prosecutors announced that Bowdoin had signed a proffer letter in the case prior to acting as his own attorney and acknowledged his company, AdSurfDaily Inc., had been operating illegally. “Mr. Bowdoin also confirmed that the revenue figures of the enterprise were managed to make it appear to prospective members that the enterprise called Ad Surf Daily was a consistently profitable, and brilliant, passive income opportunity,” prosecutors said. Despite his own acknowledgments of illegal conduct, despite the proffer — and despite the fact Bowdoin had asked the court to grant his request to submit to the forfeiture and that the court granted Bowdoin’s request — Bowdoin climbed back on the litigation saddle. “Mr. Bowdoin says that after discussing this case with his supporters, and concluding that they were smarter than his attorneys, he has changed his mind,” prosecutors said.
Total funds gathered in the alleged Bowdoin, Merrick, Bass, Alabre, Taglieri and Healy Ponzi schemes in Florida are estimated at $156.3 million, during a period in which U.S. banks are failing, the U.S. economy is confronting the worst business conditions since the Great Depression and mortgage foreclosures are piling up across the country, including hard-hit Florida.
With the Riolo conviction added to the estimate, the number totals $200.3 million. The estimate does not reflect the massive, $65 billion Ponzi fraud of Bernad Madoff, who wiped out clients in Florida and elsewhere. Nor does it take into account allegations that Arthur Nadel, another man implicated in a large-scale fraud in Florida, may be responsible for tens — if not hundreds — of millions of dollars of Ponzi pain.
“During these tough economic times, it is more important than ever that those who lie to and steal from the investing public be held accountable for their misconduct,” said Jeffrey H. Sloman, Acting U.S. Attorney for the Southern District of Florida, commenting on the 24-year prison sentence Riolo received.
“The United States Attorney’s Office will continue to investigate and prosecute those who perpetrate these large-scale fraud schemes,†Sloman said.
UPDATED 2:03 P.M. EDT (U.S.A.) The Securites and Exchange Commission — which announced yesterday that it had broken up a $22 million Ponzi scheme in Florida — announced today that it was working with the FBI to break up yet another Ponzi scheme in the Sunshine State.
The newest scheme was targeted at Haitian-Americans who were promised investment returns of 100 percent every 90 days, the SEC said.
It was not immediately clear when the criminal indictments would become available for public viewing, but the SEC said the indictments were unsealed this morning in Florida.
Charged civilly by the SEC were HomePals Investment Club LLC and HomePals LLC (Home Pals), and their principals, Ronnie Eugene Bass Jr., Abner Alabre and Brian J. Taglieri.
Bass, Alabre and Taglieri are charged criminally with securities fraud, conspiracy to commit securities fraud, wire fraud and money laundering, the SEC said.
“The extraordinary promises made by these three men spread by word of mouth throughout a close-knit community,†said Glenn Gordon, associate director of the SEC’s Miami Regional Office. “Bass presented himself as a master trader of stock options and commodities, when in reality he was a master of deceit.â€
Victims resided primarily in South Florida, the SEC said.
At least $14.3 million was raised in the scheme, which gathered money from as many as 64 “investment clubs,” the SEC said.
“By the end of December 2008, HomePals had only $7,300 left and stopped making payments to investors,” the SEC alleged.
On its website, Home Pals claimed “[i]nvestments of $25,000 or more earn higher interest rates.”
“The defendants claimed they were able to generate such spectacular returns through Bass’ purported successful trading of stock options and commodities,” the SEC alleged.
“[I]n reality, Bass traded no more than $1.2 million of the $14.3 million raised, generated trading losses of 19 percent, and . . . HomePals used the bulk of the investor funds to repay earlier investors in typical Ponzi scheme fashion.”
Bass, Alabre and Taglieri misappropriated at least $668,000 of investor funds for personal use, the SEC said.
The defendants told one lie after another, the SEC said. Among the lies was that investors were protected by a $25 million insurance policy.
Another lie was that returns were guaranteed, the SEC said.
Yet another — allegedly told by Bass and Taglieri — was that that Taglieri was HomePals’ attorney.
“This representation was false because Taglieri is not an attorney,” the SEC said.
Home Pals advised website viewers that the company was “honest” and adhered to “uncompromising ethics.”
“We guarantee realistic, honest financial strategies that achieves results. We will lead you on a course to financial freedom. Our years of experience and notable expertise ensure that your financial future is in good hands,” Home Pals said.
“Our consistent track record of uncompromising ethics instills confidence and trust,” Home Pals told viewers.
The SEC saw things differently.
“Bass and Alabre used at least $380,000 to pay for a house where they both resided until recently,” the SEC alleged. “Bass misappropriated an additional $28,000 for himself, part of which he used to purchase an automobile.
“HomePals also distributed approximately $28,000 to Alabre as ‘compensation,’” the SEC continued. “Additionally, Taglieri received an undisclosed salary of $8,000 per month, and diverted $85,000 of investor funds to pay his overdue child support obligations.”
A Florida man implicated in a pump-and-dump scheme tied to a Ponzi- and affinity-fraud scheme has been convicted and faces decades in federal prison.