Shervin Neman, the alleged affinity fraudster sued by the SEC last year in a Ponzi scheme targeted at the Persian-Jewish community, now has been arrested by the FBI in Los Angeles.
Neman, 31, also is known as Shervin Davatgarzadeh, the FBI said. The Century City resident was arrested today on a three-count indictment charging him mail fraud and wire fraud, amid allegations he hatched a new fraud scheme after the SEC brought its civil charges in April 2012.
The SEC described Neman last year as the operator of a “purported hedge fund” that married a real-estate flipping scheme involving purported foreclosures to purported opportunities to profit from IPOs conducted by Facebook, Groupon, LinkedIn and Angie’s List.
“The month after the SEC filed its lawsuit, Neman solicited $2 million from another victim with false promises that Neman could obtain pre-IPO shares in Facebook, according to the indictment,” the FBI said. “Neman allegedly used the funds obtained from the new victim to pay, among other things, most of his earlier victims and the law firm representing him in the SEC action. Neman then had victims who had been ‘paid back’ write e-mails saying that Neman did not owe them money, according to the indictment, which goes on to say that Neman used these e-mails as part of his defense in the SEC case. In June 2012, Neman sent to the later victim a $2,235,800 check that purported to be the return on the Facebook investment, but that check bounced, according to the indictment.”
BULLETIN: (UPDATED 4:08 P.M. EDT U.S.A.) The Royal Canadian Mounted Police says a terrorist plot against a VIA passenger train in the Toronto area was thwarted and that two suspects were arrested today after a probe that began last year.
Arrested were Chiheb Esseghaier, 30, and Raed Jaser, 35. RCMP said they lived in the areas of Montreal and Toronto and that the plot had ties to Al-Qaeda.
The investigation was dubbed “Project SMOOTH,” and the FBI played a role in the probe, RCMP said.
“Each and every terrorist arrest the RCMP makes sends a message and illustrates our strong resolve to root out terrorist threats and keep Canadians and our allies safe,” said Assistant Commissioner James Malizia.
The agency said the plot sparked a “National Security criminal investigation” coordinated by RCMP-led Integrated National Security Enforcement Teams (INSETs) in Montreal and Toronto.
INSETs, RCMP said, are specialized multi-agency investigative teams comprised of employees of the RCMP, Canadian Security Intelligence Service (CSIS), Canada Border Service Agency (CBSA), and other law enforcement and national security partners at the federal, provincial, municipal levels who investigate all national security criminal threats.
URGENT >> BULLETIN >> MOVING: A suspect (Dzhokar Tsarnaev) is “in custody” in the Boston Marathon bombing, the Boston Police Department announced on Twitter minutes ago . . .
UPDATE 9:07 P.M. EDT: As shown on U.S. television networks, residents of Watertown are applauding and cheering for police as they pass by in vehicles. Some chanted, “U-S-A! U-S-A!”
UPDATE 9:19 P.M. EDT: Events in Boston appear to mark the first successful terrorist attack on U.S. soil since Sept. 11, 2001. The unofficial death toll in Greater Boston stands at four, with dozens injured. Three people were killed by the twin blasts at Monday’s marathon. A police officer at the Massashusetts Institute of Technology was killed last night.
One of the suspects — Tamerlan Tsarnaev, 26 — was reported dead earlier today after a clash with police. His brother — Dzhokar Tsarnaev, 19 — is now in custody.
UPDATE 9:22 P.M. From Boston Police on Twitter minutes ago:
“In our time of rejoicing, let us not forget the families of Martin Richard, Lingzi Lu, Krystle Campbell and Officer Sean Collier.”
UPDATE 9:30 P.M. The FBI announced on its website at 9 p.m. that Dzhokar Tsarnaev is in custody.
UPDATE 9:33 P.M. Massachusetts Gov. Deval Patrick said on TV that law enforcement brought its “A-game” on behalf of the victims.
UPDATE 9:36 P.M. U.S. Attorney Carmen Ortiz is speaking on behalf of victims, thanking law enforcement and expressing her pride in its effort.
UPDATE 9:40 P.M. FBI Special Agent in Charge Richard DesLauriers spoke on behalf of victims and law enforcement.
UPDATE 9:51 P.M. Boston Mayor Tom Menino on Twitter: “We got him”
UPDATE 10 P.M. Dzhokar Tsarnaev is injured, and police described his condition as “serious.” Precise details of how the injuries were sustained have not immediately been released.
UPDATE 10:05 P.M. President Obama thanks the people of Massachusetts and lauds law enforcement for “professionalism and bravery.” Says the United States will “determine what happened” and that the terrorists failed.
The FBI this morning identified Suspect 2 as Dzhokar Tsarnaev, 19. He is still on the loose. His brother, Tamerlan Tsarnaev (Suspect 1) reportedly is dead after a battle with police in suburban Boston.
UPDATED 1:15 P.M. EDT (U.S.A.) Suspect 1 in the Boston Marathon bombings is reported dead after an overnight battle with police; Suspect 2 is reportedly still on the loose. There are concerns he may be armed with explosives.
The FBI this morning identified Suspect 2 as Dzhokar Tsarnaev, 19. (See newly released photo at left.) USA Today has identified the dead suspect as Tamerlan Tsarnaev, 26, the younger man’s brother.
Greater Boston essentially is on lockdown, with residents instructed to remain inside their homes. Separately, authorities have confirmed the death of one police officer who apparently encountered the suspects last night on or near the campus of the Massachusetts Institute of Technology.
Massachusetts Gov. Deval Patrick has described a massive police presence in the Boston region as part of an “ongoing manhunt for a person wanted in connection with Monday’s Marathon bombings.”
“[A]ll MBTA services (buses and subway) have been suspended effective immediately,” the governor’s office said. “People should not go to or congregate at transportation stations.
Suspect 1, Tamerlan Tsarnaev, 26, reportedly is dead.
“Residents in Watertown, Newton, Waltham, Belmont, Cambridge and the Allston Brighton neighborhoods of Boston are advised to stay home from work and stay in doors,” the governor’s office continued. “Residents should not answer the door unless it is a police officer, and are advised to stay away from windows. All businesses in these towns will remain closed until further notice. People should not congregate outside.”
Suspect 2 in the Boston bombings reportedly still was on the loose during the morning of April 19.
Details remain murky. The New York Times is reporting that “[t]he two suspects in the Boston Marathon bombings led police on a wild and deadly chase through the suburbs here early Friday morning that ended in the death of one of the suspects as well as a campus police officer; the other suspect remained at large while hundreds of police officers conduct a manhunt through Watertown, about five miles west of downtown Boston.”
The Boston Globe is reporting that a police officer employed by the Massachusetts Institute of Technology was killed and an MBTBA police officer was wounded.
“Ten police officers were being evaluated at St. Elizabeth’s Medical Center in Brighton early this morning, according to a source, who said the officers said they were hurt from grenades being thrown from the window of a car during a car chase,” the Globe reported. “The source did not have information about where the officers were from or the nature of their injuries.”
Officer Sean Collier was slain last night.
The Middlesex District Attorney’s Office this morning identified the slain MIT police officer as Sean Collier, 26, of Somerville. Collier had been an MIT officer since January 2012, the agency said. He was found shot in his police car about 10:30 p.m. yesterday.
“A short time later, police received reports of an armed carjacking by two males in the area of Third Street in Cambridge,” the District Attorney’s Office said. “The victim was carjacked at gunpoint by two males and was kept in the car with the suspects for approximately a half hour. The victim was released at a gas station on Memorial Drive in Cambridge. He was not injured.”
EDITOR’S NOTE:These photos and the video link were released by the FBI late this afternoon. Suspect 1 is in the black cap; Suspect 2 is in the white cap. FBI contact information is at the bottom of this post . . .
The suspects are considered armed and extremely dangerous, the FBI said this afternoon.
More information from FBI (italics added):
If you have visual images, video, and/or details regarding the explosions along the Boston Marathon route and elsewhere, submit them on https://bostonmarathontips.fbi.gov/. No piece of information or detail is too small.
You can also call 1-800-CALL-FBI (1-800-225-5324), prompt #3, with information.
UPDATED 1:43 P.M. EDT U.S.A. (APRIL 25) The charges against Paul Kevin Curtis have been dropped and he has been released from custody. See this April 25 story by the AP via Yahoo News. Here, below, our earlier story . . .
The FBI has arrested Paul Kevin Curtis in the ricin letters probe, the agency said tonight.
Curtis, the FBI said, was arrested at his home in Corinth, Miss.
Corinth is a small city in Mississippi’s northeast.
Earlier today, the FBI said a letter sent to President Obama “preliminarily tested positive for ricin.”
Two other letters that preliminarily tested positive for ricin were sent to a U.S. senator and “a Mississippi justice official,” the FBI said.
One of the intended recipients was Sen. Roger Wicker, R-Miss.
Sen. Wicker.
“Gayle and I want to thank the men and women of the FBI and U.S. Capitol Police for their professionalism and decisive action in keeping our family and staff safe from harm,” Wicker said tonight in a statement. “My offices in Mississippi and Washington remain open for business to all Mississippians. We particularly want to thank the people of Mississippi for their thoughts and prayers during this time.”
Here is the FBI’s full statement this evening (italics added):
Today at approximately 5:15 p.m. CDT, FBI special agents arrested Paul Kevin Curtis, the individual believed to be responsible for the mailings of the three letters sent through the U.S. Postal Service which contained a granular substance that preliminarily tested positive for ricin. The letters were addressed to a U.S. senator, the White House, and a Mississippi justice official.
The individual was arrested at his residence in Corinth, Mississippi following an investigation conducted by FBI Joint Terrorism Task Forces in Memphis, Tennessee and Jackson, Mississippi; the U.S. Capitol Police; the U.S. Postal Inspection Service; and the U.S. Secret Service, aided by the following state and local agencies: the Lee County (Mississippi) Sheriff’s Office; the Prentiss County (Mississippi) Sheriff’s Office; the Corinth (Mississippi) Police Department; the Booneville (Mississippi) Police Department; the Tupelo (Mississippi) Police Department; the Mississippi National Guard 47th Civil Support Team; and the Mississippi Office of Homeland Security.
A 64-year-old Alabama man who tried to pay off his mortgage by mailing a bogus “bonded promissory note” for $10 million to a mortgage-servicing company has been convicted of fraud, the office of U.S. Attorney Joyce White Vance of the Northern District of Alabama said.
Donald Joe Barber of Pinson faces up to 25 years in federal prison when sentenced July 31 by U.S. District Judge Inge P. Johnson.
“Self-appointed ‘sovereign citizens’ preach an extremist, anti-government ideology to their followers and teach a myth about American history that is untrue,” Vance said. “They often use this mythical ideology to justify crime. Sovereign citizens may disavow the authority of the U.S. government, but it exists and my office will use it to prosecute those who break the law.”
Barber “presented the fraudulent $10 million note as if it were a valid financial instrument drawn on a secret U.S. government account,” prosecutors said.
His note, they said, constituted a “fictitious financial instrument.”
Some “sovereign citizens” cling to a bizarre theory known as “redemption,” which holds in part that the U.S. government created secret accounts for citizens decades ago and that the accounts can be accessed through the filing of precise paperwork to retire debts.
“All citizens should be wary of individuals or groups that claim they can inform you on secret bank accounts, and should report that activity to the FBI,” said Richard D. Schwein Jr., FBI special agent in charge.
BULLETIN: (UPDATED 2:06 P.M. EDT) The FBI and the U.S. Secret Service are investigating a letter sent to President Obama that “preliminarily tested positive for ricin,” the FBI says.
Ricin is a deadly poison. Sen. Roger Wicker, R-Miss., also reportedly was sent a letter that preliminarily tested positive for ricin.
The President has been briefed on the letters, White House Spokesman Jay Carney said minutes ago. Earlier, the FBI said “[t]here is no indication of a connection to the attack in Boston.”
At least two bombs exploded near the finish line of the Boston Marathon on Monday. The bombs killed three people, including an eight-year-old boy, and injured dozens. Some of those injured suffered the loss of limbs.
This is the FBI statement in full (italics added):
A second letter containing a granular substance that preliminarily tested positive for ricin was received at an offsite mail screening facility. The envelope, addressed to the President, was immediately quarantined by U.S. Secret Service personnel, and a coordinated investigation with the FBI was initiated. It is important to note that operations at the White House have not been affected as a result of the investigation.
Additionally, filters at a second government mail screening facility preliminarily tested positive for ricin this morning. Mail from that facility is being tested.
Any time suspicious powder is located in a mail facility, field tests are conducted. The field and other preliminary tests can produce inconsistent results. Any time field tests indicate the possibility of a biological agent, the material is sent to an accredited laboratory for further analysis. Only a full analysis performed at an accredited laboratory can determine the presence of a biological agent such as ricin. Those tests are currently being conducted and generally take 24 to 48 hours.
The investigation into these letters remains ongoing, and more letters may still be received. There is no indication of a connection to the attack in Boston.
The U.S. Capitol Police said that an investigation is under way into the the letter allegedly sent to Wicker, although the agency did not identify the Senator by name. Here is a statement, dated yesterday, by the Capitol Police (italics added):
Washington, D.C. — Earlier today the United States Capitol Police (USCP) was notified by the Senate mail handling facility that it received an envelope containing a white granular substance. The envelope was immediately quarantined by the facility’s personnel and USCP HAZMAT responded to the scene. Preliminary tests indicate the substance found was Ricin.
The material is being forwarded to an accredited laboratory for further analysis.
The USCP is partnering with the Federal Bureau of Investigation to investigate this incident. This is an ongoing investigation.
This is a controlled event at an off-site facility. Operations at the Capitol Complex have not been affected as a result of the preliminary investigation.
We will continue to keep our stakeholders apprised of any new information as it develops.
UPDATE 2:06 P.M. CNN is reporting that the letters read, “To see a wrong and not expose it, is to become a silent partner to its continuance.”
And, according to CNN, the letters were signed, “I am KC and I approve this message.”
The alleged signature on the letters are reminiscent of disclaimers on political ads in the United States.
The FBI has a photo of Scott London, left, accepting cash in an insider-trading sting. Source: “Exhibit A” from FBI criminal complaint filed today against London.
BULLETIN: (UPDATED 4:44 P.M. EDT U.S.A.) The SEC has gone to federal court in the Central District of California, accusing a former KPMG “lead partner” and auditor of KPMG’s Herbalife account of insider trading by providing nonpublic information on Herbalife and other companies to a golfing buddy.
Scott London, 50, of Agoura Hills, Calif., was fired last week by KPMG. He now stands formally accused of passing information unlawfully to Bryan Shaw, who also has been charged. Shaw, 52, lives in Lake Sherwood, Calif., and operates a jewelry business in Encino, the SEC said.
The men met at a country club and became close friends, the SEC charged.
London has claimed he wanted to help Shaw because Shaw’s business was struggling, the SEC said.
At a minimum, however, London’s alleged misdeeds have resulted in civil and criminal liability for himself, while creating a PR crisis for KPMG. At the same time, it put KPMG client Herbalife in the awkward position of having to explain why its stock stopped trading briefly Tuesday morning while its auditor was handling fallout from London’s actions and why it suddenly had no auditor.
At 2:58 p.m. EDT today, Herbalife’s stock was showing a gain of 3.68 percent. The company said on Tuesday that KPMG had resigned its account after “it had concluded it was not independent because of alleged insider trading in Herbalife’s securities by one of KPMG’s former partners.”
Among the SEC’s alarming allegations is that Shaw paid London “at least $50,000 in cash that was usually delivered in bags outside of his Encino, Calif. jewelry store.”
For good measure, the SEC alleged, Shaw also provided London “an expensive Rolex watch as well as other jewelry, meals, and tickets to entertainment events.”
“London was honored with the highest trust of public companies, and he crassly betrayed that trust for bags of cash and a Rolex,” said George S. Canellos, acting director of the SEC’s Division of Enforcement.
Using information provided by London, Shaw made more “more than $1.2 million in illicit profits trading ahead of earnings or merger announcements,” the SEC said.
And, the SEC said, London has been charged criminally. (See photo above from FBI criminal complaint filed today against London, who is charged with criminal conspiracy to commit securities fraud through insider trading. Link to the complaint is in the Comments thread below.)
On at least one occasion, “London disclosed nonpublic information in the presence of others during a golf outing,” the SEC charged.
“Prior to public announcements, Shaw received material non-public information from London about numerous earnings announcements and releases of financial results for Herbalife, Skechers [USA Inc.] and Deckers [Outdoor Corp.],” the SEC charged.
Shaw “grossed profits of more than $714,000 from trading based on confidential financial data about Herbalife, Skechers, and Deckers,” the SEC alleged.
But the abuse didn’t stop there, the SEC alleged.
London “also gained access to inside information about impending mergers involving two former KPMG clients – RSC Holdings [Inc.] and Pacific Capital [Bancorp],” the SEC alleged. “London tipped Shaw with the confidential details. Shaw made nearly $192,000 by purchasing RSC Holdings stock the day before its Dec. 15, 2011, merger announcement. He made more than $365,000 in illicit profits from his well-timed purchase of Pacific Capital securities prior to a merger announcement on March 9, 2012.”
“As a leader at a major accounting firm, London’s conduct was an egregious violation of his ethical and professional duties,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office.
“KPMG advised the Company it resigned as Herbalife’s independent accountant solely due to the impairment of KPMG’s independence resulting from its now former partner’s alleged unlawful activities and not for any reason related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason,” Herbalife said on Tuesday.
Herbalife has been the subject of a battle between titans Carl Icahn, who is bullish on the company, and Bill Ackman, who claims Herbalife is a pyramid scheme. On its website, Herbalife denies it is either a pyramid scheme or a Ponzi scheme.
BULLETIN: A man in the Far Rockaway section of the New York City Borough of Queens was running a $50 million real-estate Ponzi swindle that duped investors into believing they were investing in a “risk-free” flipping scheme involving large properties in New York and New Jersey, federal prosecutors said.
Gershon Barkany, 29, was arrested today by the FBI.
“As alleged, Barkany promised a get-rich-quick investment scheme that really had potential to enrich only him,” said George Venizelos, assistant director-in-charge of the New York FBI office. “There were no investment properties, just a house of cards built on a foundation of lies.”
From a statement by the office of Loretta E. Lynch, the U.S. Attorney for the Eastern District of New York (Italics added):
According to the criminal complaint that was unsealed this morning, Barkany induced at least five investors to wire transfer large sums of money supposedly to purchase real estate in Manhattan, Queens, the Bronx and Atlantic City, New Jersey. According to one of the investor victims, Barkany claimed that the sellers of these properties would only close on the real estate sales contracts after Barkany had located a purchaser who would be willing to buy the property from Barkany at a higher price. In that way, Barkany assured the victim that the real estate deals would be “risk free.”
In fact, the real estate deals did not exist. As part of Barkany’s Ponzi scheme, he diverted some of the funds he received to pay investors whom he had earlier defrauded. The defendant also lost some of the funds in gambling and otherwise used the money for his own benefit.
Ronald Wesley Groves and Donald Charles Mann swindled $4.8 million from 642 investors in a bizarre “international bank trades” caper that promised a payout of 4,000 percent. Now, they’ve been sentenced to an extra year in federal prison for filing false liens against a federal prosecutor and two FBI agents involved in the fraud probe, the office of U.S. Attorney Benjamin B. Wagner of the Eastern District of California said.
Prime-bank fraud schemes, which may trade on secrecy and claim to be humanitarian in nature, are among the strangest of all in Ponzi Land. In the Groves/Mann scheme, $300,000 made its way into “the coffers of a Liberian presidential candidate,” prosecutors said.
Liberia is a country in West Africa.
Groves, 71, was sentenced last week to 10 years in federal prison for his role in the “Money Growth Solutions” (MGS) swindle, which operated between April 2005 and April 2006.
Mann, 56, was sentenced to more than 17 years for the same swindle.
Both men were sentenced today to an extra year in jail for filing the bogus liens while they were awaiting trial on fraud charges from the MGS scheme in 2008. The liens claimed that Groves and Mann were owed $101.9 million and that the meter was running against the prosecutor and FBI agents at a rate of $100,000 a day.
Groves and Mann were charged with four counts of retaliation against federal officials by false claim and slander of title and one count of obstruction of justice.
From a statement by prosecutors:
The defendants told investors that these bank trades were a highly secretive investment vehicle known only to a few people around the world.
In June 2011, a jury returned guilty verdicts against Groves and Mann after a nine-day trial. According to evidence presented at their trial, in one program, investors were offered a 10 to 1 return (1,000 percent) on their investment within a matter of weeks. In a later offering, the defendants promised a 40 to 1 return (4,000 percent) in the same amount of time. The defendants told investors that while their money was waiting to be placed into a bank trade, it would be maintained in an escrow account that could not be touched for any other purpose. The defendants also told investors that if they were unable to execute a “bank trade,” the investors would receive their entire investment back plus 6 percent interest within 12 months. With the exception of a few people who were able to obtain refunds, every MGS investor lost their entire investment.
The federal investigation revealed that by April 2006, out of the $4.8 million received, Money Growth Solutions had less than $65,000 remaining in its bank account. Some of that money — $300,000 apiece — went into the pockets of the two defendants. The remainder of the money went to the defendants’ various pet projects, including $300,000 to the coffers of a Liberian presidential candidate and $2.5 million to a Florida company that was supposedly developing a revolutionary battery. The battery company was later determined by the Securities and Exchange Commission to be a scam and its owner was federally indicted.
Shervin Neman, the alleged affinity fraudster sued by the SEC last year in a Ponzi scheme targeted at the Persian-Jewish community, now has been arrested by the FBI in Los Angeles.
