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Tag: homeland security frauds

  • SEC: New York Pitchman, 73, Hawked ‘Illegal Offering’ For Murdoch Security & Investigations Inc. By Spinning Tall Tale Of ‘Anti-Piracy’ And ‘Anti-Terror’ Success On The ‘High Seas’

    EDITOR’S NOTE: In the past 24 hours, the SEC has filed charges against two firms purportedly in the business of preventing terrorism. Read the PP Blog’s story about the first firm here.

    The cavalcade of senior citizens implicated in securities schemes continues — as does the story about the bizarre nature of recent fraud cases in the white-collar arena.

    Robert Goldstein, 73, of New York City, has been accused in federal court by the SEC of orchestrating a $1 million offering fraud for Murdoch Security & Investigations Inc. (MSI), a firm that allegedly placed ads in the Wall Street Journal last year promising “repayment of principal plus 22 percent interest per year.”

    MSI also placed ads in Barron’s and Investor’s Business Daily for its securities, which were unregistered, the SEC said.

    Goldstein was MSI’s senior vice president. His 53-year-old boss — Connecticut-based MSI CEO William C. Vassell — also has been accused by the SEC of orchestrating the alleged offering fraud.

    But advertising in prominent publications to drive business to the firm was only part of the scam, the SEC said. Lying to customers who responded to the ads also drove the fraud, the agency alleged.

    Described by the SEC as MSI’s “primary salesperson,” Goldstein “provided investors with a wide array of false and otherwise misleading information in an effort to sell the 22% Notes,” the agency said.

    The falsities included “statements about the Company’s revenues, existing assets and overseas operations,” the SEC alleged.

    Investors were told tales of fabulous success in Mexico, fantastic revenues for 2010 and the company’s “explosive” growth potential. And, according to the SEC, Goldstein spun a yarn that MSI’s “anti-piracy” and “anti-terror” business was “probably one of the largest … on the high seas” in 2011 and “that such business, including in Somalia and Yemen, was expected to yield $100 million to $300 million in revenue for MSI in subsequent years.”

    In reality, the SEC said, “MSI’s internal documents reflect revenues that did not approach the numbers conveyed to potential investors; its total assets according to those documents were approximately $4 million, and it had no overseas operations whatsoever, let alone significant revenues from Mexico or a major presence “on the high seas.”

    “The plan Goldstein outlined for investors, in explaining how MSI could afford to offer such high yields on the 22% Notes, focused on what Goldstein described as MSI’s expectation to purchase six or seven security companies to fuel increased revenues,” the agency continued.

    “Contrary to this supposed plan, MSI not only failed to purchase any security companies with the money obtained from investors in the Notes; nearly all of the money raised from those investors was spent to fund Goldstein’s and Vassell’s salaries, fund the payments on the Notes themselves, and pay for various other of MSI’ s ongoing claimed expenses,” the agency alleged.

  • BULLETIN: SEC Says InfrAegis — Purported ‘Homeland Security’ Firm With Product To Detect Weapons Of Mass Destruction — Was A $20 Million Fraud Based In Part On A ‘Trillion’-Dollar Lie; Company And CEO Gregory E. Webb Charged

    BULLETIN: The SEC has gone to federal court in Illinois to charge InfrAegis Inc. and CEO Gregory E. Webb with fraud amid allegations they fleeced investors in a $20 million scam that traded on post-9/11 fears and claims that government security contracts worth more than $1 trillion would make everybody rich.

    Webb, 64, resides in the Chicago suburb of Arlington Heights, Ill. The firm is based in the suburb of Elk Grove Village and purportedly was in the “homeland security” business, according to the SEC.

    But InfrAegis duped investors by falsely claiming to have lucrative contracts with the cities of Chicago and Washington. D.C., for kiosks that purportedly could detect the presence of nuclear or biological weapons.

    Investors were told the Chicago contract would fetch “profits of well over $80 million.” Meanwhile, the Washington contract — purportedly with the Washington Metropolitan Transit Authority (WMATA) — would be worth the staggering sum of $20 billion over 20 years.

    Moreover, the SEC charged, Webb and the firm told investors that “InfrAegis sold a partial stake in the company for $8.7 billion in cash to a company named the DW Group and that the transaction would result in 3800% to 4000% returns to investors.”

    “InfrAegis never sold, and never had any agreements to sell, any of its products to the City of Chicago,” the SEC charged.

    “Similarly, InfrAegis never sold, and never closed on a contract to sell, any of its products to WMATA,” the agency charged. “Finally, InfrAegis never received any money from the DW Group and Webb had no reasonable basis to believe that such a transaction would ever take place.”

    In addition to lying about the success of the firm even as investors were the only source of the company’s income since January 2005, Webb also lied about receiving no compensation from InfrAegis, the SEC charged.

    “Despite the fact that InfrAegis never sold a single product, and that InfrAegis’ offering materials claimed that he did not receive compensation from the company, Webb directed InfrAegis to pay him at least $741,000 using investor funds over the course of the offering,” the SEC charged. “In addition to his investor-funded ‘salary,’ from April 2005 through June 2010, Webb used an InfrAegis corporate credit card, again funded by InfrAegis investors, to purchase at least $70,000 in goods and services for himself, including vacations, clothing, fast food, groceries, tobacco, liquor, movies, video games, and music.”

    The scheme raised $20 million from 395 investors in 29 states and the District of Columbia, the SEC charged.

    Webb and the firm traded on the emotions of investors to pick their pockets, the SEC charged.

    “Some of InfrAegis’ offering materials even included photos of the World Trade Center shortly after the 9/11 attacks with smoke billowing from the towers” the SEC said. “Certain InfrAegis offering materials also claimed that InfrAegis’ products could have prevented major terrorist attacks in London, England and Mumbai, India.”

    Even sports and American pride in seeking to host the Olympic games were part of the fraud pitch, the SEC charged.

    When the city of Chicago was bidding to host the 2016 Summer Olympics, “Webb told investors that InfrAegis had received the endorsement of the 2016 Olympic Committee,” the SEC charged.

    “Webb further stated that the DW Group was in the process of completing a transaction with the United States government and certain foreign governments that exceeded $1 trillion and that, once the transaction was completed, InfrAegis would begin receiving multiple, multi-billion dollar payments from the DW Group,” the SEC charged. “Webb additionally told investors that once the DW Group transaction was completed, InfrAegis would pay its shareholders — who typically invested at $1.00 per share — between $39 and $41 per share.”

    Read the SEC complaint.