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Tag: Stewart A. Merkin

  • URGENT >> BULLETIN >> MOVING: Feds Make 3 Arrests In New York In Alleged ‘Green’ Ponzi Caper; SEC Files Emergency Parallel Action To Halt Alleged $26 Million Swindle Over Which Convicted Felon Presided With Alleged Help From Attorney

    URGENT >> BULLETIN >> MOVING: A bizarre case featuring spectacular allegations of Ponzi fraud coupled with verbal strong-arming of victims is unfolding in New York. Three people have been arrested by federal agents, and the SEC has filed an emergency action in federal court to halt what it described as a “green-product themed Ponzi scheme” involving stone pavers imported from Australia.

    Arrested by federal agents were Eric Aronson, 43, of Syosset, N.Y.; Vincent Buonauro Jr., 40, of West Islip, N.Y.; and Robert Kondratick, 41, of  Syosset. All three men are executives of a Long Island group of firms known as “PermaPave Companies,” investigators said.

    Kondratick is Aronson’s brother-in-law, investigators said.

    Aronson is a convicted felon who used proceeds from the emerging scheme to pay restitution to victims of a scheme to which “he pleaded guilty to conducting in 2000” and was sentenced to 40 months in prison, the SEC said.

    The allegation against Aronson that he used fraud proceeds from a new scam to pay restitution to victims of a previous swindle marked the second time today that the SEC made such a claim. This morning, the SEC accused Roger D. Shearer, who is implicated in a separate New York scam, of doing the same thing.

    And a separate allegation in the Aronson complaint against an attorney marked the second time today that a member of the bar had been accused of helping fleece investors. In the SEC’s Aronson complaint, attorney Fredric Aaron, 47, of Port Washington, N.Y., is accused of helping Aronson and other co-defendants dupe investors.

    “Aaron drafted the agreements used to defraud investors, participated in the solicitations conducted by Aronson, repeated during his extensive dealings with investors many of the misleading statements made by Aronson, and developed strategies for concealing the fraud,” the SEC charged.

    Earlier today, the SEC accused Miami attorney Stewart A. Merkin of aiding the alleged Shearer fraud.

    In the case against Aronson, Buonauro, Kondratick, Aaron and the PermaPave firms, the SEC said  140 individuals from the construction and landscaping trades became investors between 2006 and 2010 and were bilked out of $26 million.

    “Aronson and his associates operated the PermaPave Companies as a classic Ponzi scheme,” said George S. Canellos, director of the SEC’s New York Regional Office. “They created the façade of a profitable business, promised investors extraordinary rates of return, and used much of their investors’ money to fund their own lavish lifestyle.”

    Aronson, Buonauro and Kondratick “used new investments to make payments to earlier investors and then siphoned off much of the rest for themselves, buying luxury cars, gambling trips to Las Vegas, and jewelry,” the SEC charged.

    U.S. District Judge Jed S. Rakoff  froze the assets of the defendants and eight relief defendants.

    “Investors were told that PermaPave Companies had a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial mark-up, yielding monthly returns to investors of 7.8% to 33%,” the SEC said. “In reality, the complaint states that there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales.”

    Moreover, the SEC said, Aronson tried to turn the table on investors by accusing them of felonies when they asked for their money.

    “Aronson accused them of committing a felony by lending the PermaPave Companies money at the interest rates he promised them, which he suddenly claimed were usurious,” the SEC charged. “Aronson and . . . Aaron then allegedly made false statements to persuade investors to convert their securities into ones that deferred payments owed them for several years.”

    Most of the investors “had little or no prior investment experience” and were told that “they were purchasing high-yield instruments that were free of risk,” the SEC charged.

    “The PermaPave Entities operated from the same offices, shared the same employees, commingled assets, and purported to sell PermaPave pavers, which are squares comprised of small rocks glued together that purportedly assist with storm drainage,” the SEC charged.

    Of the $26 million raised in the scheme, only $600,000 was used to purchase pavers, the SEC charged.

    Read the SEC complaint.

     

  • 2 X BIZARRE: (1) SEC Says New York Man Used Proceeds From Unregistered Offering To Pay Restitution In Criminal Case; (2) Feds Say Philly Man Illegally Used Investor’s Funds To Pay For ‘Joy To The World’ Gala And Make Purported ‘Gold’ Purchase In West Africa

    EDITOR’S NOTE: If you’ve been wondering whether there was any ceiling to the bizarre nature of securities-fraud cases as the white-collar fraud epidemic continues, it perhaps is best to stop wondering now . . .

    A New York man has been accused by the SEC of using the proceeds of an unregistered offering for StratoComm Corp. to pay restitution owed in a previous criminal case.

    Roger D. Shearer, StratoComm’s chief executive officer, was sued Tuesday by the SEC in federal court in Albany, N.Y.

    Meanwhile, StratoComm’s outside counsel has been accused in Miami by the SEC of securities fraud amid allegations he knew StratoComm was under investigation but disclaimed knowledge of the probe in letters designed to ensure the firm’s stock would continue to be quoted on the Pink Sheets.

    Attorney Stewart A. Merkin was sued by the SEC on Monday.

    In a separate, unrelated case, a suburban Philadelphia man has been arrested on charges he solicited $4 million from an investor and “misappropriated at least half of it,” federal prosecutors in New York said.

    Charged criminally with wire fraud in the case was Tyrone L. Gilliams Jr. Gilliams owned a company known as TL Gilliams LLC, prosecutors said.

    Prosecutors said Gilliams’ victim believed the money would be used for investments in “treasury strips” — securities derived from U.S. treasury bonds.

    Gilliams, however, peeled off more than $2 million, using at least $1.3 million of it to fund a black-tie gala at the Ritz Carlton hotel in Philadelphia last year. The event was dubbed the “Joy to the World” festival. Another Joy to the World event was held in the Bahamas, prosecutors said.

    “His charade was funded by money he allegedly stole from an unwitting investor,” said U.S. Attorney Preet Bharara of the Southern District of New York.

    Another $450,000 of the $4 million was used “to refund a deposit from a prior investor,” and more than $200,000 went to a real estate title company, prosecutors said.

    Smaller sums went for other “improper purchases,” and Gilliams “wired approximately $1.6 million to Ghana, for what he has since claimed was an investment in gold,” prosecutors said.

    “Gilliams misrepresented to an investor how solicited funds would be used,” said FBI Assistant Director-in-Charge Janice K. Fedarcyk.

    In the civil case against Shearer and StratoComm, the SEC alleged that StratoComm, acting at Shearer’s direction and with the assistance of former StratoComm executive Craig Danzig, “issued and distributed public statements falsely portraying the company as actively engaged in the manufacture and sale of telecommunications systems for use in underdeveloped countries, particularly Africa.”

    But the firm “had no product and no revenue,” the SEC charged, alleging that “Shearer and Danzig sold investors approximately $3 million worth of StratoComm stock in unregistered transactions.

    “Shearer used much of that money for his own purposes, including paying a substantial part of the restitution he owed in connection with his guilty plea in a prior criminal proceeding,” the SEC said.

    Merkin, StratoComm’s counsel, wrote “four attorney representation letters for posting on the website of Pink Sheets LLC and its successor, Pink OTC Markets, Inc.,” the SEC said. “In those letters Merkin disclaimed knowledge of any investigation into possible violations of the securities laws by StratoComm or any of its officers or directors. However, the SEC’s complaint also alleges that Merkin was representing StratoComm and several individuals in connection with the SEC’s investigation at the time.

    “Nevertheless, in order that StratoComm’s shares would continue to be quoted, the SEC’s complaint alleges that Merkin falsely stated that to his knowledge StatoComm was not under investigation,” the SEC said.