Two Massachusetts CEOs have been indicted following a yearlong investigation into an alleged investment fraud scam involving a number of microcap public companies that trade on the over-the-counter bulletin board, or pink sheets.

Paul DesJordy, the CEO of Medfield, Mass-based Symbollon Pharmaceuticals (OTCBB: SYMBA) and Michael Lee, CEO of Hingham, Mass.-based ZipGlobal Holdings Inc.(OTCBB: ZIPG) were among 13 defendants accused of using kickbacks to prompt investments in a number of companies, and then covering up the fraud with sham consulting agreements.

In connection with the indictments, the U.S. Securities and Exchange Commisssion has halted trading in seven of the stocks thought to be part of the fraud ring, including Zipglobal and Symbollan.

The U.S. Attorney for the District of Massachusetts, the Federal Bureau of Investigation and the SEC filed parallel cases in federal court against the individuals. Investigators say the fraud was exposed during an undercover operation by Boston FBI agents where an officer posed as an investment fund representative.

“Because the nation’s economic security is intertwined with our overall national security, the Boston division of the FBI places a substantial emphasis on investigating white collar crimes,” Richard DesLauriers, Special Agent in Charge of the FBI in Boston said in a statement.

DesJourdy and Lee were both charged with mail fraud and conspiracy to commit securities fraud. The mail fraud charge has a possible sentence of up to 20 years in prison and fines of $250,000 for each count. If convicted on the conspiracy charges, each defendant could face up to five years in prison and a $250,000 fine for each count.

Symbollon Pharmaceuticals sells a dietary supplement for breast health, which brought in revenues of only $8,643 in fiscal 2010, according to regulatory filings. Company officials disclosed in April that the company did not have sufficient cash to fund operations for the rest of the year. Symbollon’s net loss in fiscal 2010 was $448,179. The company’s stock last traded on Nov. 28 at zero cents.

ZipGlobal is a provider of green lighting solutions. The company had cash on hand of just $42,062 on Dec 31, 2010, according to regulatory documents, which prompted its auditors to issue a “going concern” letter questioning the firm’s ability to continue operations for the next year. The company’s stock last traded on Oct. 27 at 3 cents.

Original Article http://www.bizjournals.com/boston/news/2011/12/02/penny-stock-fraud-case-ensnares-two.html

This bad ceo got himself involved in a massive federal and state investigation that targeted mortgage fraud.  Called “Operation Stolen Dreams”, the sweep named over 1200 individuals were named in mortgage fraud cases totaling over $2 billion in losses.

Well, Brett Matheson was one of those 1200 people.  He pleaded guilty in federal court to conspiracy to commit wire fraud.  He was president and CEO of Maricopa Property Investment Solutions, Inc. and only 46 years old and by the way this crime comes with stiff penalties: up to 30 years in prison, a million dollar fine, or both.  That, plus full restitution to his victims.

Brett Matheson used straw buyers (fake buyers) to hide the identity of the real buyers from investors.  These straw buyers were recruited at real estate seminars, their applications were helped through the pipeline personally by him, and supported by false bank documents.  Of course the straw buyers were unqualified for the loans.

Brett Matheson himself got financing for two properties by altering pay stubs and fake employment verification.

Kickbacks from the seller of the properties went to Brett Matheson at closing time.  52 properties were bought this way, totaling almost $50 million in fraudulent loans…which led to nearly  $20 million in lender losses.

In a huge loan scam which was uncovered almost five years ago, Gregory Podlucky obtained $875 million in loans.  He cooked the books of Le-Nature’s Inc, a Pennsylvania soft drink company that has since gone out of business.

Some of the loan money actually went toward equipment for the soft drink company, but the company was already a failing business, losing lots of money every year.  He spent much of the money on himself, including toy trains, jewels, and a $27  million mansion.

He told the IRS and the lending bank, Wachovia, that the company was pulling in hundreds of millions in revenue each year.  That means he’s also charged with major tax evasion…he’ll get twenty years in prison unless his lawyer successfully pleas for a lesser term.

The company’s former accounting director helped Gregory Podlucky at Le-Nature’s Inc. She pleaded guilty and her name is Tammy Jo Andreycak.  Mr. Pdlucky’s brother and the owner of a equipment company also pleaded guilty to related charges.

Le-Nature’s was based in Latrobe, PA and made bottled water, tea, juice, and nutritional drinks.  They filed for bankruptcy in 2006 after investors tried to get money out the company, leading to a court-appointed custodian.  That situation led to discovery of the fraud committed by Gregory Podlucky at Le-Nature’s Inc.

Ross Mandell at Sky Capital is a bit of a showman, and has a reputation as a wiseguy in the courtroom with smirks and inappropriate behavior.  He was even reprimanded by the judge this week at the fraud trial in Manhattan.

Mr. Mandell perpetrated fraud for ten years, first at his company Thornwater and then at Sky Capital. He convinced unsuspecting investors to give him money for dream companies, but blew his profits on bad boy things like prostitutes, strip clubs, steak house dinners in NYC, and huge birthday parties.

In 1998 Ross Mandell‘s brokerage firm was Thornwater.  He came up with the idea of starting a competitor to priceline.com, which has William Shatner aka Captain Kirk as spokesperson.  He would have Leonard Nimoy, aka Mr. Spock from the same TV series, as spokesperson.  His company was called Ticketplanet.com, but never actually materialized.

The adventurous spending on personal things like the steak houses and paying for a lawyer to handle personal affairs stemming from problems at a former job, were not disclosed to investors.Self Employment Tax Irs Tax Brackets IRS form 941
IRS Refund Status IRS Extension

Remember how much fun we had at the Playboy Mansion?

A.J. Munchak & Robert C Cordaro are indicted on racketeering charges, among other crimes.  They were both sworn in as Lackawanna County Republican commissioners in 2004, and Munchak retains that position.

The list of crimes they allegedly committed while in office is long, with Cordaro receiving 39 counts against him and Munchak a 25-count indictment.  If found guilty, they could be facing penalties of up to 1000 years in prison, combined!

The Robert C. Cordaro & A.J. Munchak trial is underway, with both defendants bringing in high-profile lawyers, each with a flair for the dramatic.  The public corruption trial.  Consultants and contractors for the county were promised contracts in exchange for political support.  There are also witness testimonies of incidents involving payments to the two defendants in return for business.  That would be kickbacks.

Referral fees are common among lawyers, but not when one party owns the property being sold.

Deeds show home sales by the Cordaro home show the sale for half the actual price.  The former commissioner is also accused of looting Lackawanna County’s workers’ compensation fund.  They used it to go to the Playboy mansion, a trip that cost over $40,000.  The list goes on.  I’m gonna be sick.

Winifred Jiau at Primary Global Research (PGR) faces up to twenty five years on prison for securities fraud and conspiracy.  She was convicted this week for passing along insider information to hedge fund managers who as a group paid her $208,000, a $300 gift certificate at the Cheesecake Factory,  and some lobsters.

Twenty five years for a big meal at the Cheesecake Factory and what must amount to a year’s salary or less for her?  She was a graduate of Stanford University in statistics and worked for a successful financial company in the Bay Area of San Francisco.  How badly could she have needed the money?

Meanwhile the hedge fund manages Winifred Jiau tipped off made tens of millions of dollars on her insider information.  Now she faces prison until her young life is over and she’ll be a senior citizen when she gets out.  Why did she do this?

She is the biggest fish caught so far in this FBI-led investigation, but they’re starting to turn the probe towards CEO Unni Narayanan and COO Phani Kumar Saripella, both of whom used to work at Intel Corp.

William Garfield Sandison was CEO of Community National Bank, which was spearheading the development of a local shopping plaza.  The bad CEO solicited funds from about twenty other banks, who wanted in on the development project, which was called Ramsey Town Center.  Nothing wrong with any of that.

What makes William Farfield Sandison a bad CEO was that he then turned around and arranged for two more loans from the Ramsey Town Center funds, without informing any of the other banks or Federal bank examiners.  The participating banks loaned William Garfield Sandison‘s bank around $35 million, and the two loans he took out on that sum were almost $7 million.

This is conspiracy to fraud the federal government.  Sandison supplied false and misleading information to the bank examiners.  He claims the extra loans were for bank business, but unless landscaping for your personal residence somehow counts as bank business, fraud was indeed present.

Sandison was sentenced to four months in prison and he was fined $30,000.  His son and former co-worker Curtis Alan Martinson had been sentenced in the scheme earlier.

Padma Allen and her husband, Reddy, have allegedly stolen millions of dollars from the City of New York and subsequently fled to their native country, India.  Almost a dozen people have been charged in the CityTime scandal, which erupted last December, after massive fraud was uncovered in New York City’s automated payroll renovation project.

Padma and Reddy Allen‘s company, TechnoDyne, has also been named in charges of fraud, including paying kickbacks to Science Applications International, the main contractor for NYC’s payroll project.  The City of New York has paid out $600 million, almost all of which has been touched by some sort of fraud, so massive it had become systemic, according to reports out this week.

Mayor Bloomberg was a major force behind pushing the NYC automated payroll project through, and news of the massive fraud has not made his third term look better.  The fraud charges against Reddy and Padma Allen and nine others named in indictments range from padding hours, in ironic twist in a payroll project, to hiring unnecessary contractors, to kickbacks.  The Allens are also accused of receiving kickbacks from their subcontractors.

Paul Allen at Taylor Bean & Whitaker was CEO of one of the United States’ largest private mortgage lenders.  His company resold mortgages – sometimes several times, to other investors.  Federal prosecutors sought a six year prison term but Paul Allen was sentenced to just over three years.

The CEO may have received a lesser sentence because he was really CEO in name only.  Other executives at Taylor Bean & Whitaker played more central roles in the massive mortgage fraud scheme involving $3 billion in fraud.  The major player was another bad CEO at the company, Lee Farkas.  He will be sentenced next week.

Raymond Bowman at Taylor, Bean & Whitaker plead guilty and is cooperating with prosecutors on a case involving one of the country’s largest private mortgage companies.

Raymond Bowman was the president at Taylor, Bean & Whitaker, and admitted that he and other bad CEOs sold millions of dollars worth of bad (worthless) mortgages.  The victim was Colonial Bank, of Alabama, which collapsed due to the fraud, in 2009.  The bad CEOs at Taylor Bean & Whitaker were trying to keep the company afloat.

Raymond Bowman faces up to five years in prison, full restitution to the victims, and a fine of up to $500,000.