Five Defendants Charged for Securities Fraud-Related Violations
153 Defendants Have Been Charged to Date as Part of the Southern District of Florida Securities and Investment Fraud Initiative
|U.S. Attorney’s Office August 14, 2013|
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; Michael J. De Palma, Acting Special Agent in Charge, Internal Revenue Service, Criminal Investigation (IRS-CI); Paula Reid, Special Agent in Charge, U.S. Secret Service (USSS), Miami Field Office; Ronald Verrochio, Inspector in Charge, U.S. Postal Inspection Service (USPIS); Eric I. Bustillo, Regional Director, Securities and Exchange Commission (SEC); Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG); David Meister, Director, Division of Enforcement for the U.S. Commodity Futures Trading Commission (CFTC); Cindy Liebes, Director, Federal Trade Commission, Southeast Region (FTC); and Drew J. Breakspear, Commissioner, State of Florida’s Office of Financial Regulation, announce the most recent charges filed in connection with the Southern District of Florida Securities and Investment Fraud Initiative (the Initiative). The Initiative was first announced in December 2010 and designed to combat securities fraud and protect the interests of the investing public.
The Initiative was established to address an increase in investment and securities fraud schemes in the Southern District of Florida. Participating agencies include the U.S. Attorney’s Office, FBI, IRS, USSS, U.S. Postal Inspection Service, SEC, CFTC, FTC, FDIC, and the Florida Office of Financial Regulation. These law enforcement and regulatory agencies have shared intelligence and combined their resources to combat securities and investment fraud, including Ponzi schemes, affinity fraud schemes, prime bank/high-yield investment scams, business opportunity fraud, promoter/micro-cap/“pump and dump” schemes, foreign exchange (FOREX) frauds, false bankruptcy petitions, and other schemes to defraud individual investors. Among the goals of the Initiative is to alert the public about the prevalence of these types of schemes, to educate the public on how to avoid falling prey to these schemes, and to highlight the law enforcement response to the problem.
The Southern District of Florida ranks number one in the nation in charging securities and investment fraud defendants and only second in the number of cases charged. Using the strike force model successfully developed in the health care and mortgage fraud areas, the Initiative has yielded similar success. Since its inception in December 2010, the Initiative has resulted in charges against 153 defendants in the Southern District of Florida, resulting in more than $ 1,777,025,689 in restitution ordered.
U.S. Attorney Wifredo A. Ferrer stated, “Fraud in the microcap markets is of increasing concern to our community as these markets have proven to be fertile grounds for fraud and abuse. Fraudsters know that these microcap stocks are difficult for the average investor and regulator to monitor. The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators.”
“The FBI will continue to target individuals who attempt to undermine the integrity of the securities industry by defrauding innocent investors,” said William J. Maddalena, Assistant Special Agent in Charge, FBI Miami Division. “If you are an individual investor, exercise due diligence before you invest your first dime. Ask yourself: Does it seem too good to be true? If the answer is ‘Yes,' then it probably is!”
IRS Acting Special Agent in Charge Michael De Palma stated, “IRS-Criminal Investigation will continue to lend financial expertise to this joint venture to unravel schemes in complex financial crimes. Together with our law enforcement partners, we will use every tool at our disposal to pursue, investigate, and bring swindlers to justice.”
Secret Service Special Agent in Charge Paula Reid stated, “This is a great example of how the law enforcement community in the Southern District of Florida continues to identify and penalize those insiders who misuse an honest system for selfish, personal gains. Unfortunately, these types of criminals chose to compromise the integrity of their trade and manipulate the law, policies, and procedures with no regard to trusting investors.”
“These criminals go to great lengths to mask their criminal schemes,” said Postal Inspector in Charge Ronald Verrochio. “We will continue to work with our law enforcement partners to uncover these schemes in an effort to prevent future victimization.”
“Interested only in lining their own pockets, the company officers and promoters charged today used underhanded tactics to cheat investors and manipulate penny stocks,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “Their utter disregard for investors underscores the importance of stamping out microcap fraud.”
Today, we are announcing charges against five individuals in the following four cases:
§ United States v. Jack Freedman, Case No. 13-60204-CR-Hurley
Jack Freedman, 58, of Fort Lauderdale, was charged by an information alleging that he conspired to commit securities fraud. Freedman was a promoter for Green Planet Group Inc., (GNPG) a publicly traded company whose stock was registered with the Securities and Exchange Commission. The defendant is charged with engaging in a scheme to manipulate the publicly quoted share price and trading volume of GNPG common stock. The case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.
United States v. Richard Greene and Peter Santamaria, Case No. 13-60203-CR-Marra
Richard Greene, 57, and Peter Santamaria, 57, both of Broward County, were charged by an Information alleging that the two conspired to commit securities fraud. The defendants are charged with engaging in a scheme to manipulate the publicly quoted share price and trading volume of VDO-PH International (VDPH) common stock. VDPH was a Nevada corporation that purported to engage in developing software for business telephone applications. The case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.
United States v. Mark Balbirer, Case No. 13-20605-CR-Cooke
Mark Balbirer, 49, of Coral Springs, was charged by an information today charging him with conspiracy to commit mail fraud. Balbirer, a promoter for the South Florida Film Fund (SFFF), located in Broward County, Florida, is alleged to have engaged in a scheme to send illegal kick-back payments to hedge fund fiduciaries in exchange for their investments in SFFF. The case is being prosecuted by Assistant U.S. Attorney Michael Sherwin.
United States v. Sheldon Simon, Case No. 13-60202-CR-Marra
Sheldon Simon, 58, of Palm Beach County, Florida, was charged by an information alleging that he committed wire fraud involving the artificial inflation of the securities market. Simon was a stock promoter for Ecoemissions Solutions Inc. (ECMZ), a publicly traded company whose stock was registered with the Securities and Exchange Commission. Simon is charged with engaging in a scheme to manipulate the publicly quoted share price and trading volume of ECMZ common stock. Beginning in February 2011, Simon provided another person with advance ECMZ press releases which, once released, were designed and issued to give the investing public the false impression that the fraudulent purchases of ECMZ stock were induced by positive news about the company and to conceal the defendant’s scheme from the regulatory authorities. The case is being prosecuted by Assistant U.S. Attorney Roger Cruz.
The following defendants recently pled guilty:
United States v. Jeffrey L. Schultz, Case No. 13-60075-CR-Rosenbaum
Jeffrey L. Schultz, 62, of Ft. Lauderdale, Florida, was charged by an information on April 9, 2013. Schultz was the president and chief executive officer of Redfin Network, Inc. (RFNN), a Nevada corporation whose common stock was traded in the Pink Sheets over-the-counter securities market. He was charged with securities fraud for engaging in the manipulation of RFNN’s stock price by providing improper payments to others. After entering a guilty plea in June, he is scheduled to be sentenced on August 26, 2013. The case is being prosecuted by Assistant U.S. Attorney Michael Sherwin.
United States v. Stephen F. Molinari, Case No. 13-60105-CR-Rosenbaum
Stephen F. Molinari, 49, was charged by an information on May 1, 2013. Molinari was a previously registered securities broker who was also the chairman, chief executive officer, and controlling shareholder of a mail order prescription drug business. He was charged with mail fraud in connection with his company. After entering a guilty plea in June, he is scheduled to be sentenced on August 26, 2013. The case is being prosecuted by Assistant U.S. Attorney Harold Schimkat.
The following defendants were recently sentenced:
United States v. Thomas Gaffney, Case No. 12-60224-CR- Dimitrouleas
Thomas Gaffney, 47, of Satellite Beach, Florida, was charged by an information on September 21, 2012. Gaffney was the president and chief executive officer of Health Sciences Group Inc. (HESG), a Delaware corporation whose common stock was traded in the Pink Sheets. He was charged with mail fraud associated with his company. After entering a guilty plea earlier this year, on August 8, 2013, he was sentenced to time served, followed by three years of supervised release with a special condition of eight months of home confinement. The case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.
United States v. Scott Haire and Douglas P. Martin, Case No. 12-60133-CR-Williams(s)
Scott Haire, 48, of Coral Springs, Florida, and Douglas P. Martin, 47, of Loxahatchee, Florida, were charged by a superseding indictment on September 20, 2012. Haire was President of Wound Management Technologies Inc. (WDMN), a Texas corporation whose common stock was traded on the Pink Sheets. Haire was also the chief financial officer of VHGI Holdings Inc. (VHGI), a Delaware corporation, purportedly a diversified holding company that was also traded on the Pink Sheets, that identified and acquired business assets. Douglas P. Martin was the chief executive officer of VHGI. Haire and Martin were both charged with conspiracy to commit securities fraud involving VHGI, and Haire was charged with mail fraud and securities fraud in connection with a kickback scheme involving WDMN. Both plead guilty earlier this year. On May 14, 2013, Martin was sentenced to 12 months’ probation. On August 1, 2013, Haire was sentenced to 30 months in prison, followed by three years of supervised release. The case is being prosecuted by Assistant U.S. Attorneys H. Ron Davidson and Jodi Anton.
Mr. Ferrer commended the investigative efforts of the FBI, IRS-CI, USSS, USPIS, SEC, Federal Deposit Insurance Corporation, Office of Inspector General, U.S. Commodity Futures Trading Commission, Division of Enforcement, Federal Trade Commission, and the State of Florida’s Office of Financial Regulation.
An indictment or information is merely an accusation, and defendants are presumed innocent until proven guilty.