Four Pearlman Sales Agents Sentenced in Orlando
|U.S. Attorney’s Office December 09, 2011|
ORLANDO, FL—U.S. Attorney Robert E. O’Neill announces that U.S. District Judge John Antoon, II yesterday sentenced Michael J. Crudele, Steven B. Rodd, William P. Kress, and Gary V. Leone for selling an unregistered security called the Transcontinental Airlines, Inc. Employee Investment Savings Account or “EISA” program. Ultimately, the EISA program was a fraud scheme orchestrated by Louis J. Pearlman, who is currently serving 25 years in federal prison.
Michael J. Crudele (50, Lithia) was sentenced to 36 months in federal prison for interstate transportation of securities and money taken by fraud and causing interstate travel in execution of a scheme to defraud. Crudele was sentenced to two concurrent 36 month sentences for two counts of willfully making and subscribing a false income tax return. He was ordered to pay $3,324,375.89 in restitution to EISA and Transcontinental Airways stock investors and pay a forfeiture money judgment of $3,273,500.00 to the United States.
Steven B. Rodd (45, Tampa) was sentenced to 36 months in federal prison for conspiracy to commit mail fraud. He was ordered to pay $28,861,406.49 in restitution to EISA investors and pay a forfeiture judgment of $936,500 to the United States.
William P. Kress (55, Largo) was sentenced to 36 months in federal prison for conspiracy to commit mail fraud and a concurrent sentence of 30 months in federal prison for bankruptcy fraud. He was ordered to pay $28,861,406.49 in restitution to EISA investors and pay a forfeiture judgment of $800,000 to the United States.
Gary V. Leone (58, Valrico) was sentenced to 26 months in federal prison for conspiracy to commit mail fraud. He was ordered to pay $663,408.34 in restitution to EISA investors and pay a forfeiture judgment of $450,000 to the United States.
According to court documents, Crudele, Rodd, Kress, and Leone had been barred from selling unregistered securities by the State of Florida before they sold the EISA program to investors. Kress and Leone utilized “bait and switch” tactics whereby they would lure elderly investors to their business by advertising certificates of deposits then selling them the EISA program. After the State of Florida, Office of Financial Regulation initiated an investigation of the EISA sales, the individuals conspired to conceal the fact that they were selling the investment and receiving sales commissions.
Kress committed additional fraud by hiding $788,404.69 in EISA commissions in a shell company and not disclosing the income when he filed bankruptcy in the Middle District of Florida. Crudele failed to pay taxes on approximately $2.1 million that he earned from selling the EISA program and stock in Transcontinental Airlines.
While the government found no evidence that Crudele, Rodd, Kress, or Leone knew that the EISA program was a fraud scheme, each admitted that he was not licensed to sell securities, did not notify investors that he was barred from doing so and concealed from investors that the EISA was under investigation by the State of Florida . All combined, the four men sold more than $35 million worth of the EISA program to over 350 investors.
“The Florida Office of Financial Regulation is committed to building trust through enforcement and by putting bad guys behind bars,” said OFR Commissioner Tom Grady. “We will not tolerate this type of activity that preys upon consumers’ hard-earned money.”
This case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service, and the State of Florida, Office of Financial Regulation. It was prosecuted by Assistant United States Attorney Daniel W. Eckhart.