FOR IMMEDIATE RELEASE:
December 17, 2002
FOR FURTHER INFORMATION CONTACT:
Genene Morris (973)504-6327
NEWARK - New Jersey is suing dozens of individuals and companies for their alleged roles in elaborate schemes that defrauded New Jersey investors, many of whom were elderly New Jersey residents living on fixed incomes, out of more than $12 million, Attorney General David Samson and Consumer Affairs Director Reni Erdos said.
Joining Attorney General Samson and Director Erdos in today's announcement is Bureau of Securities Chief Franklin Widmann.
In three separate lawsuits, the State has named individuals and companies from as far away as Florida that allegedly lied to and deceived investors to convince them to invest sizeable sums of money in their business ventures. Often, the complaints allege, the defendants failed to disclose financial statements; intended uses of invested funds; the nature and extent of any risks associated with those uses; and/or their ability to pay interest and repay the principal.
"To lie to investors and misrepresent their level of risk in an effort to defraud them of their money are reprehensible acts," Governor James E. McGreevey said. "We take seriously the allegations against these defendants and are treating them as such."
"We allege that many of the investors were unaware, however, how the defendants used their money, and lost significant sums of money as a result," Attorney General Samson said.
"Our actions allege that most of the investors were people who had low annual incomes or elderly investors who were on fixed income," Erdos said. "It is shameful they would take advantage of these consumers for their own selfish, monetary gains."
In the first suit, the State's administrative action names 28 individuals who allegedly carried out a massive, multi-million dollar promissory note scheme that resulted in losses to investors of more than $11 million.
The complaint names:
Carl Barone, Joseph Beninato, Stephen Bialon, Joseph Boscia, Thomas J. Braden, Michael J. Brown, Pat Cenicola, Oscar K. Chambers, Joseph A. Clair, Edward M. Crowley, Richard D'Ambola, Bruce DeHaven, Gary Fillweber, Michael Fleyzor, Kenneth J. Franco, Frank Guida, Stephen J. Larkin, Thomas McCabe, Jack Moloney, Oscar Olsen, Michael Prendergast, Frank Perez, Michael Petrulla, James P. Philbin, Manuel Prieto, John Santoro, Jeffrey Sloan and Louis Soto.
The State's five-count complaint alleges the defendants solicited investors and enticed them into purchasing promissory notes with promises of significant returns on their investments. In fact, the promissory notes were unregistered securities and closely resembled a Ponzi scheme in which some of the promissory note issuers paid interest and principal as each became due on the first promissory notes issued. But ultimately, all issuers failed to pay at least some of the interest resulting in defendants failing to deliver on their guarantees and almost all the investors suffering significant losses.
The State's suit seeks to have sanctions imposed against the defendants, including, an order requiring them to cease and desist from selling securities from or within New Jersey in violation of the Uniform Securities Law. The suit also seeks civil monetary penalties.
Deputy Attorney General John Miscione of the Division of Law is handling this matter for the State.
The second complaint names two Central New Jersey men and their company for allegedly devising and carrying out a scheme to cheat investors, many of whom were elderly citizens.
The State's four-count suit alleges that defendants Daniel F. McCorry of Spring Lake Heights, Joseph A. Schifano of Brick and their company, Prime Money Management of Toms River, defrauded 34 investors out of more than $1 million in connection with their sales of unregistered securities. Thirty-two of those investors were from New Jersey.
McCorry and Schifano, former registered agents of Royal Alliance Associates, Inc., of Toms River, unlawfully sold securities in the form of investment contracts from Royal Alliance's office - even though the broker-dealer had no knowledge of it and sales were not being effected through the broker-dealer. In fact, McCorry and Schifano were allegedly operating their own business venture, Prime Money Management, from Royal Alliance's branch office and the securities they were selling were not registered with the Bureau nor was Prime Money Management registered as a broker-dealer.
The investment contracts amounted to more than $1 million.
In contracts with investors and written materials, Schifano and McCorry allegedly guaranteed investments were safe and risk-free and would yield annual rates of return above market rates.
In fact, investor funds were going to Executive Funding, Inc., a New York corporation allegedly operating as a mortgage broker. The complaint alleges that the Executive Funding pooled investor funds and offered the proceeds to private individuals as bridge loans to purchase real estate in areas where the property values were highly depreciated. Executive Funding and its president, Joseph Greenblatt, have been the subject of criminal proceedings in New York in connection with the company's activities.
The suit seeks an order prohibiting the defendants from selling securities from or within New Jersey, requiring them to pay civil penalties and affording each purchaser of the securities the option of receiving restitution of losses incurred plus interest and expenses.
Deputy Attorney General Priya Doraswamy of the Division of Law is handling this matter for the State.
In the last case, the State alleges a Florida man, his associates and business entities deceived investors by representing to them that their investments were paying for membership interests in the defendants' business venture and that the investors would be actively involved in the acquisition, management and sale of pay telephone routes, for profit when, in actuality the defendants were selling them unregistered securities.
The State's complaint names as defendants:
The suit also names eight other U.S. Paytel entities: U.S. Paytel Atlantic, L.L.C.; U.S. Paytel Delta; U.S. Paytel L.L. C.; U.S. Paytel Optima, L.L.C.; U.S. Paytel Preferred, L.L.C.; U.S. Paytel Premier, L.L.C.; U.S Paytel Select, L.L.C.; and U.S. Paytel Southern, L.L.C.
The defendants allegedly represented to investors that the estimated annual return on investments of approximately 13 percent in the first year growing to approximately 34 percent in the fifth year.
The complaint alleges that the defendants required investors to take part in the business operations as a condition of becoming investors.
"We allege this was an attempt by the defendants to circumvent New Jersey securities laws," Widmann said. "This was a sham designed to create the appearance among investors that they were actively involved in the defendants' business venture rather than the passive investors they actually were who had no control, whatsoever, over the success of the business."
The complaint alleges that the investments sold to investors would be unsuitable for the targeted investors, many of whom were elderly, because of their income; net worth, investment objectives and experience.
The suit seeks to have the defendants pay civil monetary penalties for each violation of the Securities law, pay full restitution to affected investors and stop selling securities in the State of New Jersey.
Deputy Attorney General James B. McKinney of the Division of Law is handling this matter for the State.
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