Securities and Investment Fraud

Securities and investment fraud is not a new occurrence but with

the advent of the Internet, it hasbecome easier to perpetrate.Theschemes are still essentially thesame, promising high-yield profitswith little to no risk. Instead of justpaper copies of graphs showingphenomenal growth, there aredescriptive Web pages that appear tobe authentic and genuine. Instead ofan individual “cold calling” a potential victim, it is a computer that istargeting potential victims in emailsand through Web sites for fraudulentcorporations. In investigating financial crimes, ICE has encountered anincreasing number of securities andinvestment fraud schemes.As part of the continued Cornerstone outreach, the Special Agent inCharge (SAC) for Baltimore, JimDinkins spoke on March 12, 2007,to attendees at the Securities Industry and Financial Markets Association’s (SIFMA) Anti-Money Laun- dering Compliance Conference in New York, New York. SAC Dinkins advised the attendees to be vigilant against anything that sounds too good to be true. continued on page 2

ICE’s Role in Securities andInvestment Fraud

stoneReport

TheCorner

Inside This Issue

Safeguarding America through

Financial Investigations

www.ice.gov/cornerstone

Toll-Free Tip Line:

1-866-DHS-2-ICE

Cornerstone is U.S. Immigration and Customs Enforcement’s (ICE)comprehensive investigative initiativefor fighting financial crime.The Cornerstone Report is a quarterlybulletin highlighting key issuesrelated to ICE financial, narcotics andpublic safety investigations.

European Investors Scammed . . . . . . . . . . . . . 3Hedge Fund High Jinks . . . . . . . . . . . . . 4

Volume IV: No. 2 • July 2007

Seized home of main target, purchased utilizing funds from stock sales. Home of StockGenie conspirator, purchased utilizing funds from stock sales. Purchase of

home was identified through BSA analysis.

2003 Aston Martin purchased utilizing fundsfrom PNLK stock sales.

2002 Bentley Azure purchased utilizingfunds from StockGenie stock sales.

• Be wary of companies or individuals that

promise high yield returns. 

• Research a company and/or individual

thoroughly before sending any money.

• Check on the disciplinary record of the

financial professional that you are planning to invest with. The National Association of Securities Dealers (NASD) is theprimary private-sector regulator of America’s securities industry and offers asearch function on its Web site(w

w

w.nasd.com). Also check with your

state’s securities regulator.

• Be skeptical of any investment that is

touted as a “sure thing” or one claiminglittle or no risk.

• Don’t be afraid to ask questions. 

On its Web site, the Securities andExchange Commission (SEC)(w

w

w.sec.gov) lists some of the basic

questions an investor should ask before committing to any investment.

Don’t Be a Victim of Securities Fraud

haracterized as dividend dis

ments. In actuality, the disments were a return of the

ed funds and it further

ed him to continue to invest

 scheme. 15 additional

ors each contributed between

000 to $500,000. One of

investors also received approx

ly $350,000 back then grew

ious of the legitimacy of the

st investment fund.

nvestors suffered a total loss of

$13.5 million.The government

ention prevented the loss of

ditional $2.5 million.

tigative Results

ur was indicted on 18 counts of

raud and 2 counts of wire

and surrendered to U.S. Mar

on October 4, 2006. ICE agents

 and forfeited a 2004 Porsche

ne valued at $65,000. Proceeds

the sale of the vehicle will be

ed back to ECM victims. $

eturn by ECM was 218% as compared

e (30.8%) in the same time frame.
ICE initiated an investigation

based on suspiciousfinancial wire transfers through businesses owned and

operated by the main target of thisinvestigation, (herein referred to as“Target”), who was purported to beoperating hedge funds and financialadvisement firms, which catered towealthy European citizens outsideof the United States.Financial analysis revealed that theTarget’s account activity involvedhundreds of incoming wire transfersfrom overseas accounts to domesticaccounts held in the name of businesses controlled by the Target thatwere purportedly being used to purchase stocks in the United Statesmarket.The funds were then wiredamong several other businessaccounts controlled by Target andthen ultimately used to pay personalexpenses and business expenses infurtherance of the scheme.The Target utilized his hedge fundconsulting agencies to sponsorEuropean individuals seeking workin the United States.The Targetapplied for immigration status for

his workers and utilized them asboiler-room operators.These individuals would then contact wealthyEuropean citizens through a coldcalling technique and entice themto purportedly purchase stocks inthe United States market. Once thefunds were received via wire, theywere transferred among severalaccounts controlled by Target andhis co-conspirators.The funds wereultimately spent on personal andbusiness expenses in furtherance ofthe fraud.Very few stocks wereactually purchased with the funds.The Target instructed his workers onhow to use deceptive measures andblatant lies to extract more moneyfrom the unsuspecting investors.Some investors lost in excess of onemillion dollars in an attempt torecoup investments they believewere locked up in the United Statesstock market.In June 2006, the Target and severalco-conspirators were arrested on acomplaint filed in the Southern District of New York and charged withconspiracy to commit securities,mail, and wire fraud under Title 18USC 371.The Target and anotherdefendant are currently awaitingtrial. One co-conspirator pleadedguilty to the conspiracy charge andto a substantive count of securitiesfraud, 15 USC 78j (b) and 78 ffand is awaiting sentencing whileanother considers a plea agreement.The remaining defendant is a fugitive from justice.Investigation determined that in asix-year span,Target and his co-conspirators defrauded approximately800 victim investors out of approximately $21 million dollars.Thesenumbers may be higher due to the

fact that Target has been involved inthis scheme for approximatelytwelve years in Europe and theUnited States. Approximately$700,000 in victim’s funds havebeen recovered and seized frombank accounts and an additional$300,000 is being held in tradeaccounts. A lis pendens was alsofiled on a multi-million dollar residence that was purchased with victim funds. $

•Use of multiple business accounts to conduct

financial transactions inconsistent with normalactivity for stated business.

•Source of money for business is different from

the source listed in the business profile filed withthe bank (business profile claimed the moneywould come from hedge funds when in actualityall the money came from individuals).

•Main conspirator purported to be investing in the

stock market but neither he nor his business hadany certifications or license to buy or sell stocks.

•Conspirators had over 40 bank accounts at 

10 different financial institutions. Many of theaccounts utilized the same or similar names and addresses.

Red Flag Indicators

al route of filing a prospectus 

ndertaking an initial public 

ng (IPO).The privately held 

any takes on the “public” sta- 

rough the merger of the two 

es and new stock is issued to 

nee stockholders who are act- 

n behalf of company insiders. 

nvestigation revealed an elabo- 

ock fraud orchestrated by 

o and PNLK CEO Jean Pierre 

deau involving the fraudulent 

ce, transfer and sale of mil- 

of shares of PNLK stock 

gh foreign nominee owners 

he promotion of PNLK stock 

gh the Internet. Most of 

shares were sold through 

ian brokerage firms in order 

id SEC scrutiny. Proceeds from 

sales were laundered through 

sinos in Atlantic City and 

ial institutions in New York 

Canada, Netherlands Antilles 

witzerland. 

gative Results 

nspirators shared in over $50 

n in illegal profits from the 

f illicit stock. It is anticipated 

otal seizures in relation to this 

igation will total over $13 

n in cash, properties, vehicles, 

ther assets. ICE will return 

ximately $4.5 million to the 

ictims identified to date. As 

w, 14 conspirators, including 

o, Collardeau, two complicit 

brokers, an attorney specializ- 

 SEC law, and an accountant 

been convicted of various 

es, including money launder- 

ecurities, wire and mail fraud; 

nd tax related violations. $

European Investors Scammed

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Volume IV: No. 2

July 2007