Re: Barry Witz; organized crime
AUGUST 10, 1998
Just the Beginning? Two plead guilty in a stock-fraud case
Criminal charges and two guilty pleas have been filed in a saga chronicled by Barron's last year ("Buyer Beware!" August 25, 1997) and involving allegations of international stock fraud and money-laundering.
Recently, the Manhattan District Attorney unsealed a guilty plea to conspiracy by Salvatore J. Mazzeo, a New York stock broker who had figured in the article. The story examined two of the most prolific small-cap dealmakers of the 'Nineties bull market: former SEC attorney A. Barry Witz and his sometime partner, Parvinder S. Chadha.
Working with brokers such as Mazzeo, and with John J. O'Carroll -- an Irishman suspected by law-enforcement officials of laundering money for the Cali drug cartel -- Witz allegedly gained control of numerous small stocks and wrung from them millions of dollars in trading profits. Outside investors generally lost money on the issues.
A prosecutor's information statement, filed with Mazzeo's plea, describes a criminal enterprise in which the broker was but one conspirator. "A whole bunch of people are going to go down for this stuff," asserts John W. Moscow, deputy chief of the Manhattan District Attorney's Investigation Division.
Witz hasn't been charged, but his name came up when Mazzeo's brokerage-firm partner, George Carhart, also pled guilty to state criminal charges on July 22. Carhart told New York State Supreme Court Justice Colleen McMahon that in 1992, Barry Witz had taught the partners "how to commit a type of securities fraud known as Reg S fraud." Witz couldn't be reached last week to comment on this allegation. According to Manhattan District Attorney Robert M. Morgenthau, Mazzeo and co-conspirators sold unregistered stock by abusing the SEC's Regulation S -- which allows foreigners to buy and sell U.S. shares without filing stock-registration statements. According to law-enforcement officials, lawyers in London and Canada recruited an unnamed foreign diplomat to pretend to own offshore companies, paying him large sums to sign blank documents that later were used in the fraud. Morgenthau said that Brooklyn and Long Island-based members of the stock-fraud ring hid behind those offshore shell companies to run up stock prices, then secretly unload shares onto hapless investors.
Although unsealed last month, Mazzeo's guilty plea dates from October 1997. The subject of another Barron's story a decade ago (March 21, 1988), Mazzeo admitted violating New York's Enterprise Corruption law, a crime that could draw him up to 15 years in prison.
From 1990 through July 1997, Mazzeo admitted to obtaining over $17 million from investors in such small-capitalization stocks as Response USA, TSI Environmental, U.S. Golf & Entertainment and Candies, the shoe company whose sensational ads featured starlet Jenny McCarthy sitting on a toilet.
Investigators contend that Andrew Bressman, former president of A.R. Baron, is a conspirator who hid behind the shells; based on one of Britan's Channel Islands. Bressman and 13 others have pled guilty or been convicted in an unrelated $75 million stock-fraud scheme. The Mazzeo case resulted from the Manhattan D.A.'s collaboration with Britain's National Crime Squad. In fact, Mazzeo's plea remained sealed until the June 24 arrest of two British solicitors, one of whom is a part-time London magistrate. Neither has been formally charged. Several of the shell companies mentioned in Mazzeo's guilty plea also figured in transactions by suspected money launderer O'Carroll, as described in our story last year. In January 1993 letters to Bear Stearns, for instance, O'Carroll instructed the brokerage firm to wire $121,000 from sales of Saratoga Brands stock to an Isle of Jersey bank account in the name "Westfaelische Anlagen AG," a shell company that Mazzeo's plea says was also used in January 1992 for nearly $1 million in fraudulent stock sales.
Curiously, the 1993 letters signed by O'Carroll were faxed from Helton Ventures, a partnership of lawyer Barry Witz and the late stock swindler Richard Kirschbaum. When Barron's asked Witz about these transactions, he said that he was merely O'Carroll's lawyer, and he attributed the deals to Kirschbaum.
After the August 1997 Barron's story, Par Chadha and his public company Osicom Technologies sued Barron's publisher, Dow Jones, in a London court, for libel.
Last month, the judge there dismissed the suit. Noting that Chadha's connection with the U.K. was "somewhat tenuous" and calling Barron's "undoubtedly all-American," the judge concluded that it was "wholly inappropriate for this case to be tried in the United Kingdom rather than in the U.S." Chadha and Osicom are seeking to appeal the suit's dismissal.
-Bill Alpert
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JUNE 28, 1999
More Shell Games
Two years of investigation into money laundering yields additional arrests
By BILL ALPERT
The mysteries just multiply as prosecutors unseal indictments in a long-running probe of transatlantic money laundering and stock fraud. The latest indictment accuses 42-year-old London lawyer Andrew R. Warren of creating fake shell companies for American stock swindlers. Allegedly helping was a diplomat who lent his name to the shells. Interestingly, filings with the Securities and Exchange Commission examined by Barron's indicate that the diplomat was connected to a stock not mentioned in the indictment -- the bulletproof-vest maker Guardian Technologies International, founded by former Marine Lt. Col. Oliver L. North, a major figure in the Iran-Contra affair during the Reagan Administration.
The indictment, announced June 17 by the Manhattan district attorney's office, alleges that Warren participated in a seven-year conspiracy lasting through July 1997, setting up phony shell companies in Liberia, the English Channel Isle of Jersey and the British Virgin Islands, on behalf of four Americans who already have pleaded guilty to conspiracy charges. They are Salvatore J. Mazzeo, George A. Carhart and James E. Cohen -- all affiliated with the defunct brokerage firm Westfield Financial -- and Felice F. Mischel, a Manhattan securities lawyer. Hiding behind the offshore shells, the group sold $17 million worth of unregistered stock in such firms as Saratoga Brands, Response USA, Las Vegas Entertainment Network and the shoemaker Candies. Manhattan DA Robert M. Morgenthau is asking Britain for Warren's extradition.
Prosecutors say a Liberian diplomat served as a front man in Jersey, Liberia and the British Virgin Islands for swindles involving stocks from New York, New Jersey and Nevada. Barron's found the diplomat has been a large shareholder in former Lt. Col. North's body-armor firm.
An earlier civil suit filed by the SEC alleged the swindlers reaped nearly $3 million in just one 1993 deal, in which the Candies company sold stock to a purported Liberian company that supplied only the address "P.O. Box 26, Moscow 117049." As Barron's reported two years ago ("Buyer Beware," August 25, 1997), several of the firms involved were controlled at various times by A. Barry Witz or Parvinder S. Chadha.
In his guilty plea last year, Carhart told a judge that Barry Witz had instructed the group in stock fraud. Neither Witz nor Chadha has been charged. Currently, Chadha is chief executive of Osicom Technologies, a controversial networking firm that holds itself out as rivaling Cisco Systems and Lucent Technologies.
Under SEC regulations in effect until last year, foreign purchasers of a U.S. company's unregistered stock had to wait 40 days before selling the shares in the U.S. market. But Bear Stearns brokerage records from March 1993 show $198,000 worth of short sales in Las Vegas Entertainment by John J. O'Carroll, the owner of record for some of the offshore entities mentioned in this month's indictment. As Barron's reported in 1997, Barry Witz called himself the lawyer for O'Carroll, whom London investigators described as a money launderer for the Cali drug cartel. After the 1997 story, Chadha and Osicom sued Dow Jones & Co., the publisher of Barron's, for libel in a London court. A British appeals court upheld the suit's dismissal this year.
The London solicitor, Warren, has been out on bail since British authorities arrested him last year, along with his law partner Stuart Creggy, a London magistrate who rates an entry in Debrett's Peerage. Creggy has not been charged with a crime. But a new arrest in the case came last month, when Britain's National Crime Squad arrested Paul Martin Warren, a 52-year-old accountant with the firm Gainsleys Financial Services (and who is no relation to Warren the solicitor).
In reporting the accountant's arrest, the London Mail put a name to a mysterious foreign diplomat. Manhattan prosecutors' filings have alluded to the diplomat without ever naming him. The paper identified him as Charles HNE Wilson and said he had been recruited by the conspirators in the belief that the Liberian diplomat would be immune to interrogation and prosecution. Prosecutors refused to confirm that Wilson was the diplomat mentioned in court papers.
But among solicitor Warren's alleged conspiratorial acts, the latest indictment does mention some allegedly false 1993 statements concerning the ownership of Helmsley Finance. The very same entity turned up in annual SEC filings of Ollie North's Guardian Technologies, where Helmsley Finance appeared as an 8.5% shareholder, only to vanish in the latest proxy statement.
The SEC filings show a mailing address on the Isle of Jersey for Helmsley Finance, described as a company in the British Virgin Islands founded in 1993 and "engaged in providing financial investment services." The filings identify Helmsley's owner as Charles HNE Wilson.
While units of Guardian Technologies shot to $12 (before a subsequent split) on the day of their 1996 initial offering, they soon sank to pennies. Along with the firm's inability to make a profit, North's stock suffered from the collapse of its underwriter Landmark International Equities, after a failed share offering for an Italian-ice firm called Mama Tish's. Among the directors of Guardian is Herbert M. Jacobi, a 59-year-old Manhattan securities lawyer who is no stranger to controversy. Personal lawyer to convicted penny-stock crook Meyer Blinder, Jacobi was barred for life from working for any brokerage firm after the National Association of Securities Dealers concluded in 1991 that he was an undisclosed owner of the brokerage firm Winston-Frost Securities. Jacobi has been a longtime friend and counsel to the Mazzeo family, representing Sal Mazzeo's brother Peter against pending SEC civil charges of stock manipulation.
Jacobi says that Helmsley Finance got its shares in North's body-armor firm in a private placement arranged by Landmark International. "As for who this individual is," says the lawyer, "I have no clue."
Ollie North, now Guardian's board chairman, does not talk to the media, Jacobi says. Nor were calls to Guardian chief executive J. Andrew Moorer returned by Barron's deadline.
Along with the alleged false entries for Helmsley Finance, the new indictment charges London solicitor Warren with faking 1993 ownership papers of the offshore entities Societe Investissement Fiduciaire Occidental, Marlborough House Investments and Orient Investment Trust. Starting in 1993, those entities also turned up as substantial shareholders of Malvy Technology, according to Delaware Federal court records of a class-action suit concerning Malvy.
Shares in Malvy got extra boosts from the Internet tout sheet SGA Goldstar Research-whose publisher subsequently pleaded guilty to receiving shares for his touts-and from four Boca Raton stockbrokers indicted last year for accepting bribes to tout Malvy in 1993 (shortly after the exotically named offshore entities became stockholders).
Yet another of Warren's allegedly false 1993 filings concerned the BP Group, which has turned up in separate SEC filings of the aspiring casino firms Winners Entertainment and Alpha Hospitality. In 1993 Winners announced plans for a riverboat casino in Mississippi, in partnership with BP Group and Las Vegas Entertainment Group (a company bankrolled by BP and International Thoroughbred Breeders, the jewel in the crown of stock-fraud king Robert E. Brennan). The riverboat plan soon flopped. Alpha also tried to make a go of a Mississippi casino, but that also flopped.
Alpha's SEC filings identify the BP Group's owner as Patricia A. Cohen, a sometime director and 11% shareholder of Alpha-and incidentally, the wife of James E. Cohen, one of the four whose guilty pleas the Manhattan DA has already nabbed in the transatlantic scam.
Before Felice F. Mischel had entered her January guilty plea for supplying phony legal opinions in the offshore shell game, she had been a partner in the Manhattan securities-law firm Schneck Weltman Hashmall & Mischel. Although Saratoga Brands stiffed Mischel's firm for $94,000 in legal fees, other public firms happily used her services, including baby-product maker Diplomat Corp., where Mischel also served as a director. Diplomat's onetime principal shareholder, Robert M. Rubin, was also a director and large shareholder of Response USA, a personal-alarm service whose bogus 1993 stock placements were among the guilty admissions of Mischel and Sal Mazzeo.
The 59-year-old Rubin has had a profitable career promoting small-cap stocks that weren't consistently profitable for outside investors, including American United Global and a little number underwritten by Sal Mazzeo called Universal Self Care. Rubin's stocks also had strong support from the Long Island brokerage firm Lew Lieberbaum & Co., whose investment-banking chief sat on Response USA's board. Lieberbaum survived a 1995 NASD disciplinary action for alleged stock manipulation (which the firm neither admitted nor denied) by paying $1.1 million in fines and restitution, but not a sensational $1.75 million settlement of charges by the federal Equal Employment Opportunities Commission alleging that Lieberbaum's male employees exposed themselves to female employees and demanded oral sex. Rubin did not return messages by deadline.
Originally arrested with Andrew R. Warren was his senior partner, Stuart Creggy. The wealthy 60-year-old magistrate and amateur stamp collector has not been charged. His name came up, however, in 1995 as the manager of Panavest & Co., a Gibraltar firm that Toronto newspapers reported as owning a valuable Toronto land parcel whose development was stymied by the presence of a historic landmark church -- until the church was destroyed in a fire.
Panavest's Canadian agent, according to press reports, was one Bernard Kraft, an accountant whose Toronto firm has audited another business that's caught the eye of Manhattan prosecutors -- a penny-stock firm called Alaska Apollo Resources. One catchy thing about Alaska Apollo are Form 13D stock-ownership filings that showed a million shares in the hands of Gracechurch Securities, a Liberian corporation with a London address. The owner of Gracechurch, according to the SEC filings, was Douglas H. Mansfield, a Bahamian investor who paid a fine and settled a 1995 cease-and-desist proceeding by the SEC, without an admission or denial. The SEC had charged him and four others with using a Florida brokerage firm to manipulate and dump unregistered shares of a couple of Canadian firms in the late 'Eighties.
With so many unsolved mysteries, small wonder that officials from the Manhattan DA's office and Britain's National Crime Squad say that their investigation is far from over.
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