NatWest's Coutts Was Defrauded of $32 Mln, NY Prosecutor Says
New York, March 2 (Bloomberg) -- National Westminster Bank Plc's Coutts & Co. private banking unit was defrauded of more than $32 million by two Canadian businessmen who artificially inflated the stock of an Internet gaming company, according to an indictment by a New York grand jury.
Jack Banks, chief executive of GalaxiWorld.com Ltd., formerly known as Laser Friendly Inc., and Larry Weltman, the chief financial officer, were charged with grand larceny and fraud. Bail was set at $35 million for Banks and $3 million for Weltman. Both men were arrested Friday when they came to New York for a hearing in a federal class-action lawsuit against their company, the D.A.'s office said. The two Ontario residents have been unable to post bail and remain in custody.
Banks and Weltman borrowed $32 million from the former New York office of Coutts in 1995, using Laser Friendly stock as collateral, Manhattan D.A. Robert Morgenthau said. The two men used Laser Friendly to acquire other companies that supplied lottery tickets and betting slips to the gaming industry.
When they secured the loan from Coutts, the value of Laser Friendly stock was artificially inflated because Banks and Weltman had failed to disclose they didn't have the necessary licenses and regulatory approvals to operate one of the companies, said John Moscow, Morgenthau's deputy chief of investigations.
Coutts lost about $28 million on the loans, Moscow said. Attorneys for Banks and Weltman couldn't immediately be reached for comment. Grand larceny is punishable by as much as 25 years in prison.
Another former client of Coutts' New York branch, Rachamim Anatian, was indicted by a New York grand jury in January. Anatian, formerly CEO of Global Broadcasting Systems Inc., was charged with falsifying records in the home-shopping company's bankruptcy case.
Anatian had invested in Global Broadcasting using money borrowed from Coutts. Investigators who were looking into possible crimes against Coutts discovered his alleged falsifications, Moscow said in January.
Coutts closed its New York branch in 1998 after the office racked up about $100 million in losses, Moscow said.
Closely held Ostel Management Inc. in December acquired GalaxiWorld.com, which operates an Internet gaming site.
Mar/02/2000 15:47
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