Indicted Businessman Has Long Trail of Iffy Ventures
Friday, June 16, 2000
BY ANNA CEKOLA and BOB MIMS
THE SALT LAKE TRIBUNE
Allen Z. Wolfson is no stranger to the legal system, with a string of convictions dating to the late 1970s when he gained notoriety in Florida for questionable real estate dealings, illegal political contributions, securities fraud and an eccentric style that included driving around in a gray stretch limo.
But the Salt Lake City businessman may face his biggest legal challenge yet after being named this week along with more than 100 reputed mobsters, stock promoters, brokers and Internet start-up executives accused of manipulating penny stocks in the country's largest-ever crackdown on securities fraud.
Wolfson, 54, describes himself as a consultant with CyberAmerica Corp., which purportedly specializes in buying and turning around distressed public companies. He is charged with five counts of securities fraud, two counts of wire fraud and one count of conspiracy to commit fraud.
A U.S. magistrate Thursday ordered Wolfson, wearing shackles and a blue jail jumpsuit, held on $500,000 bail. Judge Samuel Alba cited the serious nature of the allegations and concerns that the defendant might pose a risk of "economic harm" to the community. Wolfson's attorney had unsuccessfully urged Alba to release his client, an insulin-dependent diabetic and father of two young children, on his own recognizance. Prosecutors sought $1 million in bail.
Federal authorities Wednesday accused Wolfson of participating in a scheme to manipulate the stock of five troubled companies, ranging from a Fort Lauderdale home-cleaning business to a company running learning and day-care centers in New York. Wolfson allegedly received large blocks of stock in the companies, either free or at substantial discounts. He then paid another defendant, New York-based stock promoter Michael Grecco, a "bribe equal to between 40 and 70 percent of the value of retail sales of Wolfson's stock," according to the indictment by a U.S. District Court grand jury in New York.
Grecco allegedly recruited five other people, also named as defendants, to sell Wolfson's stock in exchange for payoffs, spanning at least 15 months through this spring. The seven defendants allegedly made at least $7 million manipulating and then selling the securities, according to the Securities and Exchange Commission. As part of the investigation, officials said, they served search warrants at offices belonging to Wolfson and CyberAmerica in Salt Lake City.
If convicted, Wolfson faces a maximum penalty of up to 5 years in prison and $250,000 in fines on each count.
The charges are the latest legal troubles for a man described as everything from a giver of false promises to a generous supporter of a local synagogue.
Rabbi Benny Zippel of Salt Lake City's Bais Menachem Chabad Lubavitch synagogue attended Wolfson's hearing Thursday. Zippel, who characterized himself as Wolfson's friend and spiritual adviser, declined to comment on the securities fraud allegations.
He did, however, discuss their friendship and his view of Wolfson as an honest person.
The rabbi said Wolfson became involved in the Orthodox Jewish Chabad Lubavitch movement through the sect's Aleth Institute inmate outreach program more than a decade ago, when Wolfson was in a Florida prison. At various times during the 1980s, Wolfson was jailed for campaign contribution violations, bank fraud and securities wrongdoing.
"He made it his responsibility that when he got out, he would help support Chabad wherever in the country he would be," Zippel said.
In May 1990, Wolfson was released to a halfway house in Utah, where he had business associates. Two years later, Zippel moved from Brooklyn to Salt Lake City to start a Chabad Lubavitch congregation that today numbers around 50 worshippers.
Wolfson's support of Bais Menachem has kept the congregation "actively alive," Zippel said.
It was while Wolfson was last behind bars in late 1996 that Zippel said he suggested he seek God's favor by enhancing his life as a Jew. From then on, Wolfson joined Zippel in daily prayer, wearing tefillin, a pair of Scripture-holding cubes containing parchment inscribed with biblical verses.
But in Canton, Ill., people have an altogether different view of Wolfson. The small farming community of 15,000 is still mopping up his business dealings there. Last June, Fulton County took deed to a 33-acre property CyberAmerica owned in Canton. The company hadn't paid taxes on the property, which once was home to International Harvester, since 1988 and owed more than $500,000.
CyberAmerica planned to build a tire recycling plant on the site, funded in part by a loan from the city. The venture never got off the ground, though CyberAmerica stockpiled an estimated 600,000 tires on the property.
Jim Synder, administrative assistant to Canton Mayor Don Edwards, said the Illinois environmental agency has spent nearly $2 million removing the tires and cleaning up other toxic wastes at the site and has been unable to get CyberAmerica to pick up the tab.
"We've had nothing but false promises from those people," Synder said.
In Florida, where a Little League complex had once been named after him to honor a donation, Wolfson was accused in the late 1970s and early 1980s for his role in a scandal involving Tampa's Key Bank, in the collapse of Tampa's Metropolitan Bank and Trust and in a bribery case that jailed a large part of the Hillsborough County Commission.
His record includes prison sentences for convictions in the 1980s involving illegal political contributions, fraudulently funneling hundreds of thousands of dollars from a New Jersey railroad and for violating probation for a securities fraud conviction.
Once in Utah, Wolfson wasted no time making a name for himself.
In the early '90s, he served as host to an hour-long radio show on KTKK that promoted bartering. Each month he invited an IRS representative on his show to answer questions and explain that traders had to pay taxes on property and services they receive through barter.
Later, he promoted building a city, modeled after Jerusalem, and a religious theme park dubbed "City of Peace" in remote northwest Utah.
But his biggest creation while operating in Utah would be contributing to a complicated group of companies, including CyberAmerica, that dealt in tire recycling, Internet malls and stock gambits, most of which were a bust. But CyberAmerica's main focus was buying distressed real estate and stakes in struggling companies at a small percentage of their potential value.
"CyberAmerica seeks to locate and acquire undervalued real estate [primarily commercial properties] with little or no cash down," according to a statement on the company's Web site.
CyberAmerica, run by Wolfson's nephew Richard Surber, says on its Web site that Wolfson is not an officer or director, but a consultant who has "significant influence and control over the affairs [of the company] by virtue of his beneficial ownership of over 5 percent of the company's common stock."
Wolfson was barred from being an officer of a public company because of his previous securities convictions. CyberAmerica's Salt Lake City office did not return phone messages left by The Salt Lake Tribune seeking comment.
CyberAmerica, though, was just one of the companies associated with Wolfson.
"It was known he could put together deals, and other [stock] promoters would go to him to put together deals," said Tony Taggart, Utah Division of Securities director.
The division apparently knew Wolfson well. When asked whether the agency had a file on him, Taggart said, "Oh yeah. A couple of boxes."
The division once tried to map out CyberAmerica's convoluted corporate structure. It couldn't.
Wolfson, who likes to hire lawyers, once offered Taggart a job. He also interviewed another attorney at the division -- a meeting supposedly interrupted by several dozen calls. During some, Wolfson screamed at the top of his lungs.
"He could be a real bulldog," Taggart said.
Federal officials indicted Wolfson in 1996 in an alleged nationwide securities kickback scheme, but the U.S. attorney for the southern district of New York later declined to pursue criminal charges against him.
"It was the same thing," Taggart said. "It was alleged he had bribed brokers."
In the latest case, Wolfson was ordered to appear in court next Friday for an identity hearing to confirm he is the person named in the indictment. Once he is identified, officials said, they expect the prosecution to proceed in New York.
In the hearing Thursday, Wolfson indicated he has monthly income of more than $160,000 and could possibly post the $500,000 bail if he put a second mortgage on some property. Investigators from the Securities and Exchange Commission said Wednesday's sweep -- which included indictments and criminal complaints naming 120 people -- shows the extent of organized crime's penetration into the stock market of the Internet era. Wolfson denied Thursday that he has any ties to organized crime.
"I have none. Absolutely none," he said.
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Tribune reporters Brooke Adams and Guy Boulton and The Associated Press contributed to this story.
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