Utah Defendant In Fraud Case Pleads Innocent
BY ANNA CEKOLA
THE SALT LAKE TRIBUNE
A Utah business consultant arrested in the nation's largest crackdown on securities fraud pleaded innocent Friday to charges he manipulated penny stocks and bribed brokers in an alleged $7 million scheme.
Allen Z. Wolfson, who is free on $500,000 bail, traveled to New York City for the arraignment hearing. The 54-year-old man, whose criminal record includes convictions in Florida during the 1970s and 1980s involving bank fraud, illegal political contributions and securities fraud, is only allowed to travel to New York for court appearances under terms of his bail.
He is set to return to court Sept. 15 for a hearing, a spokeswoman with the U.S. Attorney's Office for the southern district of New York said.
While prosecution of Wolfson will take place in U.S. District Court in New York, questions remain about Wolfson's business dealings in Salt Lake City, particularly his involvement with CyberAmerica Corp., a public holding company run by his nephew. The company describes its business as buying and developing undervalued real estate and providing financial consulting to companies.
Neither Wolfson nor his nephew, Richard Surber, could be reached for comment Friday.
CyberAmerica, in a recent statement, said it lacked information to determine what action, if any, should be taken over its relationship with Wolfson, described by the company as a "control person" based on his stock ownership interests, family connection and key role as a consultant.
Regarding his consulting role, the company describes Wolfson as the "primary finder of potential transactions" and "primary business consultant to the company." The company stresses that Wolfson is not a company director or board member, positions he is barred from holding in any company under his previous convictions.
Federal investigators on June 14 searched CyberAmerica's Salt Lake City offices in connection with Wolfson's arrest and indictment. But the company said it "has not been informed that it is, in any fashion, a target of the investigation and is not aware of any relationship it might have to any of the defendants named in the indictment other than with Wolfson."
CyberAmerica's management expressed confidence the company "can continue to grow" if it should sever its business relationship with Wolfson. If it decides to terminate the relationship, the company said it may consider buying out Wolfson's direct and indirect share holdings in exchange for debt owed to the company by Wolfson or entities controlled by him, including A-Z Professional Consultants and The Great Saltair LLC.
CyberAmerica has loaned nearly $475,000 to Wolfson's two companies, according to the company's 1999 annual report to the Securities and Exchange Commission.
Since settling in Utah after release from a federal halfway house in 1990, Wolfson has been involved in a myriad of business dealings, including CyberAmerica, which rose from the bankruptcy remains of Canton Industrial Corp., a former industrial and tire recycling manufacturer. The company changed its name to CyberAmerica in 1996 as part of a failed attempt to launch into development of Internet malls.
CyberAmerica, traded on the OTC Bulletin Board, now owns or has interest in about two dozen subsidiaries, which own or have interest in more than a dozen properties in Utah, Nevada and other states, according to its annual report. The company discloses about $100,000 owed in real-estate taxes and assessments on its properties. One property, an old tire-recycling parcel tied up in years of legal wrangling, was seized last year in Canton, Ill., with more than $500,000 owed in back taxes.
Holdings in nine subsidiaries include about 7,000 acres of undeveloped land in Box Elder County, once reportedly targeted by Wolfson for a proposed Jerusalem-inspired development dubbed "City of Peace," complete with an organic farm, golf course, condos and a religious theme park with replicas of Holy Land landmarks. Another large holding includes a vast tract of remote land in Elko County, Nev., tagged for a resort, casino, golf course and homes.
The company also owns interest in 20 shell companies, with the intention of finding operations for the businesses through reverse mergers, according to its annual report. Through its consulting work through two subsidiaries, Hudson Consulting Group Inc. and Canton Financial Services Corp., the company often receives payment in stock.
Wolfson's most recent legal trouble came four years after he was indicted, but never prosecuted, on similar charges of offering bribes involving penny-stock companies. U.S. attorney officials in New York have declined to say why charges were dropped against Wolfson, who was one of 45 indicted in that 1996 case.
In the latest indictment, Wolfson is one of 120 brokers, stock promoters, Internet start-up executives and alleged mobsters accused of manipulating penny stocks in the country's largest crackdown yet on securities fraud. Wolfson, who has denied any mob involvement, is charged with five counts of securities fraud, two counts of wire fraud and one count of conspiracy to commit fraud. He is accused of manipulating and hyping the stocks of five troubled companies and bribing six brokers, who also face charges in the alleged scheme, to push the penny stocks from January 1999 through at least March.
The SEC also initiated administrative proceedings against Wolfson in connection with the allegations.
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