8/21/01
PRESS RELEASE
12 DEFENDANTS INDICTED IN BOILER ROOM
STOCK FRAUD SCHEME THAT NETTED OVER
40 MILLION DOLLARS
ALAN VINEGRAD, United States Attorney for the Eastern District of New York, BARRY W. MAWN, Assistant Director-in-Charge of the Federal Bureau of Investigation in New York, and PAUL L. MACHALEK, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation, New York, today announced the unsealing of an indictment charging 12 defendants with participation in a massive stock fraud scheme that defrauded thousands of individual investors out of more than 40 million dollars. The defendants used a Manhattan and a Staten Island branch of Euro-Atlantic Securities ("Euro-Atlantic), a now-defunct brokerage firm that had its principal office in Boca Raton, Florida, to manipulate the selling price of securities of at least three companies controlled by the defendant ILAN ARBEL and his nominees. The defendants are all charged with securities fraud and money laundering, as well as conspiracies to commit these crimes.
The indictment charges that between January 1996 and April 1997, ARBEL funneled approximately one-half million dollars to the Manhattan office of Euro-Atlantic, located at 30 Broad Street, New York, New York. (1) In exchange, Euro-Atlantic's principals agreed to manipulate the market price of the securities of Multimedia Concepts International, "MMCI" (hereinafter referred to as "MMCI"); Hollywood Productions, "FILM" (hereinafter referred to as "Hollywood"); and U.S. Wireless, "USWC" (hereinafter referred to as "U.S. Wireless"). The shares of each of these ARBEL-controlled companies (hereinafter referred to as "House Stocks") traded on the NASDAQ small cap stock market and the Over-the-Counter Bulletin Board market.
As alleged in the indictment, ARBEL and DAVID MELILLO arranged for Euro-Atlantic to acquire control over large quantities of common stock and warrants of the House Stocks by issuing large blocks of freely tradable stock to the firm at discount prices or for no consideration at all. Often the shares were secretly maintained in and controlled from nominee accounts at Euro-Atlantic. The defendants then artificially and illegally inflated the prices of the House Stocks by making false and fraudulent representations to retail customers, using high pressure and deceptive sales tactics, paying and accepting excessive and undisclosed commissions and sales credits, making unauthorized trades in retail customer accounts, and authorizing unregistered brokers and cold callers routinely to misrepresent to customers that they were registered brokers.
The high pressure and deceptive sales tactics used by the brokers included promising enormous returns on investments, luring customers to buy or hold House Stocks by promising that the customer would be allowed to participate in future lucrative deals, verbally abusing customers who resisted advice to buy or hold House Stocks, and failing to disclose the firm's relationship with ARBEL and the House Stocks.
As the price of the House Stocks rose as a result of these unlawful techniques, the defendants sold their shares of House Stocks from the accounts that they secretly controlled, reaping huge profits. On occasion, the defendant-brokers also received cash kickbacks for selling House Stocks. Euro-Atlantic also retained a percentage of the proceeds of the sales of the House Stocks and used this money to further the fraudulent scheme.
Eventually, after the defendants sold all or most of their shares of a House Stock
at artificially inflated prices, the defendants withdrew their support of the stock and allowed its price to collapse, causing their customers to sustain heavy losses. For example, between January 1996 and May 1997, the defendants drove the price of MMCI stock up to $9.62 per share before allowing it to plunge to 37 cents per share. Similarly, during the charged conspiracy, Hollywood traded from a high of $11.50 to a low of $2.43 per share, and U.S. Wireless traded from a high of $6.75 to a low of approximately $1.50 per share. Currently, MMCI is listed at 24 cents per share, Hollywood (now called ShopNet) is listed at 91 cents per share, and trading in U.S. Wireless was halted by NASDAQ on May 25, 2001.
The defendants are also charged with laundering millions of dollars of proceeds of securities fraud through various domestic and foreign bank accounts, including a number of nominee accounts.
According to the indictment, DAVID MELILLO was the sole listed principal of Euro-Atlantic's Manhattan office; LOUIS CATAPANO was employed at that office as an undisclosed manager; MICHAEL KELLY was Euro-Atlantic's head trader in New York; GLEN DELUCA, NEIL GRIPPA, BRETT HAMBURGER, GEORGE MATARAZZO, and STEPHEN O'DONNELL were Euro-Atlantic registered representatives; and ENRICO MONTAPERTO, SR. and STEVEN DIBENEDETTO assisted the money laundering activity at the 30 Broad Street address.
The charges in the indictment carry the following maximum sentences: as to each money laundering count, 20 years imprisonment, 3 years of supervised release, a $250,000 fine (or the greater of twice the gross gain or loss resulting from the offense) and an order of restitution; as to each securities fraud count, 10 years imprisonment, 3 years of supervised release, a $1,000,000 fine (or the greater of twice the gross gain or loss resulting from the offense) and an order of restitution; and as to each conspiracy to commit securities fraud count: 5 years imprisonment, 3 years of supervised release, a $250,000 fine (or the greater of twice the gross gain or loss resulting from the offense) and an order of restitution. In addition, the tens of millions of dollars of ill-gotten gains laundered by the defendants are subject to criminal forfeiture. (2)
The defendants arrested in New York will be arraigned later today by United States Magistrate Judge Robert M. Levy at the United States Courthouse in Brooklyn. The case has been assigned to United States District Judge I. Leo Glasser.
In announcing the indictment and arrests, United States Attorney ALAN VINEGRAD thanked the Securities and Exchange Commission and the National Association of Securities Dealers for the assistance they provided to the investigation and stated: "Thousands of investors throughout the country put their trust in Euro-Atlantic, only to lose tens of millions of dollars while the defendants broke that trust and the law and secretly reaped huge profits. The message of this indictment is twofold - not only will the insiders who engage in unlawful high pressure and deceptive sales practices and market manipulations be held accountable for their crimes, but the behind-the-scenes operators such as ILAN ARBEL who used his influence and resources to ensure that his stocks were 'pumped and dumped' on an unsuspecting public, will be vigorously investigated and prosecuted."
BARRY W. MAWN, Assistant Director-in-Charge of the Federal Bureau of Investigation in New York stated: "There was nothing new or original about the scheme carried out by these defendants, but it was nonetheless quite effective in separating well-meaning investors from their money. Dishonest conduct doesn't have to be cutting edge to be damaging. While the FBI must keep pace with the latest trends in crime, we will continue to ferret out predatory conduct wherever it lies, be it in the boiler room or the boardroom."
PAUL L. MACHALEK, Special Agent-in-Charge, Internal Revenue Service, stated: "The Internal Revenue Service is especially interested in investigating money laundering as it relates to all kinds of criminal activity, including the laundering of funds derived from securities fraud. Money laundering is a threat to our nation's tax system because it allows criminals and criminal organizations to conceal illegal income in an untaxed underground economy. I wish to emphasize to the public, especially victims of this fraud, that IRS Special Agents of the New York Field Office are on the alert for detecting, uncovering and investigating white collar fraud schemes of all kinds. IRS, Criminal Investigation, as part of the federal law enforcement team, will do its part to maintain the integrity of the financial system and the tax system, in particular."
The government's case is being prosecuted by Assistant United States Attorneys Julie Myers, Nikki Kowalski and Arthur Hui.
The Defendants:
1) Ilan Arbel
106 Central Park South
New York, NY
DOB: 2/3/53
2) Louis Catapano
246 Grasmere Drive #1
Staten Island, New York
DOB: 9/10/70
3) Glen DeLuca
26 Plymouth Road
1st Floor
Staten Island, NY
DOB: 2/3/70
4) Stephen DiBenedetto
17 Scheid Drive
Parlin, New Jersey 08859
DOB: 12/14/70
5) Neil Grippa
336 99th Street #14
Brooklyn, NY
DOB: 2/2/67
6) Brett Hamburger
2687 Cypress Lane
Ft. Lauderdale, FL 33332
DOB: 12/14/70
7) Michael Kelly
9101 Orchid Tree Lane
Hollywood, Florida
DOB: 9/2/56
8) George Matarazzo
600 West 150th Street
Apt. #61
New York, NY
DOB: 5/2/60
9) David MELILLO
6059 115th Avenue
Pinellas Park, Florida
DOB: 12/5/61
10) Enrico Montaperto Sr.
3752 Neptune Avenue
2nd Floor
Brooklyn, NY 11224
DOB: 11/1/43
11) Steven O'Donnell
8801 Shore Road #5C
Brooklyn, NY
DOB: 12/28/63
12) Robert Valente
11905 Royal Palm Blvd.
Apt.#201
Pompano Beach, FL 33065
DOB: 12/5/72
1. The Staten Island branch office was located at 306 Manor Road. Both New York branches ceased doing business in 1997. Euro-Atlantic's Boca Raton office closed in October 1998.
2. The charges contained in the indictment announced today are merely accusations and the defendants are presumed innocent unless and until proven guilty |
