"The indictment charges that the defendants fraudulently sold and manipulated the shares of Aviation Holdings, Inc., Conmat Technologies, Inc., Direct III Marketing, Inc., Informatix Holdings, Inc., MediaBay, Inc., NetValue Holdings, Inc., Insiderstreet.com, Inc., GlobalNet, Inc., Realm Production and Entertainment, Inc., SkyNet Holdings, Inc., Thrift Management, Inc., Trimfast Group, Inc., VDC Communications, Inc., and Unistar Financial Service Corp., Inc."
DISTRICT ATTORNEY - NEW YORK COUNTY
News Release
April 28, 2004
Contact: Barbara Thompson
212.335.9400
Manhattan District Attorney Robert M. Morgenthau announced today the racketeering indictment of ten stock brokers who worked at LCP Capital Corp., a defunct securities firm based in Manhattan. The top charge, Enterprise Corruption, alleges that the defendants ran LCP Capital as a criminal enterprise from December of 1998 through January of 2001, and that the members of the enterprise defrauded hundreds of customers out of millions of dollars.
The indictment charges that the defendants were paid cash bribes by unscrupulous stock promoters fraudulently to pump up 14 different stocks to artificially raise and manipulate the stocks' prices. Promoters paid the firm bribes of $11.8 million by check and wire transfer, with millions more paid in cash The cash payments to the individual brokers were sometimes over $10,000 per month, and generally ranged from hundreds to thousands per month. If a broker had a big month selling stocks he could become "entitled" to $50,000 or more in cash, but the payments would be pieced out over a series of months. The money raised through the sale of these manipulated stocks was split between the promoter, LCP Capital, and the individual brokers; usually the promoter got 60% of the proceeds, while the remaining 40% was split between LCP and the brokers.
Among other methods, the defendants induced customers to buy stocks by using high pressure sales tactics, by making fraudulent purchase recommendations, and by intentionally misrepresenting and concealing their true motivations for recommending the stocks to their customers.
In order to keep stock prices high the defendants enforced a no-net-sales rule: if a customer wished to sell a stock a defendant would initially use high-pressure tactics to dissuade the customer from selling or would simply disregard the customer's directions; if those methods failed, the broker would prevent a net sale from occurring by the use of undisclosed cross trades or unauthorized purchases into the accounts of unsuspecting investors.
Although the total losses suffered by investors are not yet known but more than $50 million worth of stocks involved in the scheme was sold to unsuspecting customers. The hardships visited on customers by the LCP schemes are shown by a few examples. One customer was a retired commercial pilot who lost $200,000 on LCP stocks. His losses forced him to start working again, but he was too old to be a pilot and had to take a job as a security guard. A second customer, also an airline pilot, invested his $850,000 IRA account in LCP stocks and lost it all. A third customer found that an unauthorized purchase of stock was made in his account for about $25,000. When he complained, the broker refused to reverse the trade and threatened to sue the customer if he did not pay for the purchase. The customer took out a loan secured by his house to pay for the shares, whose purchase he had not authorized in the first place. The customer is still paying off the loan; the stock has since lost all its value.
The ten defendants, KEVIN BRODY, ROSS INSERRA, EMANUELE SCARSO, DEAN GIASI, HAROLD DONNERSTAG, JOHN MONTEFORTE, LEONARD INSERRA, NICHOLAS CUTRONE, JOSEPH PACILLO, AND GERARD CERULLO, have been indicted for Enterprise Corruption, Grand Larceny in the First, Second and Third Degrees, and securities fraud in violation of the New York General Business Law, Section 352-c (the Martin Act).
The indictment charges that the defendants fraudulently sold and manipulated the shares of Aviation Holdings, Inc., Conmat Technologies, Inc., Direct III Marketing, Inc., Informatix Holdings, Inc., MediaBay, Inc., NetValue Holdings, Inc., Insiderstreet.com, Inc., GlobalNet, Inc., Realm Production and Entertainment, Inc., SkyNet Holdings, Inc., Thrift Management, Inc., Trimfast Group, Inc., VDC Communications, Inc., and Unistar Financial Service Corp., Inc.
The crimes of Enterprise Corruption and Grand Larceny in the First Degree are class B felonies punishable by up to 25 years in prison; the crime of Grand Larceny in the Second Degree is a class C felony punishable by up to 15 years in prison; the crime of Grand Larceny in the Third Degree is a class D felony punishable by up to 7 years in prison; and the crime of securities fraud under the New York General Business Law, Section 352-c (the Martin Act) is a class E felony punishable by up to 4 years in prison.
The District Attorney expressed his thanks to the North East Regional Office of the United States Securities and Exchange Commission, which provided invaluable assistance to the District Attorney's Office throughout the course of the investigation.
The investigation was conducted by members of the District Attorney's Investigation Bureau, including Investigator Jeremy Rosenthal and Supervising Investigator Jose Flores, under the supervision of Assistant Chief Terence Mulderrig and Chief Joseph Pennisi. Also involved in the investigation was Supervising Financial Investigator Angelo Delli Carpini and Financial Investigator Brian Brennan of the DA's Financial Crimes Bureau, under the supervision of Deputy Bureau Chief Robert Demarest and Chief Frank Puma.
The case was presented to the grand jury by Assistant District Attorneys John Melican, Sean Brewer and Brenton Petersen under the supervision of Owen Heimer, Chief of the District Attorney's Frauds Bureau, and Michael Kitsis and Jeannette Molina, Deputy Chiefs of the Frauds Bureau.
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Defendant Information
Kevin Brody (9/10/68)
6 Hunt Lane
Staten Island, NY
Gerard Cerullo (9/14/60)
6 Knessel Road
Staten Island, NY
Nicholas Cutrone (3/6/69)
1625 Bay Ridge Avenue
Brooklyn, NY
Harold Donnerstag (1/26/73)
127 Crawford Street
Eatontown, NJ
Dean Giasi (9/18/70)
151 Ramble Road
Staten Island, NY
Leonard Inserra (9/29/72)
37 Sawyer Avenue
Staten Island, NY
Ross Inserra (11/10/66)
128 Fairview Avenue
Staten Island, NY
John Monteforte (8/18/66)
657 Correll Avenue
Staten Island, NY
Joseph Pacillo (10/2/67)
2 Druid Hill Drive
Parsippany, NY
Emanuele Scarso (9/3/72)
447 95th Street, Apt. 2A
Brooklyn, NY |
