Bergen man guilty of cheating gold investors out of $46M
Thursday, July 28, 2005
By PRASHANT GOPAL
STAFF WRITER
A Franklin Lakes man could get up to 40 years in jail for orchestrating a stock pump-and-dump scheme that bilked victims out of $46 million, authorities said.
A federal jury deliberated for just a few hours before convicting John Surgent on Tuesday of securities fraud and money laundering for duping people to buy stock in a worthless company he controlled, Orex Gold Mines Corp. Prosecutors said he collected $6 million and pumped more than $1 million into his house on Algonquin Road.
"Hundreds of people ... were victimized by John Surgent's lies," assistant U.S. Attorney Suzanne McDermott had said during opening arguments in the five-day trial in U.S. District Court in Brooklyn. "These people believed they were buying into a wonderful opportunity, but instead they were playing right into the hands of John Surgent."
Surgent's lawyer, Miles Feinstein argued that witnesses who cooperated in the case were "acknowledged liars, who would lie to stay out of jail."
Feinstein said Wednesday that his client has a wife and seven children.
"There's a human side to John Surgent," Feinstein said. "He came from a good family and it's a shame this had to happen."
His father is the late Dr. John W. Surgent, an oral surgeon and former Clifton mayor.
The stock was pumped up by Surgent and a brokerage firm that received kickbacks in exchange for its help, prosecutors said. One broker has already been convicted.
Brokers told clients the stock was bound to rise because Orex had patented a valuable new gold extraction process, assistant U.S. Attorney Scott Klugman said. What they didn't mention was that Orex was a shell company with no revenues that was secretly controlled by a convicted felon.
Surgent was sentenced to 10 years in prison in the early 1980s for securities fraud involving a gambling company he ran.
Orex shares began trading at about $1.50 in March 1999. It rose steadily, reaching a high of $7.86 in May 1999. By the middle of August that year it was worth about a dime, Klugman said.
When Orex stock started falling, brokers stopped returning clients' calls or didn't execute sell trades, according to the indictment.
Even though Surgent controlled the company, he kept his role hidden.
He received 5 million shares, some of them through bogus consulting arrangements. The so-called consultants included an exotic dancer in Florida, who was the girlfriend of one of Surgent's associates, prosecutors said. "Just about all the stock that appeared to be issued to these people ... ended up in the same place - in John Surgent's hands," McDermott said in court.
Fred Kahl was 75 back in 1999 when he first heard the pitch. A broker called him and promised that if he bought Orex stock, he could triple or quadruple his money, McDermott said during the trial.
Kahl said that he pulled out 90 percent of his savings and bought $350,000 of Orex shares.
Losing that money "ruined my golden years," Kahl testified. "I don't have the assets or returns from the earnings of those assets to take care of me for the remaining years of my life."
Another victim, Patrick O'Reilly, 79, said he was thrilled about the conviction. O'Reilly lost $30,000.
"They talked a good story. And the info they sent in the mail was even better; it came out of an oil journal, so I assumed it was legitimate," O'Reilly said in a telephone interview Wednesday from San Antonio.
"But it was all a big lie. ... I think a lot of people out there are doing the same thing. As a matter of fact, I don't buy stock right now."
E-mail: gopal@northjersey.com |
