HARTCOURTS TOMB STONE
Hartcourt Companies
OTC BB: (HRCT)
BLOCK TRADE
$678,000
November 1999 web.archive.org
AND NOW A WORD ABOUT RUBIN INVESTMENT GROUP:
EC:RW:TF
F. #2003R00759
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA I N D I C T M E N T
Cr. No. ____________
- against - (T. 18, U.S.C., §§
1341, 1348, 1349,
982(a)(1), 982(b),
DANIEL RUBIN, 1956(h), 2
DANIEL NOURANI, and 3551 et seq.)
GLEN SANTHA and
SCOTT HALPERIN,
Defendants.
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THE GRAND JURY CHARGES:
INTRODUCTION
At all times relevant to this Indictment, unless
otherwise stated:
I. RUBIN INVESTMENT GROUP
1. Rubin Investment Group, Inc. (“Rubin Investment
Group”) was founded in 1994 by the defendant DANIEL RUBIN, with
its principal office in Los Angeles, California. The firm later
added offices in Manhattan and Lake Helen, Florida.
2. Rubin Investment Group held itself out as a
private investment banking firm specializing in providing
financing to “small-cap” companies, which are small, thinly
capitalized companies. Among the services that Rubin Investment
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Group purportedly provided to such companies were “block share”
transactions, equity financing and research.
II. THE DEFENDANTS
3. The defendant DANIEL RUBIN was the sole
shareholder of Rubin Investment Group. He also served as the
Chairman of the Board of Directors, Chief Executive Officer and
President of the firm. Beginning in or around October 2002,
RUBIN resided in Lake Helen, Florida.
4. The defendant DANIEL NOURANI was the Managing
Director of Rubin Investment Group and worked in the firm’s
offices in Los Angeles, California.
5. The defendant GLEN SANTHA was the Director of
Investment Banking at Rubin Investment Group and worked in the
firm’s offices in Lake Helen, Florida.
6. The defendant SCOTT HALPERIN was the Chief
Executive Officer of The Classica Group, Inc. (“Classica”).
Classica was a New York corporation with its headquarters in
Sayreville, New Jersey. Classica’s stock was registered under
Section 12(g) of the Securities Exchange Act of 1934 and was
publicly traded through the Over-the-Counter Bulletin Board
system under the symbol “TCGI”. Classica was in the business of
designing, building and selling microwave heat processing
equipment for pasteurization, sterilization, drying and
sanitization in the food and pharmaceutical industries.
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III. RUBIN’S TAKEOVER OF 1-800-ATTORNEY, INC.
AND MANIPULATION OF ITS STOCK PRICE
7. In or about October 2002, the defendant DANIEL
RUBIN, together with others, hatched a scheme (i) to fraudently
induce 1-800-ATTORNEY, Inc. (“1-800-ATTORNEY” or the “Company”)
and its shareholders to grant him control over the Company based
on his representations that he would invest over $1 million in
cash in the Company; and (ii) to manipulate the market price of
the Company’s stock and to sell shares of the stock that he had
acquired to unwitting investors at the artificially inflated
prices.
A. RUBIN’S TAKEOVER OF
1-800-ATTORNEY, INC.
8. 1-800-ATTORNEY was founded in 1993, and it became
a publicly-held company in 1996. Its main offices were located
in Lake Helen, Florida. The Company published membership
directories for bar associations and contracted with attorneys
for participation in a referral network. Until February 13,
2003, the Company’s stock was traded on the National Association
of Securities Dealers Automated Quotations SmallCap Market
(“NASDAQ SmallCap Market”) under the symbol “ATTY”. The stock
thereafter was traded on the Over-the-Counter Bulletin Board
market. Effective March 21, 2003, the Company’s stock was traded
on the Pink Sheets, a quotation service for over-the-counter
stocks. Also effective March 21, 2003, the registration of the
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Company’s stock under Section 12 of the Securities Exchange Act
of 1934 was terminated.
9. During the summer of 2002, the Company was
experiencing financial difficulties, and its stock price was
declining. In or around July and August 2002, the NASDAQ Stock
Market, Inc. (“NASDAQ”), which operated the NASDAQ SmallCap
Market, notified the Company that it was in violation of minimum
market capitalization and shareholder equity requirements for
continued listing of its stock on the SmallCap Market. On or
about October 1, 2002, the NASDAQ informed the Company that its
staff had determined that the Company’s stock was subject to
delisting. On or about October 7, 2002, the Company issued a
press release announcing the NASDAQ’s determination and the
Company’s request for an appeal.
10. On or about October 4, 2002, the Company opened
negotiations with the defendant DANIEL RUBIN about a possible
investment by Rubin Investment Group in the Company. A
representative of Rubin Investment Group had first contacted the
Company in or around June 2002, but subsequent negotiations had
failed to yield an agreement between Rubin Investment Group and
the Company.
11. In negotiations conducted from approximately
October 4, 2002 through October 22, 2002, the defendant DANIEL
RUBIN represented that he would be willing, through Rubin
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Investment Group, to invest in excess of $1 million in the
Company and to create within the Company a subsidiary that would
generate at least $2.5 million in additional revenue. RUBIN also
represented to the Company that a New Jersey businessman (the
“New Jersey Businessman”) whom he knew would also be willing to
invest in the company. In exchange, RUBIN would assume control
over the Company.
12. Based on the representations made by the
defendant DANIEL RUBIN, the board of directors of 1-800-ATTORNEY
authorized the Company to enter into stock purchase agreements
with Rubin Investment Group and the New Jersey Businessman.
RUBIN and the New Jersey Businessman signed their respective
stock purchase agreements on or about October 21, 2002, and they
signed amended versions of the agreements on or about October 24,
2002 (as amended, the “RIG Stock Purchase Agreement” and the “New
Jersey Businessman Stock Purchase Agreement”, respectively).
13. Pursuant to the RIG Stock Purchase Agreement, (i)
on or about October 22, 2002, the defendant DANIEL RUBIN
became the Chairman of the Board and Chief Executive Officer of
1-800-Attorney; and (ii) on or about October 24, 2002, the
Company issued 136,465 shares of its common stock to Rubin
Investment Group at a price of $.384 per share. Similarly,
pursuant to the New Jersey Businessman Stock Purchase Agreement,
(i) on or about October 22, 2002, the New Jersey Businessman
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became a director of the Company; and (ii) on or about October
24, 2002, the Company issued 136,465 shares of its common stock
to the New Jersey Businessman at a price of $.384 per share.
14. In addition to the shares immediately issued to
Rubin Investment Group and the New Jersey Businessman, the stock
purchase agreements also provided that, subject to shareholder
approval, the Company would issue an additional 3,213,535 shares
of its common stock to Rubin Investment Group (which was to leave
RUBIN with control of approximately 80 percent of the Company’s
stock) and an additional 88,535 shares to the New Jersey
Businessman, at a price of $.384 per share.
B. RUBIN’S MISREPRESENTATIONS TO INDUCE SHAREHOLDERS
TO APPROVE THE ISSUANCE OF THE ADDITIONAL SHARES
15. After assuming control of the Company on or about
October 22, 2002, the defendant DANIEL RUBIN, together with
others, caused the Company to issue public statements announcing
the terms of the stock purchase agreements and representing that
Rubin Investment Group’s proposed purchase of 3,213,535 shares
would generate over $1,200,000 of additional cash and shareholder
equity for the Company.
16. On or about December 5, 2003, the defendant
DANIEL RUBIN, together with others, caused 1-800-ATTORNEY to file
with the Securities and Exchange Commission (“SEC”), and to
disseminate to the Company’s shareholders, a Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of 1933
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(the “Proxy Statement”), in which the Company sought the
shareholders’ approval for, among other things, the issuance of
the 3,213,535 shares to Rubin Investment Group pursuant to the
RIG Stock Purchase Agreement.
17. The defendant DANIEL RUBIN caused the Company to
include in the Proxy Statement the RIG Purchase Agreement, which
stated that the delivery of, and the payment for, the 3,213,535
shares was to happen concurrently. In addition, RUBIN caused the
Company to state in the Proxy Statement that RUBIN’s purchase of
the shares would represent a “cash investment” in the Company.
18. On or about December 19, 2002, following the
shareholders’ approval of the proposed issuance of shares to
Rubin Investment Group, the defendant DANIEL RUBIN, together with
others, caused the Company to issue a total of 3,213,535 shares
of stock to Rubin Investment Group and 88,535 shares of stock to
the New Jersey Businessman.
19. Although the defendant DANIEL RUBIN had agreed
pursuant to the RIG Shareholder Agreement that Rubin Investment
Group would pay approximately $1,234,000 in cash concurrently
upon receipt of the 3,213,535 shares, RUBIN failed to make, or
cause to be made, the required payment. Instead, on various
dates from approximately December 30, 2002 to February 12, 2003,
the defendant DANIEL RUBIN caused Rubin Investment Group to make
certain payments to the Company, in cash and securities, totaling
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less than one-half the consideration that Rubin Investment Group
owed.
20. On or about February 14, 2003, the defendant
DANIEL RUBIN caused Rubin Investment Group to file a Form 4 with
the SEC falsely stating that the firm had purchased the shares
that it had acquired through the Proxy Statement on February 12,
2003, when in fact the firm had not paid for the shares.
21. On various dates from approximately April 2003 to
August 2003, the defendant DANIEL RUBIN, together with others,
purported to satisfy Rubin Investment Group’s outstanding
obligation to 1-800-ATTORNEY by (i) diverting revenue from the
Company to Rubin Investment Group; (ii) causing Rubin Investment
Group to pay the diverted funds back to the Company; (iii)
causing the Company to credit the payments of the diverted funds
toward Rubin Investment Group’s outstanding obligation to the
Company.
22. The defendant DANIEL RUBIN failed to make, and
failed to cause the Company to make, any disclosures to
shareholders concerning Rubin Investment Group’s failure to pay
the promised cash consideration in accordance with the terms set
out in the Proxy Statement and the RIG Stock Purchase Agreement.
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C. RUBIN’S MANIPULATION OF
THE COMPANY’S STOCK PRICE
23. As explained above, upon taking control of 1-800-
ATTORNEY on October 22, 2002, the defendant DANIEL RUBIN caused
the Company to issue public statements falsely representing,
among other things, that Rubin Investment Group’s purchase of the
shares that were the subject of the Proxy Statement would
generate over $1,200,000 in additional capital for the Company,
when in fact RUBIN had no intention of paying the promised
consideration to the Company.
24. In addition, beginning on or about October 24,
2002, the defendant DANIEL RUBIN, together with others, devised a
scheme to purchase shares of 1-800-ATTORNEY stock on the open
market, to manipulate the stock price and cause it to be
artificially inflated, and to sell the shares that he had
purchased on the open market at the artificially inflated prices.
25. To effectuate this scheme, the defendant DANIEL
RUBIN purchased 1-800-ATTORNEY stock in his own name and in the
name of Rubin Investment Group on the open market, both through
accounts that he maintained at a broker-dealer of securities (the
“Broker-Dealer”) and through “on-line” accounts that he
maintained through a separate broker-dealer (the “On-Line
Brokerage Accounts”). In addition, RUBIN, through a nominee
account, and at RUBIN’s direction employees of RUBIN acquired
additional shares of the Company’s stock on the open market.
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26. The defendant DANIEL RUBIN, together with others,
engaged in various practices to increase artificially the market
price of the Company’s stock, including, among others things (i)
placing orders for execution at the beginning and the end of the
trading day to increase artificially the opening and closing
price of the stock; (ii) placing orders to purchase small
quantities of the Company’s stock at incrementally higher prices
to “walk up” the stock price and to create the appearance of
market interest in the stock; and (iii) directing trades through
nominee accounts and accounts controlled by other employees of
the firm to create the appearance of market interest in the
stock.
27. As a result of this manipulative scheme, the
market price of 1-800-ATTORNEY’s stock increased over 1000
percent between October 24, 2002 and December 3, 2002.
28. On various dates from approximately December 2002
through March 2003, the defendant DANIEL RUBIN, together with
others, sold 1-800-ATTORNEY stock that he had purchased for Rubin
Investment Group and for his own accounts on the open market at
artificially inflated prices and reaped substantial profits.
IV. RUBIN INVESTMENT GROUP’S SCHEME TO DEFRAUD
PUBLICLY-HELD COMPANIES AND THEIR SHAREHOLDERS
29. As explained above, pursuant to the RIG Stock
Purchase Agreement, the defendant DANIEL RUBIN agreed to create
within 1-800-ATTORNEY a new subsidiary that would purportedly
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generate additional revenue for the Company. In October 2002,
after assuming control of the Company, RUBIN created such an
entity, initially called “RIG Consulting” and later “ATTY
Consulting” (collectively, the “Consulting Business”). The
Consulting Business operated out of 1-800-ATTORNEY’s offices in
Lake Helen, Florida. Although the Consulting Business was
ostensibly a part of 1-800-ATTORNEY, it essentially functioned as
a vehicle for generating business for Rubin Investment Group.
30. Through the Consulting Business, the defendants
DANIEL RUBIN, DANIEL NOURANI and GLEN SANTHA, together with
others, engaged in a scheme to defraud publicly-held companies
(or “issuers”) and shareholders who held large blocks of stock in
such companies by (i) fraudulently inducing issuers and
shareholders to sell to the firm discounted stock; and (ii)
manipulating the price of certain stocks that the firm acquired
and then selling the stock at artificially inflated prices.
A. Misrepresentations to
Issuers and Shareholders
31. Beginning in or about October 2002, the defendant
DANIEL RUBIN, together with others, created a team of “cold
callers”, which included personnel from 1-800-ATTORNEY, to
solicit issuers and shareholders. The defendants DANIEL RUBIN,
DANIEL NOURANI and GLEN SANTHA, together with others, exercised
supervisory responsibility over the cold callers, and they would
follow-up on leads developed by the cold call solicitations.
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32. The defendants DANIEL RUBIN, DANIEL NOURANI and
GLEN SANTHA, together with others, created “scripts” for the cold
callers that included a number of fraudulent misrepresentations
designed to induce issuers and shareholders to sell stock to the
firm at a discount from the market price of the stock.
33. Through the sales scripts, the cold callers were
instructed to state, among other things, that (i) Rubin
Investment Group managed the “RIG Micro Cap Fund”; (ii) the fund
had a large base of clients (frequently described as including
“3,000 doctors and dentists”); and (iii) the firm would recommend
the issuers’ stock to these clients, who in turn would invest in
the stock. In fact, the fund had only a small number of
investors with nominal investments.
34. Similarly, the defendants DANIEL RUBIN, DANIEL
NOURANI and GLEN SANTHA, together with others, represented and
caused others to represent that Rubin Investment Group had a base
of brokers who would recommend stocks to the firm’s clients and
who traded stocks that the firm acquired. To further this aspect
of the scheme, RUBIN, NOURANI and SANTHA invited representatives
of issuers to visit the firm’s offices to make presentations
concerning their companies, and then instructed the cold callers
to ask questions to make it appear as though they were
knowledgeable stock brokers. In fact, neither the firm nor any
of its employees were registered broker-dealers.
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35. In addition to these and other misrepresentations
about Rubin Investment Group itself, the defendants DANIEL RUBIN,
DANIEL NOURANI and GLEN SANTHA, together with others, also
fraudulently induced issuers or shareholders of issuers to sell
stock to Rubin Investment Group based on the representation that
the firm would pay a fixed price for the stock, when in fact the
firm had no intention of paying the promised consideration.
36. To effectuate this aspect of the scheme, Rubin
Investment Group failed to pay issuers or shareholders for stock
that they had sold to the firm. The defendants DANIEL RUBIN,
DANIEL NOURANI and GLEN SANTHA then made, or directed others to
make, false representations to issuers or shareholders who were
demanding payment, for the purpose of inducing the issuers or
shareholders to accept less consideration for the shares than the
firm had originally agreed to pay.
B. Manipulative Trading Practices
37. The defendant DANIEL RUBIN, together with others,
also manipulated the market price of stocks that RUBIN held to
cause the market price of the stocks to increase artificially so
that RUBIN could sell his stock at a profit to unwitting
shareholders.
38. The defendant DANIEL RUBIN maintained the
securities that he and Rubin Investment Group obtained at the
Broker-Dealer and/or in the On-Line Brokerage Accounts. RUBIN
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then executed trades in these securities through the On-Line
Brokerage Accounts, or he would place buy and sell orders through
the accounts at the Broker-Dealer.
39. The defendant DANIEL RUBIN, together with others,
engaged in a scheme to manipulate stock prices to cause them to
increase artificially through a number of means, including, but
not limited to, executing sales of stock from RUBIN’s On-Line
Brokerage Accounts to his accounts at the Broker-Dealer to create
the appearance of genuine market interest in the stock.
C. Certain Stocks Involved
in The Fraudulent Scheme
(1) Augrid Corporation
40. Augrid Corporation (“Augrid”) was a publiclytraded
company whose stock was registered under Section 12 of the
Securities Exchange Act of 1934 and was traded on the Over-the-
Counter Bulletin Board under the symbol “AGRD.” From
approximately June 2003 through approximately October 2003, the
defendants DANIEL RUBIN and DANIEL NOURANI, together with others,
engaged in a scheme to defraud Augrid and its shareholders by,
among other things, (i) inducing the company to sell stock to
Rubin Investment Group, even though RUBIN had no intention of
paying the promised consideration; and (ii) manipulating the
stock price and then selling stock at artificially inflated
prices.
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41. On or about June 18, 2003, the defendants DANIEL
RUBIN and DANIEL NOURANI, together with others, induced Augrid to
enter into a consulting agreement pursuant to which Rubin
Investment Group agreed to provide certain investment banking
services in return for an option to purchase 50,000,000 shares of
Augrid stock at $.01 per share. On or about July 27, 2003, RUBIN
and NOURANI induced Augrid to enter into a second consulting
agreement pursuant to which Rubin Investment Group agreed to
provide additional investment banking services in return for an
option to purchase 230,000,000 shares of Augrid stock at $.01 per
share. In fact, RUBIN did not intend to pay the promised
consideration for the Augrid shares that Rubin Investment Group
acquired.
42. Although Rubin Investment Group acquired
280,000,000 shares of Augrid stock, by late August 2003, the
defendant DANIEL RUBIN had caused Rubin Investment Group to pay
only for the 50,000,000 shares from the initial agreement.
When Augrid representatives contacted RUBIN concerning the
$2,300,000 that Rubin Investment Group owed for the shares from
the second agreement, RUBIN, and at RUBIN’s direction the
defendant DANIEL NOURANI and others, made and directed others to
make numerous material misrepresentations to Augrid concerning
the firm’s ability to pay the promised consideration.
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43. Through these misrepresentations, the defendants
DANIEL RUBIN and DANIEL NOURANI, together with others, induced
Augrid to agree to take back 30,000,000 shares from Rubin
Investment Group and to accept only $1,000,000 for the remaining
200,000,000 shares that Rubin Investment Group had received from
the second consulting agreement, one-half the amount of the
original promised consideration for these shares.
44. To further increase Rubin Investment Group’s
profit from the Augrid scheme, in or about September 2003, the
defendant DANIEL RUBIN, together with others, engaged in a scheme
to manipulate the market price of Augrid’s stock by executing
“wash sales” of his own stock for the purpose of creating the
appearance of market interest in the stock. A “wash sale” is a
sale of shares in which beneficial ownership does not change, as
when an individual sells shares from one brokerage account to
another that the same individual controls. Such sales have no
economic rationale, they serve only to increase the trading
volume in a stock, and are intended to create the false
appearance of market interest in the stock.
45. On or about September 10, 2003, the defendant
DANIEL RUBIN caused approximately 103,150,000 shares of Augrid
stock to be sold from RUBIN’s and Rubin Investment Group’s On-
Line Brokerage Accounts to Rubin Investment Group’s account at
the Broker-Dealer to create the appearance of genuine market
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interest in the stock. Indeed, these wash sales constituted
approximately 90 percent of the trading volume that day. In the
wake of these substantial wash sales, Augrid’s stock price
increased by over 40 percent within one day, and RUBIN sold a
substantial amount of his stock at the artificially inflated
prices.
(2) The Classica Group, Inc.
46. On or about May 8, 2003, Classica received a
notice from the NASDAQ that its stock was in danger of being
“delisted” from the Over-the-Counter Bulletin Board, and that
delisting would be averted if Classica’s stock price closed at $1
per share or higher for a minimum of ten consecutive trading days
by November 4, 2003. In or about May 2003, the defendant SCOTT
HALPERIN, together with others, entered into negotiations with
Rubin Investment Group on behalf of Classica, in the hope of
enlisting the firm’s assistance in raising the company’s stock
price. In subsequent negotiations, the defendant DANIEL RUBIN,
together with others, attempted to conclude an agreement whereby
Rubin Investment Group would purchase shares of stock from
Classica. By late July 2003, however, those negotiations had not
produced an agreement.
47. Throughout the summer of 2003, however,
Classica’s stock consistently traded below $1 per share, and by
early August 2003, the market price of the stock was
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approximately $.50 per share. In addition, Classica’s microwave
technology was still in development, and the company was
suffering substantial operating losses.
48. In or about early August 2003, the defendant
SCOTT HALPERIN, together with others, reopened negotiations with
Rubin Investment Group. In those negotiations, HALPERIN and the
defendants DANIEL RUBIN, DANIEL NOURANI and GLEN SANTHA, together
with others, devised and agreed to a scheme to defraud Classica’s
shareholders whereby Classica issued stock to Rubin Investment
Group at a discount from the market price, ostensibly in exchange
for consulting services. In return, Classica received cash from
Rubin Investment Group’s purchase of the shares. In addition,
RUBIN, NOURANI and SANTHA represented to HALPERIN that the firm’s
“brokers” would promote the stock to the firm’s “clients.”
Specifically, RUBIN promised HALPERIN that he would cause
Classica’s market price to rise above $1 per share for at least
ten trading days to permit Classica to maintain its stock
listing.
49. In addition, the defendants DANIEL RUBIN, DANIEL
NOURANI, GLEN SANTHA and SCOTT HALPERIN agreed to disguise the
scheme through the use of an “Investment Banking Agreement,”
pursuant to which Rubin Investment Group was to receive the
discounted Classica stock in exchange for performing putative
consulting services. On or about August 27, 2003 and August 29,
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2003, RUBIN and HALPERIN, together with others, caused Rubin
Investment Group and Classica to enter into consulting
agreements. Pursuant to those agreements, Classica issued a
total of 1,800,000 shares of its common stock to Rubin Investment
Group at a discount from the market price of the stock. In
exchange, Rubin Investment Group agreed to provide various
consulting services. On or about August 27, 2003 and August 29,
2003, HALPERIN, together with others, caused Classica to issue a
total of 1,800,000 shares of its common stock to Rubin Investment
Group.
50. In addition, on or about August 27, 2003 and
September 12, 2003, the defendant SCOTT HALPERIN caused Classica
to state falsely in SEC filings that the shares were being issued
to Rubin Investment Group as compensation for bona fide
consulting services, when in fact HALPERIN knew that they were
not.
51. In addition, on various dates from approximately
June 2003 to August 2003, the defendant SCOTT HALPERIN caused
Classica to issue press releases containing materially false and
misleading information concerning the company. HALPERIN also
engaged stock promoters to further disseminate such false and
misleading information concerning Classica.
52. On or about August 27, 2003, Classica’s stock
price roughly doubled within hours of the start of trading. On
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various dates on or about and between August 28, 2003 and
September 30, 2003, the defendant DANIEL RUBIN caused Rubin
Investment Group to sell the Classica stock that it had received
at a substantial profit.
(3) Marx Toys & Entertainment Corporation
53. In late August 2003, while completing the
negotiation of the Classica consulting agreements, the defendants
DANIEL RUBIN, DANIEL NOURANI and SCOTT HALPERIN hatched a similar
scheme involving Marx Toys & Entertainment Corporation (“Marx
Toys”). HALPERIN had served as the Chairman of the Board of Marx
Toys’ corporate predecessor, Stereoscape.com, Inc., and he
continued to own a significant amount of Marx Toys stock. In
addition, HALPERIN maintained a close business relationship with
the then-chief executive officer of Marx Toys, Steven Wise.
54. At the time, Marx Toys was in need of capital to
continue its operations. On or about August 29, 2003, the
defendant SCOTT HALPERIN informed Steven Wise that he had found
an investor, the defendant DANIEL RUBIN, who was willing to put
capital into Marx Toys by purchasing discounted shares of the
stock, and that RUBIN had been responsible for the August 27th
run-up of Classica’s stock price.
55. Under an Investment Banking Agreement negotiated
by the defendants DANIEL RUBIN, DANIEL NOURANI and SCOTT
HALPERIN, Rubin Investment Group was to receive for its putative
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consulting services an option to purchase 5,000,000 shares of
Marx Toys’ stock at $.20 per share. The Marx Toys Investment
Banking Agreement was subsequently amended to give Rubin
Investment Group an option to purchase an additional 1,800,000
shares of Marx Toys stock at $.20 per share.
56. On or about August 29, 2003, the defendant SCOTT
HALPERIN prepared a draft Form S-8 for the shares that were to be
issued to Rubin Investment Group, HALPERIN and the other Classica
employees. On or about August 29, 2003, at HALPERIN’s direction,
Steven Wise filed the Form S-8 with the SEC.
57. In addition, the defendant SCOTT HALPERIN used the
transaction to enrich himself and other Classica employees. For
example, HALPERIN demanded that Steven Wise issue stock to
HALPERIN and other Classica employees under the August 29, 2003
Form S-8, even though they had not performed any bona fide
consulting services for Marx Toys. HALPERIN also arranged to be
paid an undisclosed kickback from Marx Toys for the capital that
it raised through the transaction with Rubin Investment Group.
58. On or about September 18, 2003, the price of Marx
Toys’ stock increased approximately 100 percent, and the
defendant DANIEL RUBIN caused Rubin Investment Group to sell a
large amount of the Marx Toys stock that the firm held at a
substantial profit.
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D. LAUNDERING OF FRAUD PROCEEDS
59. The defendant DANIEL RUBIN, together with others,
laundered the proceeds of this securities fraud scheme with the
intent to promote the fraudulent scheme. Specifically, RUBIN
accumulated the proceeds of the scheme into brokerage and bank
accounts that he controlled, and then used those proceeds to
purchase additional securities to further the scheme.
COUNT ONE
(Securities Fraud Conspiracy)
60. The allegations contained in paragraphs 1 through
59 are realleged and incorporated as if fully set forth in this
paragraph.
61. In or about and between October 2002 and October
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendants DANIEL
RUBIN, DANIEL NOURANI, GLEN SANTHA and SCOTT HALPERIN, together
with others, did knowingly and intentionally conspire to execute
a scheme or artifice (a) to defraud persons in connection with
securities of an issuer with a class of securities that was
registered under Section 12 of the Securities Exchange Act of
1934, and (b) to obtain, by means of materially false and
fraudulent pretenses, representations, and promises, money and
property in connection with the purchase and sale of securities
of an issuer with a class of securities that was registered under
Section 12 of the Securities Exchange Act of 1934, to wit:
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1-800-ATTORNEY, Inc., Augrid Corporation, The Classica Group,
Inc., Marx Toys & Entertainment Corporation and others, all in
violation of Title 18, United States Code, Section 1348.
(Title 18, United States Code, Sections 1349 and 3551
et seq.)
COUNT TWO
(Securities Fraud - 1-800-ATTORNEY, Inc.)
62. The allegations contained in paragraphs 1 through
28 are repeated and incorporated as though fully set forth in
this paragraph.
63. In or about and between October 2002 and March
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendant DANIEL
RUBIN, together with others, did knowingly and intentionally
execute a scheme and artifice (a) to defraud persons in
connection with securities of an issuer with a class of
securities that was registered under Section 12 of the Securities
Exchange Act of 1934, to wit, the common stock of 1-800-Attorney,
Inc., and (b) to obtain, by means of materially false and
fraudulent pretenses, representations, and promises, money and
property in connection with the purchase and sale of securities
of an issuer with a class of securities that was registered under
24
Section 12 of the Securities Exchange Act of 1934, to wit, the
common stock of 1-800-ATTORNEY, Inc.
(Title 18, United States Code, Sections 1348, 2 and
3551 et seq.)
COUNT THREE
(Securities Fraud - Augrid Corporation)
64. The allegations contained in paragraphs 1 through
45 are repeated and incorporated as though fully set forth in
this paragraph.
65. In or about and between June 2003 and October
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendants DANIEL
RUBIN and DANIEL NOURANI, together with others, did knowingly and
intentionally execute a scheme and artifice (a) to defraud
persons in connection with securities of an issuer with a class
of securities that was registered under Section 12 of the
Securities Exchange Act of 1934, to wit, the common stock of
Augrid Corporation, and (b) to obtain, by means of materially
false and fraudulent pretenses, representations, and promises,
money and property in connection with the purchase and sale of
securities of an issuer with a class of securities that was
registered under Section 12 of the Securities Exchange Act of
1934, to wit, the common stock of Augrid Corporation.
(Title 18, United States Code, Sections 1348, 2 and
3551 et seq.)
25
COUNT FOUR
(Securities Fraud - The Classica Group, Inc.)
66. The allegations contained in paragraphs 1 through
39 and 46 through 52 are repeated and incorporated as though
fully set forth in this paragraph.
67. In or about and between May 2003 and September
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendants DANIEL
RUBIN, DANIEL NOURANI, GLEN SANTHA and SCOTT HALPERIN, together
with others, did knowingly and intentionally execute a scheme and
artifice (a) to defraud persons in connection with securities of
an issuer with a class of securities that was registered under
Section 12 of the Securities Exchange Act of 1934, to wit, the
common stock of The Classica Group, Inc., and (b) to obtain, by
means of materially false and fraudulent pretenses,
representations, and promises, money and property in connection
with the purchase and sale of securities of an issuer with a
class of securities that was registered under Section 12 of the
Securities Exchange Act of 1934, to wit, the common stock of The
Classica Group, Inc.
(Title 18, United States Code, Sections 1348, 2 and
3551 et seq.)
26
COUNT FIVE
(Securities Fraud - Marx Toys & Entertainment Corp.)
68. The allegations contained in paragraphs 1 through
39 and 53 through 58 are repeated and incorporated as though
fully set forth in this paragraph.
69. In or about and between May 2003 and September
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendants DANIEL
RUBIN, DANIEL NOURANI and SCOTT HALPERIN, together with others,
did knowingly and intentionally execute a scheme and artifice (a)
to defraud persons in connection with securities of an issuer
with a class of securities that was registered under Section 12
of the Securities Exchange Act of 1934, to wit, the common stock
of Marx Toys & Entertainment Corporation; and (b) to obtain, by
means of materially false and fraudulent pretenses,
representations, and promises, money and property in connection
with the purchase and sale of securities of an issuer with a
class of securities that was registered under Section 12 of the
Securities Exchange Act of 1934, to wit, the common stock of Marx
Toys & Entertainment Corporation.
(Title 18, United States Code, Sections 1348, 2 and
3551 et seq.)
27
COUNT SIX
(Mail Fraud - 1-800-ATTORNEY, Inc.)
70. The allegations contained in paragraphs 1 through
28 are realleged and incorporated as if fully set forth in this
paragraph.
71. In or about and between October 2002 and October
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendant DANIEL
RUBIN, together with others, did knowingly and intentionally
devise a scheme and artifice to defraud 1-800-ATTORNEY, Inc., and
to obtain money and property from 1-800-ATTORNEY, Inc., by means
of materially false and fraudulent pretenses, representations and
promises.
72. For the purpose of executing this scheme and
artifice, and attempting to do so, on or about December 20, 2002,
the defendant DANIEL RUBIN, together with others, did cause mail
matter, to wit: stock certificates, to be delivered by commercial
interstate carriers from Brooklyn, New York to Lake Helen,
Florida.
(Title 18, United States Code, Sections 1341 and 3551
et seq.)
28
COUNT SEVEN
(Money Laundering Conspiracy)
73. The allegations contained in paragraphs 1 through
59, 61, 63, 65, 67, 69, 71 and 72 are realleged and incorporated
as if fully set forth in this paragraph.
74. In or about and between October 2002 and October
2003, both dates being approximate and inclusive, within the
Eastern District of New York and elsewhere, the defendant DANIEL
RUBIN, together with others, did knowingly and intentionally
conspire to conduct and attempt to conduct financial transactions
affecting interstate and foreign commerce which in fact involved
the proceeds of specified unlawful activity, to wit: securities
fraud, knowing that the property involved in such financial
transactions represented proceeds of some form of unlawful
activity, with the intent to promote the carrying on of the
specified unlawful activity, in violation of Title 18, United
States Code, Section 1956(a)(1)(A)(i).
(Title 18, United States Code, Sections 1956(h) and
3551 et seq.)
CRIMINAL FORFEITURE ALLEGATION FOR COUNTS ONE THROUGH SIX
75. The United States hereby gives notice to the
defendants charged in Counts One through Six that, upon their
conviction of such offenses, the government will seek forfeiture
in accordance with Title 18, United States Code, Section
981(a)(1)(C) and Title 28, United States Code, Section 2461(c),
29
of any property involved in each offense in violation of Title
18, United States Code, Sections 1341, 1348 and 1349, and
conspiracy to commit such offense, and all property traceable to
such property as a result of the defendants’ conviction of Counts
One through Six of this Indictment, including but not limited to,
the following:
(a) a sum of money equal to $3,400,000.00 in United
States currency;
(b) 3,213,535 shares or certificates of stock, more or
less, of 1-800-ATTORNEY, Inc. currently held by, and in the care,
custody and control of the defendant DANIEL RUBIN, on behalf of
and for the benefit of the defendant DANIEL RUBIN;
(c) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 2066324498, held in
the name of Rubin Investment Group, Inc., on behalf of and for
the benefit of the defendant DANIEL RUBIN, and all proceeds
traceable thereto;
(d) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 2066376415 held in
the name of R.I.G. (Rubin Investment Group) Microcap, L.P., on
behalf of and for the benefit of the defendant DANIEL RUBIN, and
all proceeds traceable thereto;
(e) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 1007548454, held in
30
the name of Dan J. Rubin, on behalf of and for the benefit of the
defendant DANIEL RUBIN, and all proceeds traceable thereto;
(f) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 3365276314, held in
the name of Dan J. Rubin, on behalf of and for the benefit of the
defendant DANIEL RUBIN, and all proceeds traceable thereto.
76. If more than one defendant is convicted of the
offenses set forth in Counts One through Six of this Indictment,
the defendants so convicted are jointly and severally liable for
the forfeiture obligations alleged herein.
77. If any of the above-described forfeitable
property, as a result of any act or omission of the defendants:
(a) cannot be located upon the exercise of due
diligence;
(b) has been transferred or sold to, or deposited
with, a third party;
(c) has been placed beyond the jurisdiction of the
court;
(d) has been substantially diminished in value; or
(e) has been commingled with other property which
cannot be divided without difficulty; it is the intent of the
United States, pursuant to Title 21, United States Code, Section
853(p), as incorporated by Title 28, United States Code, Section
2461(c) to seek forfeiture of any other property of such
31
defendants up to the value of the forfeitable property described
in subparagraph 77(a) through 77(e), including but not limited to
the following:
(a) all right, title and interest to the real property
located at 10 West Knicklighter Road, Lake Helen, Florida, 32744
in the name of defendant DANIEL RUBIN;
(b) all right, title and interest to the real property
located at 119 North Lakeview Drive, Lake Helen, Florida, 32744
in the name of defendant DANIEL RUBIN.
(Title 28, United States Code, Section 2461(c); Title
18, United States Code, Section 981(a)(1)(C); Title 21, United
States Code, Section 853)
CRIMINAL FORFEITURE ALLEGATION FOR COUNT SEVEN
78. The United States hereby gives notice to the
defendant charged in Count Seven that, upon his conviction of
such offense, the government will seek forfeiture in accordance
with Title 18, United States Code, Section 982, of all property
involved in the conspiracy to commit a violation of Title 18,
United States Code, Section 1956, and all property traceable to
such property as a result of the defendant’s conviction of Count
Seven of this Indictment, including but not limited to, the
following:
(a) a sum of money equal to $3,400,000.00 in United
States currency;
32
(b) 3,213,535 shares or certificates of stock, more or
less, of 1-800-ATTORNEY, Inc. currently held by, and in the care,
custody and control of the defendant DANIEL RUBIN, on behalf of
and for the benefit of the defendant DANIEL RUBIN;
(c) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 2066324498, held in
the name of Rubin Investment Group, Inc., on behalf of and for
the benefit of the defendant DANIEL RUBIN, and all proceeds
traceable thereto;
(d) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 2066376415 held in
the name of R.I.G. (Rubin Investment Group) Microcap, L.P., on
behalf of and for the benefit of the defendant DANIEL RUBIN, and
all proceeds traceable thereto;
(e) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 1007548454, held in
the name of Dan J. Rubin, on behalf of and for the benefit of the
defendant DANIEL RUBIN, and all proceeds traceable thereto;
(f) all funds on deposit in, or transferred to or
through, Wells Fargo Bank, N.A., account no. 3365276314, held in
the name of Dan J. Rubin, on behalf of and for the benefit of the
defendant DANIEL RUBIN, and all proceeds traceable thereto.
79. If any of the above described forfeitable
property, as a result of any act or omission of the defendant
33
DANIEL RUBIN:
a. cannot be located upon the exercise of due
diligence;
b. has been transferred or sold to, or deposited
with, a third party;
c. has been placed beyond the jurisdiction of the
Court;
d. has been substantially diminished in value; or
e. has been commingled with other property, which
cannot be divided without difficulty;
it is the intent of the United States, pursuant to Title 21,
United States Code, Section 853(p), to seek forfeiture of any
other property of such defendant up to the value of the
forfeitable property described in sub-paragraphs 79(a) through
79(e) above, including but not limited to the following:
(a) all right, title and interest to the real property
located at 10 West Knicklighter Road, Lake Helen, Florida, 32744
in the name of defendant DANIEL RUBIN;
34
(b) all right, title and interest to the real property
located at 119 North Lakeview Drive, Lake Helen, Florida, 32744
in the name of defendant DANIEL RUBIN.
(Title 18, United States Code, Section 982; Title 21,
United States Code, Section 853)
A TRUE BILL
_______________________
FOREPERSON
________________________________
ROSLYNN R. MAUSKOPF
UNITED STATES ATTORNEY
EASTERN DISTRICT OF NEW YORK |
