Memories...
Over Din of Fellow Inmates, Man Ran Investment Fraud, Officials Say
By ROBERT D. MCFADDEN
Published: February 27, 2001
On Oct. 29, 1999, Ira Monas, a Long Island investment adviser who had been convicted of grand larceny and possession of forged documents in a securities fraud case, entered the Adirondack Correctional Facility at Ray Brook, N.Y., to begin serving a term of two to four years as New York State Inmate 98A5992.
In the next two months, using only a phone in a common room, federal prosecutors said yesterday, Mr. Monas made almost daily calls to two investment firms he owned, directing subordinates -- who apparently did not know that he was in prison -- to promote sales of securities in three initial public offerings that were widely regarded as hot investments.
He called collect, and to mask the raucousness of inmates in the background, he said he was in Europe or at a terribly noisy restaurant. And while he had no access to the securities he was promoting, federal prosecutors said, about 200 investors sent $8.5 million to bank accounts he controlled.
The investors, caught up in a feeding frenzy of Internet ventures and I.P.O.'s, thought they were buying soaring shares of United Parcel Service; Fogdog, an Internet sports equipment merchant; and Freemarkets, an online auction vendor. But all they ever got, the prosecutors said, were pieces of paper that appeared to be confirmation slips and official-looking account statements.
Meanwhile, hundreds of thousands of dollars the investors had sent in went to pay Mr. Monas's personal and business debts, while $42,000 was used to buy a Mercedes-Benz for his daughter and millions more wound up in bank accounts that he controlled, the authorities said.
''None of the investors' funds were used to purchase securities for the investors,'' Mary Jo White, the United States attorney in Manhattan, said as she released a three-count complaint against Mr. Monas, 55, of Massapequa, N.Y. Mr. Monas appeared before a federal magistrate on Friday and was to be released today on a $1 million bond to the custody of his former wife, Rita.
The complaint did not accuse the companies Mr. Monas controlled, or any of his subordinates or employees, of any wrongdoing, and federal officials said it appeared that the employees -- from securities sales personnel to secretaries who typed up account statements -- had been misled into aiding his scheme.
Mr. Monas's lawyer, Stephen Scaring, would not comment on the case in detail, but said his client ''has not acknowledged any responsibility for involvement in this complex scheme the government has outlined, but is looking forward to defending himself.''
James Flateau, speaking for the State Department of Correctional Services, noted that the state's 71,000 inmates were free to make collect phone calls during free time in the common rooms of New York's 70 prisons, and that they make about 22,000 calls every day. And while it is illegal for inmates to conduct business from prison, catching them doing so is difficult, even though many of the calls are monitored and recorded.
The case of Michael Mathie, an inmate at Elmira Correctional Facility who claims to have traded more than $8 million in securities since 1998 and had an adjusted gross income of $899,969 in 1999, was reported earlier this month, but state officials said he had merely managed his own money and had not engaged in any illegal business activity.
Another unusual investor, 15-year-old Jonathan Lebed of Cedar Grove, N.J., turned an $8,000 savings bond into $285,000 in 1999 and 2000 by using a bedroom computer and the Internet to promote stocks he had invested in. The Securities and Exchange Commission stumbled onto the boy's case during an investigation into Mr. Monas's dealings. Mr. Monas, officials said, had given the boy false information about companies whose stock the teenager had promoted.
It was that inquiry, officials said, that led to Mr. Monas's conviction and imprisonment in 1999. At the time, said a complaint by a federal investigator, John P. Keelan 3rd, Mr. Monas was the sole owner of Milan Capital, a Melville, N.Y., investment advisory service. He was also the undisclosed owner of AC Financial, a brokerage firm with offices in Palm Harbor, Fla., and Pittsburgh, which he acquired through secret transactions that placed a relative in nominal charge, the complaint said. |
