The latest guilty pleas in Spongetech case
October 24, 2011 | 12:32 pm by Aaron Elstein
mycrains.crainsnewyork.com
Three more defendants in the Spongetech Delivery Systems case pleaded guilty last week, bringing the number of convictions in the audacious penny stock fraud to five. Charges remain pending against the company’s former CEO, Michael Metter.
Federal prosecutors say Mr. Metter and Spongetech’s former chief operating officer, Steven Moskowitz, cheated investors by fabricating 99% of sales in their New York-based company, which purported to make SpongeBob SquarePants sponges and other such products. The two created phony customers and even built fake offices for the imaginary buyers, the feds say, and made millions in illegal profits by selling shares to investors at inflated prices. A company controlled by Mr. Metter now faces the prospect of returning up to $52 million in unlawful gains.
Mr. Moskowitz pleaded guilty to a single securities fraud charge in August. A sentencing date hasn’t been set and documents in his case were sealed. Mr. Metter’s lawyer, Miranda Fritz, couldn’t be reached immediately for comment.
The three defendants who pleaded guilty last Friday all were support players in the Spongetech operation. They include Seymour “Jimmy” Eisenberg, a domestic sales employee who pleaded to three counts of fraud, conspiracy and conspiracy to launder money. His attorney, John Meringolo, said Mr. Eisenberg faces up to 19 years in prison.
The other pleas came from Thomas Cavanagh and Frank Nicolois, identified as international sales employees in an indictment. Both men pleaded guilty to a single structuring charge, meaning they broke down large financial transactions into amounts under $10,000 in order to avoid federal reporting requirements. It isn’t clear if Mr. Cavanagh faces prison time, said his lawyer, Jim Sherwood; Mr. Nicolois’s lawyer, Paul Batista, didn’t immediately return a call.
Charges remain pending against Andrew “Avi” Tepfer, who is identified in an indictment as president of New York firms AIT Capital and Wesley Equities and is alleged to have helped Mr. Metter and Mr. Moskowitz sell their shares. Mr. Tepfer’s lawyer, Avraham Moskowitz, couldn’t be reached immediately.
Early last week, a Brooklyn-based stock promoter named George Speranza was sentenced to five years of probation after pleading guilty to perjuring himself before federal investigators.
“He was a Spongetech ‘groupie,’ a ‘true believer’ in the product,” Mr. Speranza’s lawyer, Richard Rosenberg, wrote in a court filing.
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