Marchiano, 32 others indicted in Manhattan for involvement with A.S. Goldmen
Friday, July 9, 1999
By GINA EDWARDS, Staff Writer
NEW YORK - Manhattan prosecutors charged Naples millionaire Anthony Marchiano in indictments unsealed Thursday as the head of a massive stock fraud scheme that bilked investors out of nearly $100 million.
Salvatore Marchiano, center, is led from the Manhattan State Court in New York for booking on Thursday. Marchiano, the twin brother of Anthony Marchiano of Naples, helped his brother start the A.S. Goldmen financial investment firm. Winkler was A.S. Goldmen's chief financial officer. Dan Wagner / Staff
The Manhattan District Attorney's office charged the 37-year-old Marchiano, owner of Naples brokerage A.S. Goldmen & Co., as the head of a corrupt enterprise that committed crimes in almost all areas of the underwriting and offering of securities to the public.
"Certainly this does run the full gamut," Manhattan District Attorney Robert Morgenthau said at a news conference to announce the indictments. "They didn't miss many opportunities."
Prosecutors say Marchiano set up the firm in 1988 to conduct criminal activity and he personally profited by $30 million to $40 million. In all, the New York grand jury indicted 33 individuals, including Marchiano's wife, Maria, twin brother Salvatore, and seven brokers who worked out of A.S. Goldmen's Naples office. Of those indicted, 26 were A.S. Goldmen employees. The others included wives and girlfriends of brokers who prosecutors say helped participate in the scheme by using their names on bogus accounts to conceal the true ownership of stocks.
The indictments come as part of a two-year investigation by Morgenthau's office into A.S. Goldmen and a broader effort to attack fraud in the trading of small company stocks that regulators say costs investors $6 billion a year.
Simultaneous to the criminal indictments Thursday, the Securities and Exchange Commission announced a civil action charging Marchiano and five former Naples brokers for participating in five interrelated stock schemes. The action charges that Marchiano set up a boiler room operation in Naples where brokers fraudulently hyped the stock of Millennium Sports Management Inc., the partner in the failed Stadium Naples golf development. William Baker, associate director of enforcement for the SEC, commended Morgenthau's office for taking criminal action.
"This is the kind of effort I think we need to have to bring fraud in the micro-cap market to an end," Baker said. "This is a segment of the market that I think is only going to respond to criminal charges."
The largest of the criminal indictments - 240 counts covering 330 pages - charges Anthony and Salvatore Marchiano, the firm and 15 other defendants with enterprise corruption under New York's Organized Crime Control Act. If convicted, a charge of enterprise corruption can carry a sentence of between eight and 25 years in prison.
One of those charged was Stuart Winkler, a principal of the firm who worked as a regulator in the New York office of the National Association of Securities Dealers before joining A.S. Goldmen in the early days of the firm. Prosecutors claim Winkler used his expertise to help the firm evade regulators.
"He knew all the methods," Morgenthau said.
Prosecutors claim Marchiano closed the New York office of his firm in 1996 and fled to Naples to evade law enforcement and seek the protection of Florida's Homestead exemption, that can prevent the government from seizing one's house. To coincide with the criminal actions, prosecutors initiated a civil forfeiture action seeking $99.2 million in restitution proceeds of the criminal enterprise. A judge granted a freeze of assets of the defendants charged with enterprise corruption. Marchiano owns a $3.5 million beachfront mansion on Gordon Drive and a luxury car collection of more than 22 cars, including four Ferraris and a Lamborghini.
Women involved in the A.S. Goldmen stock fraud case are led from Manhattan State Court in New York on Thursday. At far left is Maria Marchiano of Naples, wife of Anthony Marchiano, who was charged with violation of general business law. Dan Wagner / Staff
The asset freeze added to the circus atmosphere in court Thursday, where dozens of attorneys for the defendants waited as their clients were brought into the courtroom in handcuffs and chains linked together. The attorneys pleaded with the judge to reduce bail amounts requested by prosecutors. The judge set bail for Anthony Marchiano at $1 million and Salvatore Marchiano at $750,000.
Outside the courtroom late Thursday evening, attorneys and Marchiano's father were negotiating with a bail bondsman. Both men were held in jail and Marchiano's attorney, Wilmer Parker, said it wasn't likely they would post bail for the release Thursday night.
They named the firm A.S. Goldmen, initials for "Anthony and Salvatore, the men who make gold."
All of the defendants in the cases pleaded not guilty at arraignment hearings Thursday.
Parker said the Marchianos will fight the charges.
"We don't believe the evidence will sustain the charges," Parker said. "The DA has to prove their burden beyond a reasonable doubt."
In a separate but related action Thursday, the federal Securities and Exchange Commission began administrative and cease-and-desist proceedings against Goldmen & Co.
The federal regulatory agency charged the firm with selling unregistered securities, fraudulent sales practices and violations of the anti-manipulation provisions of federal stock laws.
From its office in Washington, D.C., the agency said it was taking action primarily against:
Anthony J. Marchiano, of Naples, Goldmen's president and sole owner.
Stuart E. Winkler, of Morganville, N.J., Goldmen's financial and operations director.
John T. Diasabeyagunawardena, also known as John Abey, of Naples and Metuchen, N.J.
John P. DelCioppo, of Naples.
Christopher M. DelCioppo, of Tampa.
Vincent J. Lia, of Naples.
Duane P. Taylor, of Naples.
Charles Trento, of Forked River, N.J.
The agency said Abey, John DelCioppo, Christopher DelCioppo, Lia and Taylor worked in Goldmen's Naples office while Trento was based in Goldmen's New Jersey office.
Richard Walker, the director of the Division of Enforcement, said Thursday in a prepared statement: "We will spare no effort to close the doors of 'boiler rooms' that fraudulently peddle stocks to unsuspecting investors and tarnish the reputation of our capital markets."
In its release, the agency said it identified these related schemes that occurred between July 1994 and June 1998:
From April 1997 to April 1998, Goldmen, Marchiano and Winkler conducted an unregistered offering of more than 3 million shares of the common stock of Millennium Sports Management, Inc., a publicly traded corporation. They failed to deliver Millennium documents to Goldmen's retail clients who had bought Millennium stock during the unregistered offering.
Goldmen raised at least $7.5 million through the sale of Millennium Stock during this period.
From July 1997 to June 1998, Marchiano, Abey, John DelCioppo, Christopher DelCioppo, Lia and Taylor participated in the sale of Millennium common stock to retail clients using fraudulent and deceptive sales practices.
Under Marchiano's direction, Goldmen's Naples office became a "boiler room" operation that sold Millennium common stock through an aggressive telemarketing campaign that featured high-pressure sales tactics, misrepresentations and substantial factual omissions, and misleading pricing information.
From July 1994 to February 1997, Winkler violated federal securities laws on at least six occasions by making public offerings of stock that had been underwritten by Goldmen.
Winkler placed securities into at least four accounts and then had Goldmen brokers immediately repurchase the securities at a substantial profit and resell them to bona fide investors at even higher prices.
Manipulating the price of the stock in this fashion to inflate the price artificially is prohibited by federal securities laws.
The Winkler accounts made at least $250,000 by doing this.
From July 1997 to June 1998, Winkler and Marchiano violated anti-manipulation laws as they dealt in stocks as a means to raise money to resolve clients' complaints.
From July 1994 to May 1997, Trento engaged in a pattern of fraudulent sales practices. These included the use of accounts to hide his financial interest in certain sales of securities; engaging in fraudulent cross-trading; making baseless price predictions; executing unauthorized and unsuitable trades and engaging in an undisclosed no net-selling practice.
The federal agency will hold a hearing before an administrative law judge to determine whether the accusations can be proven, and if so, what penalties should be imposed.
In the criminal case, prosecutors contend that from August 1992 to October 1998, A.S. Goldmen employees broke numerous securities laws.
Anthony Marchiano, co-owner of A.S. Goldmen, lived in this beachfront home in Naples. Lisa Krantz / Staff
The schemes, prosecutors said, included the manipulation of markets in certain stocks to benefit Goldmen employees; the use of phony accounts to trade in securities that the employees were prohibited from owning; trading on nonpublic information; the making of unauthorized trades; refusals to adhere to customers' sell orders, and the falsifying of the firm's records.
Morgenthau also said that Goldmen employees lied to regulators and destroyed documents.
In addition to the indictment, Morgenthau brought civil action seeking $99.2 million in repayment for what he called the criminal proceeds of the activities.
State Supreme Court Justice Helen Freedman signed a temporary restraining order Thursday prohibiting the defendants from disposing of any assets without court approval. The investigation into the firm's activities is continuing.
Morgenthau said Goldmen brokers focused on retirees as investors, many of whom lost their entire savings with the firm.
One victim, he said, was a retired bus driver in upstate New York who lost all his savings and had to return to work as a result of the loss. Another Goldmen customer was a Maryland woman who lost the $25,000 nest egg she planned to use to pay for her daughter's wedding.
"These were real people who lost real money to a bunch of crumbums," Morgenthau said. "These guys were heartless."
The district attorney's two-year investigation into A.S. Goldmen began as a result of numerous complaints from the firm's customers.
With offices in Naples, New York, New Jersey and Los Angeles, it had 50,000 investor accounts.
The firm, which received mail at its headquarters in Red Bank, N.J., in care of Body by Boris, had been the subject of 11 actions by state securities regulators since 1991 and had been involved in numerous investor arbitrations.
The charges in Thursday's indictment involve the marketing of securities in Millenium Sports Management Inc., Stadium Capital Inc., Independence Brewing Co., Imatec Ltd., Wanderlust Interactive Inc., Winfield Capital Corp., Veritas Music Entertainment, Nickelodeon Theater Co., Cinema Ride Inc. and Innovative Tech Systems Inc.
Many of the crimes, prosecutors said, rose from the use of phony, or "nominee," accounts set up by Goldmen employees for their own benefit using the names of friends and family members with different surnames. The indictment included charges against seven individuals for such crimes.
To evade rules prohibiting underwriters from trading in their own initial public offerings, money provided by the Goldmen brokers would be placed in these accounts and used to buy low-priced warrants on stocks underwritten by the firm, prosecutors said.
For example, warrants offered at 25 cents each would be bought back by the firm at 75 cents even though the warrants were trading publicly for twice that price. The profits would then be repaid to the Goldmen employees by the account holders in cash to avoid detection.
The New York Times News Service contributed to this report.
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