REGIS POSSINO WHO RUNS THE DAILY AFFAIRS OF KHASHOGGI'S BOILER ROOM BANK WAS PARTNERS WITH RAYMON D'ONOFRIO. RAMON PASSED AWAY LAST YEAR. MAY HE REST IN PEACE.
ACCORDING TO HARTCOURTS OWN SEC FILINGS REGIS POSSINO WAS THE SIGNER AND PRESIDENT OF FIRST CAPITAL NETWORK.
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HARTCOURT COMPANIES INC filed this 10SB12B on 01/21/1997.
"FIRST CAPITAL NETWORK, INC 4,500 /s/ Regis Possino President"
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BELOW IS THE TRUTH ABOUT RAMON D'ONOFRIO CONNECTION TO FIRST CAPITAL NETWORK. RAMON D'ONOFRIO IS JUST ONE IN A LONG LINE OF FRAUDULENT PROMOTERS TIED TO THE HARTCOURT COMPANIES AND REGIS POSSINO.
Easy Pickings: How Career Swindlers Run Rings Around SEC and Prosecutors ---
White-Collar Crooks Serve Little Jail Time, Leave Billions in Fines Unpaid
--- `The Bad Guys Are Winning'
By John R. Emshwiller
Staff Reporter of The Wall Street Journal
05/12/1995
The Wall Street Journal
SANTA MONICA, Calif. -- For more than a quarter century, Ramon D'Onofrio has
been playing games with the law -- and mostly winning.
The 67-year-old Mr. D'Onofrio, operating out of a modest office suite at the
airport here, is a master stock swindler. He is responsible for fleecing the
public out of tens of millions of dollars in the course of numerous stock
manipulations, say officials who have tangled with him in about 20 civil and
criminal investigations. A federal appeals court once referred to him as
"ubiquitously criminal."
Mr. D'Onofrio has been convicted of fraud-related crimes five times and is
once again under investigation, people familiar with the case say. Yet he
hasn't spent a day in prison in the past 20 years -- and he served only
about a year behind bars before that. His most recent criminal conviction
came in 1991; he received probation. While the Securities and Exchange
Commission has "permanently" enjoined Mr. D'Onofrio from future violations
of securities laws, it has done so seven different times. Meanwhile, he has
left unpaid about $11.5 million in fines and civil judgments.
Mr. D'Onofrio isn't alone. Hundreds of career swindlers, many of whom have
infiltrated legitimate industries ranging from securities to health care,
are laughing all the way to the bank -- with other people's money. "If you
have the aptitude and you're enough of a sociopath, there are few places
where the pickings are as easy" as swindling, says Scott Stapf,
investor-education adviser for the North American Securities Administrators
Association, a group of state regulators.
Data gathered from government agencies show that it takes far longer to
bring white-collar criminals to justice than perpetrators of other crimes.
Once apprehended and convicted, swindlers generally receive light sentences
-- frequently nothing more than probation and a fine. Often, as with Mr.
D'Onofrio, they aren't compelled to pay back what they have stolen;
extraordinarily, about $4.48 billion in uncollected federal criminal fines
and restitution payments is currently outstanding.
While nobody argues that high-priority battles against drugs and street
crime should be neglected, many white-collar-crime investigators contend
that the devastating impact of fraud isn't sufficiently appreciated. Rough
estimates by government agencies and others indicate that white-collar crime
costs Americans more than $100 billion annually. And increasingly,
free-lance stock swindlers are joining forces with organized crime, to the
benefit of both.
"These are people who are stealing millions from working-class Americans.
These are people who ruin lives," says John Perkins, until recently Missouri
securities commissioner. The former regulator still recalls a Thanksgiving
Day nearly 20 years ago when a local farmer, after having mortgaged his
property and lost the money in an investment swindle, committed suicide by
shooting himself in the head. Quinton Darence Cloninger, who was convicted
of helping run that swindle, was out of prison after three years -- and back
in the investment business. He couldn't be located for comment.
Over the years, Mr. D'Onofrio and his ilk have benefited richly from the
fact that civil authorities don't have much enforcement clout without the
backing of the criminal-justice system. Criminal prosecutors, in turn,
aren't always interested in white-collar offenses -- and may be becoming
less so.
Consider the SEC civil injunctions that Mr. D'Onofrio and others so often
ignore. Violations of such injunctions -- which often bar the individual
from working in the securities industry -- can lead to criminal-contempt
charges and jail time. But, SEC officials concede, contempt is a rarely used
weapon. Records supplied by the SEC show that only a handful of
criminal-contempt cases have been brought in the past five years.
For one thing, the agency has to persuade a U.S. attorney's office to
prosecute a contempt case. The chances of that happening are usually "slim
to none," says one SEC attorney, particularly since criminal-contempt cases
usually don't produce long sentences. Many prosecutors are loath to put in
time on a case where the potential payoff is small.
In 1990, at the SEC's request, the U.S. attorney's office in Salt Lake City
did bring a criminal-contempt case against Mr. D'Onofrio. According to a
complaint filed in federal court there, Mr. D'Onofrio violated a 1982 court
injunction requiring disclosure of his significant stock holdings, an order
that resulted from an earlier SEC lawsuit over stock manipulation. Mr.
D'Onofrio pleaded guilty, was given probation and continued his career
unimpeded.
Mr. D'Onofrio declined numerous requests for an interview for this article.
"Some people do talk to the press and some people don't," says his attorney,
Ira Sorkin, the former head of the SEC's New York regional office. Mr.
D'Onofrio "falls into the latter category," adds Mr. Sorkin, who won't talk
about his client either. (As an assistant U.S. attorney in New York 20 years
ago, Mr. Sorkin helped prosecute a criminal case in which Mr. D'Onofrio was
an unindicted co-conspirator.)
Contempt isn't the only criminal charge available in swindling cases;
frequently, scam artists can be prosecuted criminally under fraud or
racketeering laws. But Philip Feigin, a Colorado regulator and current
president of the North American Securities Administrators Association,
bemoans a "vicious cycle" in which securities regulators, investigators and
prosecutors often relegate criminal statutes to an "afterthought."
One reason is that white-collar criminal cases often eat up enormous amounts
of time and resources. Stewart Walz, a veteran federal prosecutor and former
head of the criminal section of the U.S. attorney's office in Salt Lake
City, recalls one complex white-collar case several years ago that required
a quarter of his section's attorneys for a five-month trial. Although
multiple convictions resulted, Mr. Walz asks: "How many other cases went
unprosecuted?"
On average, it takes more than 10 months for a white-collar criminal case to
be filed in court from the time it is referred to a federal prosecutor's
office, according to national statistics gathered by the Transactional
Records Access Clearinghouse at Syracuse University in New York. That is
nearly three times as long as for the average drug case. Complex,
document-laden white-collar cases frequently take years to complete.
When prosecutors do bring fraud charges, they often end up disappointed with
the sentences that result. The latest federal prison statistics show that
the median jail term for fraud is just 12 months; even violators of
pornography and prostitution laws receive 33 months behind bars, while drug
traffickers are sent away for a median of 60 months. A check of state
sentencing statistics in California and Florida, two centers of white-collar
crime, also shows large disparities in sentences between fraud and drug
trafficking.
James Sepulveda, a prosecutor in the district attorney's office of Contra
Costa County in Northern California, says he has helped convict hundreds of
white-collar criminals during the past 14 years. Some 90% of them, he
estimates, received probation: "The bad guys are winning," he says.
Such experiences have made prosecutors increasingly reluctant to take on
many potentially promising cases. These days, if a case is worth less than
$1 million, some big-city prosecutors won't even touch it, experts say.
A major factor is the nation's war on drugs, which has been overwhelming
prosecutors' offices, courts and prisons. In 1985, for instance, only 34% of
the federal prison population was serving time for drug-related crimes.
Today, the figure is 62%. As recently as the early 1980s, the average
federal prosecutor handled about the same number of white-collar and drug
cases each year, according to the Syracuse University group. By 1993, that
same prosecutor was handling nearly twice as many drug matters as
white-collar cases.
Of the thousands of white-collar cases filed by the federal prosecutors
annually, only several dozen involve alleged securities fraud, according to
records of various government agencies. The SEC keeps only what an agency
spokesman terms a "spongy" count of such cases.
Though Justice Department officials agree that drug cases have been getting
more and more attention, they insist that the agency's commitment to
prosecuting white-collar cases hasn't diminished. They note that in recent
years the department has focused increasingly on particularly complex and
time-consuming white-collar cases. While not great in number, these
prosecutions tend to have a significant impact, they say.
Nonetheless, the scarcity of government record keeping in this area seems to
underscore the relatively low priority given to white-collar crime. The
Federal Bureau of Investigation, for example, annually gathers from more
than 16,000 local and state law-enforcement agencies detailed statistics on
crimes ranging from murder to auto theft. That survey doesn't include fraud,
for which much less detailed information is assembled. FBI officials say
they are working on a new reporting system that will gather more information
on white-collar crimes, but they don't expect it to be in place before the
end of the decade.
For its part, the SEC has established no formal system for identifying or
tracking repeat offenders. Nor does it always know their whereabouts. During
a recent interview, Thomas Newkirk, an associate director for enforcement,
proclaims that Thomas Quinn is safely ensconced in a European jail. But Mr.
Quinn, one of the major stock manipulators of the 1980s -- who regulators
say was responsible for as much as several hundred million dollars in
investor losses world-wide -- has been out of jail for months and is living
on Long Island, N.Y. Mr. Quinn says he isn't involved in the securities
business and "never will be again. I am just trying to get on with my life."
William McLucas, the SEC's enforcement chief, says there "should be a place
in the system" to deal "harshly" with securities-law recidivists, and that
the agency does its best to make sure they are brought to justice. But he
also notes that the SEC has to regulate thousands of public companies and
investment advisers and a vast mutual-fund industry. "We have a whole lot of
market realities we are trying to keep pace with," he says. "So we must make
some hard judgments about where to put resources."
Some of these judgment calls have made life easier for Mr. D'Onofrio. The
two most recent SEC lawsuits against him -- one filed in Los Angeles federal
court in 1993, the other in New York federal court last September -- were
years in the making and involve alleged stock manipulations that occurred,
in some cases, more than a half-decade earlier.
Such time lags aren't uncommon, SEC officials say. The continuing criminal
investigation, which involves some of the same activities as the two civil
cases, also seems to be moving at a glacial pace. Hovhanness "John"
Freeland, an alleged D'Onofrio confederate in one of the civil cases,
pleaded guilty to criminal stock fraud in a related case in New York federal
court. He entered that plea more than two years ago but hasn't been
sentenced yet. Mr. Freeland, who is back in the business world, declines to
be interviewed, and prosecutors won't comment on the criminal case.
When charges are brought against Mr. D'Onofrio, he is as likely to quit as
to fight. Indeed, Mr. D'Onofrio's success with the law has stemmed partly
from his willingness to cooperate when caught. This has helped keep his
incarceration time to a minimum, even though by the early 1970s he was
clearing as much as $1 million annually in stock manipulations, according to
one court ruling.
In one early instance of cooperation, Mr. D'Onofrio agreed to be the main
witness against his former business associate and onetime state-court judge,
Joseph Pfingst, in a bankruptcy-fraud case in Brooklyn, N.Y. Mr. D'Onofrio
was sentenced to probation after helping get Mr. Pfingst convicted; the
former New York judge got a four-month term.
In another case against an alleged co-conspirator, Mr. D'Onofrio testified
readily to his own role as a "manipulator of stocks" who causes "the price
of the stock to rise by fraudulent means and in the process makes a lot of
money," according to a federal-court opinion. But Mr. D'Onofrio has always
been extremely secretive concerning anything that might interfere with his
continuing prosperity. In one case, he was jailed 22 days for contempt
rather than discuss his overseas bank accounts.
Lately, Mr. D'Onofrio has been dabbling in new business ventures, aided by a
1990 SEC rule change. "Regulation S" allows a company to sell stock overseas
without going through the time-consuming and expensive disclosure procedures
normally required to sell new stock in the U.S. The idea is to give
companies a tool for raising capital. Such is the latitude of Regulation S
that the SEC doesn't even track which firms do such transactions.
Law-enforcement officials say they believe Mr. D'Onofrio and others have
been using Regulation S to obtain millions of shares of stock, which they
fail to pay for or buy at a deep discount, then resell to the public before
the price of the stock crashes.
The SEC has voiced concern about possible Regulation S abuses but has done
little to curb them. In 1991, the agency did file suit in Washington, D.C.,
federal court against several defendants in a Regulation S transaction
involving a small Tucson, Ariz., company, Work Recovery Inc. The SEC
obtained injunctions and disgorgement orders against the defendants, whom
the agency charged with failing to pay for 1.5 million Work Recovery shares
and then illegally selling a substantial number of these shares to U.S.
investors.
Though one of Mr. D'Onofrio's firms was Work Recovery's investment banker,
the SEC didn't name him or the firm in its suit. The agency declines to say
why. Work Recovery later sued Mr. D'Onofrio and others in Denver federal
court and won a default judgment of nearly $9.5 million in April 1993. It
remains unpaid.
In a 1992 interview, Work Recovery President Thomas Brandon recalled being
impressed by Mr. D'Onofrio's plush office suite, chauffeured limousine and
seeming dedication to helping small companies such as his raise capital
through Regulation S transactions. Mr. Brandon said the pitch "was almost
evangelical in tone."
Mr. D'Onofrio and his associates recently latched onto another small
publicly traded company, Madera International Inc., a Calabasas, Calif.,
firm with a bizarre past that included plans for an automatic-weapons
factory in China. By last year, Madera had a new business -- exporting
timber from Nicaragua -- and a new investment banker, First Capital Network
Inc.
Mr. D'Onofrio has been operating from First Capital's Santa Monica office.
According to several individuals who have done business with the firm, he
was involved in financing and stock transactions for First Capital, despite
an outstanding court order barring him from "acting as a promoter, finder,
consultant, agent or other person who engages in . . . the issuance or
trading of any security." Repeated requests for comment from company
officials, left by phone and in person at the firm's office, received no
response.
Madera Chairman Daniel Lezak says of Mr. D'Onofrio that "it was my
impression that he helped run the firm." Mr. Lezak says, and SEC filings
confirm, that First Capital arranged the transfer of millions of new shares
of Madera stock to itself or offshore buyers at no cost or at deep discounts
through Regulation S and other transactions. Mr. Lezak says he believes much
of that stock was quickly dumped in the U.S., a move he believes contributed
to Madera stock's dropping to about 10 cents a share from a high last year
of more than $3. Mr. Lezak says he fired First Capital as Madera's
investment banker, but says he still sometimes consults with firm officials.
Mr. D'Onofrio has had serious heart problems of late, law-enforcement
officials say. But he appears to be passing his accumulated knowledge to
others, including his 35-year-old son Mark, who for the past several years
has been working with his father.
Already, the younger Mr. D'Onofrio has been the subject of three SEC
injunctions for alleged securities-law violations. He recently pleaded
guilty in connection with federal conspiracy and fraud charges filed in Los
Angeles federal court as part of the criminal investigation that also
involves his father. Mark D'Onofrio remains free pending sentencing,
scheduled for later this year. His attorney, Mr. Sorkin, says the son, like
the father, doesn't talk to the press.
But Mr. Brandon, the Work Recovery executive, recalls a dinner conversation
where Mark D'Onofrio talked of how he "was proud of his father's doggedness"
and wanted "to follow in his father's footsteps |
