"In addition to a law practice, Rivlin is chairman of DNA Medical Technologies Inc., a genetic research firm in Hiawatha, Iowa, formerly known as Questar International Inc. The company, which has said it faces an unrelated SEC inquiry into the movement of its stock price before a $1.5 billion offer in June 1998 for 80 percent of its shares, had no comment on Rivlin's case."
Lewis Rivlin, Lawyer, Charged in $6.2 Mln Fraud Case
Washington, June 8 (Bloomberg) -- Washington lawyer Lewis Allen Rivlin was charged with fraudulently selling $6.2 million of non-existent securities to investors, including an Ecuadorian charity for underprivileged girls, regulators said.
The Securities and Exchange Commission alleged Rivlin, 69, a former Justice Department lawyer and ex-husband of Federal Reserve Vice Chairman Alice Rivlin, promised some investors a 100 percent return every 10 banking days for investing in a ''risk- free'' trading program.
Rivlin and Edwin E. Huling, a New York man who worked at Rivlin's firm last year, convinced at least four groups to invest a total of $6.24 million, the SEC said. They told investors their money would be pooled to buy and resell deeply discounted bank instruments, the SEC alleged in a complaint filed in a Washington federal court.
The ''prime bank'' securities they offered from December 1997 to June 1998 didn't exist, the SEC said, and investors never received any profits and lost all their principal. Regulators in recent years have filed fraud charges in a number of cases where investors were allegedly offered non-existent ''prime-bank'' securities that purportedly were backed by major international banks.
''Despite all the attention focused on so-called prime bank offerings, people still fall prey to these schemes,'' said SEC Enforcement Director Richard H. Walker. ''The bottom line is prime bank offerings are a total scam, they do not exist.''
Rivlin, who was divorced from Alice Rivlin in 1977 after 22 years of marriage, is contesting the charges. His lawyer had no immediate comment.
Contesting Charges
Huling also is contesting the charges. His lawyer, Frank Razzano in Washington, said Huling worked part-time in the law office answering phones and that Huling himself lost thousands of dollars investing with Rivlin.
''If the commission's charges are true, it should be suing on behalf of Mr. Huling, not suing him,'' said Razzano, a partner in the law firm of Dickstein, Shapiro, Morin & Oshinsky. ''Mr. Huling will demonstrate his innocence at trial and fully expects to be vindicated.''
Rivlin's former law partner, Alfred H. Velarde of Vienna, Virginia, was charged with aiding and abetting the alleged scheme. He settled the charges by agreeing to pay a $20,000 civil fine, the SEC said. In the settlement, he neither admitted nor denied the allegations.
In a statement through his lawyer, Velarde said, ''a lot of good people put faith in Mr. Rivlin's credentials and representations of fact. Everyone I know who did, including myself, has suffered greatly in one way or another.''
Quality, Not Connections
''The case demonstrates that people should focus on the quality of an investment, not the connections of the broker,'' said Elizabeth Gray, SEC assistant enforcement director.
In addition to a law practice, Rivlin is chairman of DNA Medical Technologies Inc., a genetic research firm in Hiawatha, Iowa, formerly known as Questar International Inc. The company, which has said it faces an unrelated SEC inquiry into the movement of its stock price before a $1.5 billion offer in June 1998 for 80 percent of its shares, had no comment on Rivlin's case.
In the prime bank securities case, the SEC seeks fines and the return of alleged ill-gotten gains from Rivlin and Huling. The SEC's Gray alleged that Rivlin, a resident of suburban Rockville, Maryland, with a private law practice in Washington, continues to participate in fraudulent trading programs that the commission wants to stop.
There already are legal judgments against Rivlin arising from high-yield trading programs -- including the allegations involved in the SEC action -- that render Rivlin liable for at least $18 million, the SEC said.
Legal Claims
In April, a federal judge in Washington ordered Rivlin to pay $16 million to his client, the Fundacion Perez Pallares, an Ecuadorian charity for poor girls. Fundacion filed claims against Rivlin alleging fraud, negligence and breach of contract. Fundacion is one of the four investors the SEC said invested in Rivlin's allegedly fictitious trading program.
The SEC said beginning in December 1997, Rivlin made it known that he had access to a high yield trading program under the auspices of Chrysanthos Chrysostomou, who was then Metropolitan, or a high-ranking official of the Greek Orthodox Church, in Limassol, Cyprus.
Rivlin, who was practicing with the law firm Rivlin, Velarde & Taylor at the time, supplied the investors for the fraudulent trading program and was the principal spokesman, the SEC said. Rivlin gave at least two investors his ''personal guarantee'' they would not lose their money -- a promise he has not made good on, the SEC said.
The SEC said Huling acted as a contact person for investors in Rivlin's absence and that Velarde reviewed documents required for participation in the program, spoke with investors, and drafted at least one investment agreement, the SEC said.
No Registration
In addition to the fraud charges, the SEC alleged Rivlin and Huling acted as brokers, by selling interests in the trading program, without registering as brokers.
Velarde now is a lawyer with A.H. Velarde & Associates in McLean, Virginia, the SEC said.
Chrysostomou, who resigned from his post in November 1998 amid allegations of ethics violations, was named in the SEC case as a relief defendant -- someone who, while not charged with wrongdoing, is alleged to have received some of the ill-gotten investor money the agency seeks to recover. Other relief defendants include a Greek company, Z-Finance SA, and its chairman, Anthony Zioudas; and a British Virgin Islands company, Hedley Finance Ltd., and its chief of administration, Christian Dante.
A Fed spokeswoman said Alice Rivlin had no comment on the case either.
Jun/08/1999 16:50
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