LAWFUEL – The US Legal Newswire – MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, announced today that DENNIS MICHAEL NOURI, the former Chief Executive Officer (“CEO”) and
President of Smart Online, REZA ERIC NOURI — a former Smart
Online employee and brother of the CEO — and stock brokers RUBEN
SERRANO and ALAIN LUSTIG were indicted today on charges arising
from the NOURIS’ fraudulent scheme to pay undisclosed bribes to
brokers, including the other two defendants, to solicit their
customers to purchase Smart Online shares, thereby driving up the
price of the stock. According to the Indictment, and a Complaint
previously filed in Manhattan federal court:
From May 2005 through July 2005, DENNIS MICHAEL NOURI
and his brother REZA ERIC NOURI engaged in a fraudulent scheme
designed to manipulate the price of the securities of Smart
Online, which stock is publicly traded on the OTC-Bulletin Board.
As part of the scheme, the CEO and his brother bribed brokers,
including SERRANO and LUSTIG, to sell Smart Online stock to their
customers so that the price of the stock went up. In several
recorded conversations and telephone calls, DENNIS MICHAEL NOURI
and REEZA ERIC NOURI discussed the details of the fraudulent
scheme, including the amount of the kickbacks paid to brokers for
buying Smart Online stock and the NOURIS’ desire to pump up the
price of the stock before the company was listed on the NASDAQ
In recorded conversations that took place after the
Securities and Exchange Commission (“SEC”) suspended trading of
Smart Online stock on the NASDAQ, DENNIS MICHAEL NOURI described
how to lie to investigators to cover up the scheme and how to be
careful when paying kickbacks to brokers. He warned that someone
might be taking pictures and demonstrated how to transfer money
to another person without being seen. In another meeting, DENNIS
MICHAEL NOURI took a cooperating broker’s cell phone to delete a
phone number the broker had been using to contact him, and gave
the broker a number to call when speaking with him in the future.
DENNIS MICHAEL NOURI, REEZA ERIC NOURI, RUBEN SERRANO,
and ALAIN LUSTIG were indicted today and are expected to be
arraigned before United States District Judge DENNY CHIN on
November 20, 2007 at 2:00 p.m.
All the defendants are charged with one count of
conspiracy to commit securities fraud, wire fraud, and commercial
bribery, and one count of securities fraud. DENNIS MICHAEL NOURI
and REZA ERIC NOURI are charged with additional counts of wire
fraud and commercial bribery. The conspiracy and commercial
bribery charges each carry a maximum sentence of 5 years’
imprisonment and a maximum fine of the greater of $250,000, or
twice the gross gain or loss from the offense. The securities
fraud and wire fraud charges each carry a maximum sentence of 20
years’ imprisonment and a maximum fine of $5 million, or twice
the gross gain or loss from the offense.
Mr. GARCIA praised the efforts of the Federal Bureau of
Investigation and the SEC in the investigation of this case.
Assistant United States Attorney REED MICHAEL BRODSKY
is in charge of the prosecution.
The charges contained in an Indictment are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.