LAWFUEL – Law News, Law Jobs – The attorney for a commodities futures trading firm that defrauded hundreds of investors out of more than $95 million has pleaded guilty to conspiring with one of the scam’s principals to defraud an investment victim, as well as to lying to investment industry regulators and a state court.
Michael Arthur Cardenas, a 47-year-old attorney who lives in the San Fernando Valley district of Winnetka, pleaded guilty Thursday afternoon. Appearing in United States District Court in Los Angeles, Cardenas admitted his guilt to conspiracy, bankruptcy fraud and tax evasion.
The conspiracy count involves Cardenas’ role as attorney for Midland Euro, a Sherman Oaks foreign exchange currency trading operation that fraudulently raised more than $130 million from investors located in the United States, Canada, Saudi Arabia and Israel in less than five years. Through mismanagement and misappropriation, investors lost nearly $100 million.
One victim, the Qatar-based Al Baraka International Investment Company Ltd., sued Midland Euro after the National Futures Association began investigating Midland Euro and after Midland Euro was unable to return funds invested by Al Baraka. In court yesterday, Cardenas admitted participating in Midland Euro’s scheme to deceive Al Baraka. Cardenas admitted that he lied to the NFA, the State Court overseeing the Al Baraka lawsuit, Al Baraka and Al Baraka’s lawyer in order to conceal Midland Euro’s misappropriation of Al Baraka’s investments. In a plea agreement, Cardenas admitted that he repeatedly and falsely stated that Al Baraka’s funds “were safe” in Cardenas’ attorney-client trust fund, when, in fact, Cardenas moved money out of the attorney-client trust account, giving money to himself and to a Midland Euro principal, even though a State Court judge had ordered the account frozen.
“The Midland Euro case victimized hundreds of investors who lost millions of dollars,” said J. Stephen Tidwell, Assistant Director in Charge of the FBI in Los Angeles. “The guilty pleas by Cardenas and the previous fraud convictions are examples of the FBI’s hard work and continued pledge to investigate fraud, particularly by those in positions of power who are thereby most accountable.”
Ron Hirst, the NFA’s Associate General Counsel and Enforcement Coordinator, stated: “As the self-regulatory organization for the commodity futures industry, the National Futures Association depends on the cooperation and truthfulness of its members and their attorneys to carry out its investigative function. Mr. Cardenas repeatedly lied to the NFA in the course of our investigation into Midland-Euro, and this case sends a strong message that lying to the NFA is a serious offense with severe consequences.”
Cardenas, who for a time maintained a bankruptcy law practice, also pleaded guilty to lying to the Bankruptcy Court and the United States Trustee in relation to a bankruptcy petition he filed on October 14, 2005. Cardenas failed to disclose assets and repeatedly lied to the court about his income.
“Concealing assets and making false statements in bankruptcy cases are serious crimes that undermine the integrity of the bankruptcy system,”stated Peter C. Anderson, United States Trustee for Central California (Region 16). “The charges filed in this case demonstrate that such conduct will not be tolerated and will be aggressively pursued.”
Cardenas also pleaded guilty to tax evasion, admitting that on his 2001 tax form he under-reported his income by more than half and that he took active steps to conceal income from the Internal Revenue Service.
As a result of Thursday’s guilty pleas, Cardenas faces a statutory maximum sentence of 15 years in federal prison. The plea agreement between the government and the defendant contemplates a sentence of up to 2½ years in prison.
The leaders of the Midland Euro scheme were sentenced in 2005 to 11¼ years and 20 years in prison, see: http://www.usdoj.gov/usao/cac/pr2005/077.html.
This case was investigated by the Federal Bureau of Investigation, IRS-Criminal Investigation Division and the U.S. Postal Inspection Service. These agencies received the assistance of the National Futures Association, as well as the United States Trustee Program, a Justice Department component that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.
Release No. 07-035