LAWFUEL – The Legal Newswire – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, and MARK J. MERSHON, the Assistant
Director-in-Charge of the New York Field Office of the Federal
Bureau of Investigation (“FBI”), announced today that DENNIS
MICHAEL NOURI, the Chief Executive Officer (“CEO”) and President
of Smart Online, REEZA ERIC NOURI — a Smart Online employee and
brother of the CEO — and brokers RUBEN SERRANO, ANTHONY MARTIN,
JAMES DOOLAN, and ALAIN LUSTIG were arrested today on securities
fraud and conspiracy charges. The charges arose from the NOURIS’
fraudulent scheme to pay undisclosed bribes to brokers, including
the other four defendants, to solicit their customers to purchase
Smart Online shares, thereby driving up the price of the stock.
According to the Complaint filed in Manhattan federal court:
From May 2005 through July 2005, DENNIS MICHAEL NOURI
and his brother REEZA 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 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 Capital Market.
In conversations recorded 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, 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 and REEZA ERIC NOURI were arrested
today and are expected to be presented today before a United
States Magistrate Judge in Durham, North Carolina. Brokers
SERRANO, MARTIN, DOOLAN, and LUSTIG were also arrested today and
are expected to be presented today before a United States
Magistrate Judge in Manhattan federal court.
All the defendants are charged with one count of
conspiracy to commit securities fraud and one count of securities
fraud. The conspiracy charge carries 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 count carries 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 FBI 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 the Complaint are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.