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July 19, 2004 – LAWFUEL – Marcos Daniel Jiménez, United States Attorney for the Southern District of Florida, and James K. Belz, Inspector in Charge, United States Postal Inspection Service, Miami Division, announced today that defendant, Philip R. Gratz, a former stockbroker who conducted business as Phoenix World Wide Enterprises, Inc. (“Phoenix”), pleaded guilty to one (1) count of mail fraud, in violation of Title 18, United States Code, Sections 1341 and 2; one (1) count of wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2; one (1) count of securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff(a); and one (1) count of criminal contempt, in violation of Title 18, United States Code, Section 401(3). The statutory maximum term of imprisonment for the mail, wire, and securities fraud counts is twenty (20) years as to each count; there is no statutory maximum penalty for criminal contempt. Gratz’s sentencing hearing is scheduled for September 27, 2004, in Miami, Florida, before United States District Court Judge Jose E. Martinez.
On or about April 30, 1992, the United States District Court for the Southern District of Florida in the case of SEC v. Delta Rental Systems, Inc., et al., Case No. 91-2136-CIV-DAVIS (S.D. Fla.), entered a Final Judgment of Permanent Injunction and Other Relief (the “Permanent Injunction”) against Gratz, which prohibited him from committing future violations of, among others, the anti-fraud provisions of the federal securities laws. In violation of the Permanent Injunction, from in or around November 1998, to in or around March 2003, Gratz, while doing business as Phoenix, conducted a scheme to defraud in which he raised approximately $8.9 million from various investors located in different states throughout the country, including investors residing in the Southern District of Florida. In or about March 2003, the Southeast Regional Office of the U.S. Securities and Exchange Commission (“SEC”) in Miami, Florida halted the scheme by filing an emergency civil contempt action against Gratz.
To carry out his scheme, Gratz solicited individuals to invest money with him in return for guaranteed annual “interest” payments ranging from 25% to 50%. During investor solicitations, Gratz falsely represented to investors, among other things, that he would invest all of their funds in the stock market. In truth, Gratz misappropriated over $3 million in investor funds for his and his family’s personal use and benefit, including to purchase, among other things, a luxury home, real estate properties, two Mercedes Benz automobiles, artwork, jewelry and watches, home furnishings, a vacation to St. Barthelemy, a country club membership; to lease a Range Rover sport utility vehicle; and to pay for personal credit card expenses, which included, among other things, vacations, airfare, lodging, cruises, limousines, restaurants, designer clothes, and retail store purchases.
To induce investors to invest money, Gratz made materially false statements to investors, including, among others, that all investors’ funds would be used to make investments in the stock market when, in truth and in fact, Gratz used investors’ funds for other purposes, including for his personal use and benefit, and only invested a small portion of the total amount of money raised from investors in the stock market; that investors were guaranteed to receive a fixed annual “interest” payment that ranged from 25% to 50%, when, in truth and in fact, Gratz could not guarantee investors would receive a fixed annual “interest” payment because investors’ returns were subject to Gratz’s ability to generate profits from securities trading, which is inherently risky and cannot generate guaranteed rates of return; that Gratz averaged annual rates of return as high as 60% to 100% from his investments, when, in truth and in fact, he suffered substantial securities trading losses using investors’ monies; that Gratz was managing more than $50 million in investor funds, when, in truth and in fact, he had less than $10 million in investor funds under his “management.”
In addition to the material misrepresentations, Gratz omitted to state material facts to investors, including, among others, that Gratz was misappropriating investor funds for his and his family’s personal use and benefit; that Gratz was misdirecting investor funds to repay principal and make “interest” payments to other investors who withdrew their funds; that on or about March 10, 1995, Gratz was criminally convicted in the case of United States v. Philip R. Gratz, Case No. 94-6196-CR-ZLOCH (S.D. Fla.), for having committed securities fraud, in violation of Title 15, United States Code, Sections 78j(b) and 78ff, and mail fraud, in violation Title 18, United States Code, Section 1341; that on or about April 30, 1992, Gratz was enjoined by a United States District Court in the Delta Rental Systems, Inc. case, from committing further violations of the anti-fraud and other provisions of the federal securities laws; that on or about December 22, 1992, Gratz was permanently barred by the SEC in the case of In the Matter of Philip R. Gratz, Securities Exchange Act Rel. No. 31629 (December 22, 1992), “from association with any broker, dealer, municipal securities dealer, investment company or investment adviser;” and that Gratz had incurred substantial securities trading losses using investors’ monies.
Mr. Jiménez commended the investigative efforts of the United States Postal Inspection Service and the Southeast Regional Office of the United States Securities and Exchange Commission. The case is being prosecuted by Assistant United States Attorney Richard Hong and Special Assistant United States Attorney Jeffrey L. Cox.