US Attorney – Defendant Indicted In 1992 Pleads Guilty On Securities Fraud After Extradition From Costa Rica

LAWFUEL – The US Legal Announcement Service – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, announced that ALLAN STONE, who
was indicted in 1992 on securities fraud and other charges and
was extradited from Costa Rica to the United States last month,
pleaded guilty today to securities fraud charges in connection
with his scheme to misrepresent his ownership in and operation of
multiple public companies. STONE, 62, of New York, N.Y., pleaded
guilty in Manhattan federal court before United States District
Judge LEWIS A. KAPLAN. According to the Indictment to which
STONE pleaded and other filings in the case:

Between 1987 and 1989, STONE, co-conspirators JOHN
MALESKO, JAMES HODGES, IRWIN ROTHBARD, and others engaged in an
illegal scheme to deceive investors as well as the Securities and
Exchange Commission in connection with the initial public
offerings of the following companies, none of which generated any
revenue: Classic Capital Corporation; Regency Resources, Inc.;
Harvard Technology, Ltd.; Harvard Resources; Venus Ventures,
Ltd.; and Wellington Group I, Inc. (the “Public Companies”). As
part of their scheme, STONE and his co-conspirators opened and
controlled brokerage accounts in the names of friends and
relatives to conceal their ownership in the Public Companies. By
concealing their beneficial ownership in these companies and
making other misrepresentations to investors, STONE and his coconspirators raised hundreds of thousands of dollars through
initial public offerings, and raised additional funds thereafter
by illegally requiring investors to sell a portion of their
initial investments in the form of warrants — which give the
holder the right to purchase a stock at a certain price — to
STONE and his co-conspirators. Most of the proceeds from these
fraudulent sales were transferred to offshore nominee bank
accounts in the names of STONE’s friends and family, and then
were wired from these offshore accounts to personal bank accounts
in the United States in the names of STONE and his coconspirators.
Through these fraudulent schemes, STONE and his
co-conspirators were able to misappropriate over $2 million for
their personal use.

In August 1987, STONE helped cause one of the Public
Companies, Classic Capital Corporation, to enter into a
consulting agreement with a company owned and controlled by STONE
and a co-conspirator. STONE later became the president of
Classic Capital and paid himself a salary in excess of $100,000
per year, even though the company’s only asset was the proceeds
from the sale of the warrants.

STONE also issued checks from
Classic Capital’s account for the following personal items: (1)
$26,000 payable to cash; (2) $17,000 to pay for the rent of
STONE’s apartment; (3) $15,000 for furniture delivered to STONE’s
apartment; (4) $14,000 for clothing and jewelry; and (5) $6,000
in payments to STONE’s personal credit card account.
Shortly before STONE was indicted in 1992, he left the
United States and went to Costa Rica. In 1992 and again in 2006,
arrest warrants were issued for STONE. In August 2006, at the
request of the United States, STONE was arrested in Costa Rica
based on the arrest warrants against him, and unsuccessfully
fought extradition to the United States for over a year.
Approximately 15 years after Stone was indicted, on October 26,
2007, Stone was returned to the United States to face the
securities fraud and other charges against him.
STONE pleaded guilty to one count of conspiracy to
commit securities fraud and six additional accounts of securities
fraud in connection with the initial public offerings of the
Public Companies. Each charges carries a maximum penalty of five
years in prison and a $250,000 fine. STONE is tentatively
scheduled to be sentenced by Judge KAPLAN on Tuesday, November
13, 2007 at 4:45 p.m.

In 1992, MALESKO, HODGES, and ROTHBARD were arrested in
the U.S. following the Indictment. MALESKO and HODGES pleaded
guilty on September 17, 1992; ROTHBARD pleaded guilty on
September 25, 1992. On December 3, 1992, Judge LOUIS J. FREEH
sentenced MALESKO on counts 1, 22 and 23 to a term of 18 months
in prison on each count, to run concurrently, and sentenced
HODGES to 2 years’ probation on count 2. Judge FREEH sentenced
ROTHBARD on count 1 to 21 months in prison on December 11, 1992.
If you believe you were a victim of these crimes, and
you wish to provide information to law enforcement and/or receive
notice of future developments in the case or additional
information, please consult the following website:
Special Assistant United States Attorney RHONDA JUNG
and Assistant United States Attorneys REED MICHAEL BRODSKY and
MARC P. BERGER are in charge of the prosecution.
07-271 ###

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