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 Office of the
Federal Bureau of Investigation (“FBI”), announced today that
PHILIP WONG, a Canadian-based stock promoter who pleaded guilty
earlier this year to conspiring to commit securities fraud and
securities fraud, was sentenced to 21 months in prison by the
Honorable COLLEEN McMAHON of Manhattan federal court. Mr. GARCIA
and Mr. MERSHON also announced the unsealing on Tuesday, October
21, 2008, of an Indictment in Manhattan federal court charging
WILLIAM CURTIS with conspiring to commit securities fraud and to
commit commercial bribery as well as substantive securities fraud
in connection with a separate stockbroker bribery scheme. WONG’s
sentencing and the Indictment against CURTIS follow the filing in
September 2008 in Manhattan federal court of four criminal
Complaints charging seven other individuals with conspiring to
commit securities fraud and commercial bribery.
The charges against WONG, CURTIS and the seven other
defendants are the result of a wide-ranging FBI undercover
investigation of related stockbroker bribery schemes involving
US-based, Canadian-based and Costa Rican-based stock promoters
and stockholders. The four criminal Complaints unsealed in
September 2008 charged JONATHAN CURSHEN and BRUCE GROSSMAN of a
Costa Rica-based company, GLENN GROSSMAN, STEVEN COHEN and SHAY
KEREN, a/k/a “David Schmidt,” principals of Manhattan-based Onyx
Consulting Group, JOHN ZANIC, a Canadian-based stock promoter,
and JASON JADIDIAN, a Queens, New York-based stock promoter, with
conspiring to commit securities fraud and commercial bribery.
All seven individuals were arrested in September 2008.
PHILIP WONG SENTENCING
According to documents filed in WONG’s cases and
statements made during the guilty plea and sentencing
proceedings: WONG previously pleaded guilty in July 2008 to
conspiracy and securities fraud charges filed in an Indictment
and an Information. The charges in the Indictment and the
Information arose out of separate schemes in 2002, 2006, and
2007, to pay secret cash bribes to stockbrokers in order to
induce them to cause their retail customers to buy and hold stock
in the following companies: SecureWare, Inc. (“SecureWare”) in
2002, eNotes Systems, Inc. (“eNotes”) in 2006, and Jake’s
Trucking International, Inc. (“Jake’s Trucking”) in 2007. With
each of these bribery schemes, confidential informants (“CI”s)
working at the direction of the FBI posed as corrupt
stockbrokers. The CIs had a series of recorded conversations
with WONG about an agreement to accept secret cash bribes that
would be paid by WONG in exchange for the stock purchases.
Pursuant to those agreements, in July 2002, WONG transferred
$4,200 in secret cash bribes into an undercover FBI bank account
in exchange for the sale of approximately $10,000 worth of
SecureWare stock. In 2006, among other things, WONG caused the
transfer of approximately $13,585 worth of secret cash bribes to
an undercover FBI bank account in exchange for the total sale of
approximately $69,700 worth of eNotes stock, and a later bribe of
$10,000 for the sale of an additional $100,000 worth of eNotes
stock. In addition, in 2007 WONG caused the transfer to an
undercover FBI bank account of approximately $10,000 as a cash
bribe for a CI’s purchase of approximately $34,980 worth of
Jake’s Trucking stock into the CI’s “customer” accounts.
In addition to his prison term, Judge McMAHON sentenced
WONG to two years of supervised release and criminal forfeiture
of $197,710. During today’s sentencing, Judge McMAHON described
WONG’s stockbroker bribery schemes as a “very serious crime” that
impacted the integrity of the financial markets. WONG has been
in federal custody since his February 11, 2008 arrest.
WILLIAM CURTIS INDICTMENT
According to the Indictment against CURTIS unsealed
this week, over a three-month period from July through September
2007, CURTIS agreed to pay secret, cash bribes to a CI. The CI
posed as a financial advisor who, in exchange for the bribes,
would convince “investors” to purchase common stock of G&S
Minerals, Inc. (“G&S”) that CURTIS and his co-conspirators
controlled. In recorded conversations, CURTIS specifically
agreed that the cash bribes would not be disclosed to the CI’s
“investors,” and that the amount of the bribe would be 30 percent
of the purchase orders placed by the CI’s retail customers for
G&S stock. In September 2007, according to the Indictment, after
purporting to sell to retail customer clients a total of over
$63,000 worth of shares of G&S common stock that CURTIS had
provided, the FBI received from CURTIS two cash kickbacks
totaling approximately $19,000, which represented approximately
30 percent of the value of the G&S stock purchased by the CI from
JASON JADIDIAN COMPLAINT
According to a criminal Complaint filed on September
16, 2008, JADIDIAN, who was arrested on September 18, 2008,
agreed to pay a secret, cash bribe to stockbrokers and an FBI
agent acting in an undercover capacity (the “UC”) in order to
convince them to buy, on behalf of retail customers, Tecton Corp.
(“Tecton”) common stock that JADIDIAN was promoting. The UC
posed as another promoter who, in exchange for the bribe, would
recruit stockbrokers who held accounts on behalf of their retail
customers, and with whom the UC would share the bribe. In July
2008, after the UC purported to have induced retail customer
clients to buy approximately 80,000 shares of Tecton common stock
that JADIDIAN had provided, JADIDIAN transferred from an account
in British Columbia, Canada, a secret cash bribe of $5,000 to an
undercover FBI account in New York City. The amount of the bribe
represented approximately 27 percent of the value of the Tecton
JONATHAN CURSHEN & BRUCE GROSSMAN COMPLAINT
According to the criminal Complaint that was filed on
September 4, 2008, CURSHEN and BRUCE GROSSMAN schemed to defraud
investors in Industrial Biotechnology Corporation (“IBC”) common
stock by paying secret cash kickbacks to the UC, who was posing
as a middleman willing to recruit corrupt stockbrokers.
As part of the sting operation, in a series of recorded conversations,
CURSHEN and BRUCE GROSSMAN agreed with a middleman, an FBI agent
acting in an undercover capacity (the “UC”), that the UC would
recruit corrupt stockbrokers at brokerage firms who were prepared
to buy IBC stock from CURSHEN and BRUCE GROSSMAN and sell that
stock to the brokerage firms’ retail brokerage clients in the
United States. The FBI eventually purchased about $76,000 of IBC
stock from CURSHEN and BRUCE GROSSMAN. In return, CURSHEN and
BRUCE GROSSMAN agreed to, and eventually did, wire secret cash
payments to the UC and the stockbrokers totaling approximately
$19,000, or 25 percent of the value of the IBC stock they
believed had been sold to retail customers.
GLENN GROSSMAN, STEVE COHEN, SHAY KEREN & JOHN ZANIC COMPLAINTS
The criminal Complaints filed in September 2008 against
GLENN GROSSMAN, COHEN, KEREN and ZANIC charge them with scheming
from March through September 2008 to defraud investors in Guyana
Gold Corporation (“Guyana Gold”) by paying secret cash bribes to
an FBI agent acting in an undercover capacity as a middleman,
(the “UC”). According to those Complaints, as part of the sting
operation, the UC agreed to recruit stockbrokers who were
prepared to buy Guyana Gold common stock from GLENN GROSSMAN,
COHEN, and KEREN and sell that stock to the brokerage firm’s
retail brokerage customers in return for secret cash payments to
the stockbrokers totaling approximately 23 percent of the value
of the stock sold to those customers, while the UC received seven
percent of the value of the stock sold. As part of the scheme,
from May through August 2008, GROSSMAN, COHEN, KEREN and ZANIC
paid the UC and the “stockbrokers” whom the UC had purportedly
recruited bribes totaling approximately $21,800. The bribes
represented 30 percent of the nearly $75,000 worth of Guyana Gold
stock the UC’s “stockbrokers” had purchased in trades using an
undercover FBI account. In September 2008, ZANIC transferred
$100,000 to the same undercover FBI account as a cash bribe to
induce the UC and the UC’s stockbrokers to purchase additional
Guyana Gold stock.
WONG, 48, is a resident of Vancouver, British Columbia,
CURTIS, 49, is a resident of Naperville, Illinois. He
surrendered to the FBI yesterday in Los Angeles, California.
CURTIS is out on bail and his case is assigned to United States
District Judge GERARD E. LYNCH.
JADIDIAN, 24, is a resident of Queens, New York. He is
out on bail and his case is pending.
CURSHEN, 43, is a resident of Sarasota, Florida and
Costa Rica. BRUCE GROSSMAN, 50, is a resident of Maitland,
Florida. They are both out on bail and their case is pending.
GLENN GROSSMAN, 33, and COHEN, 35, are residents of
Long Island, New York. KEREN, 38, who is also known as David
Schmidt, is a resident of New City, New York. They are all out on
bail and their case is pending.
ZANIC, 48, is a resident of British Columbia, Canada.
His is currently detained and his case is pending.
If convicted of the charge contained in the Complaints,
JADIDIAN, CURSHEN, BRUCE GROSSMAN, GLENN GROSSMAN, COHEN, KEREN
and ZANIC each face a maximum sentence of 5 years in prison, as
well as a maximum fine of $250,000. If convicted of the charges
contained in the Indictment against him, CURTIS faces a total
maximum sentence of 25 years in prison.
Mr. GARCIA praised the work of the FBI, the Vancouver
Integrated Market Enforcement Team of the Royal Canadian Mounted
Police, and the United States Securities and Exchange Commission
for their assistance in this investigation.
Assistant United States Attorneys ALEXANDER J.
WILLSCHER, VIRGINIA CHAVEZ ROMANO, WILLIAM J. STELLMACH, LISA
BARONI and RAY LOHIER are in charge of the prosecution.
The charges contained in the Indictment and the
criminal Complaints are merely accusations, and the defendants
are presumed innocent unless and until proven guilty.