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U.S. Department of Justice PRESS RELEASE FOR IMMEDIATE RELEASE For Information, Monday, September 24, 2007
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Washington, D.C. - United States Attorney Jeffrey A. Taylor, FBI Supervisory Agent in Charge Jennifer Smith Love and U.S. Postal Inspection Service Inspector in Charge Guy Cottrell jointly announced that Florida resident Paul C. Harary pled guilty today in United States District Court for the District of Columbia before United States Magistrate Judge John Facciola to one count of conspiracy to commit mail fraud and wire fraud in connection with a multi-million dollar securities market manipulation and securities broker kickback scheme which victimized more than 45 unsuspecting investors. At sentencing, Paul Harary faces a maximum term of imprisonment of 20 years, and a fine of $250,000. Under federal sentencing guidelines, Harary faces a likely range of 63 to 78 months in prison. A sentencing date has not yet been set by the Court.
According to the government’s evidence, from January 2004 through September 27, 2005, Paul Harary conspired with a Florida stockbroker and others: to manipulate the price of two publicly traded companies, American Financial Holdings, Inc. (“AFHJ”) and Secure Solutions Holdings, Inc. (“SSLX”), to grossly inflated levels; to defraud customers of the Florida stockbroker; and to deprive the clients of the Florida broker of the honest services of their broker by paying substantial kickbacks and bribes to the Florida broker in connection with their market manipulation and mail and wire fraud scheme. Harary and the Florida stockbroker defrauded the stockbroker’s customers by secretly acquiring control of the free trading shares of AFHJ and SSLX stock, using matched orders to manipulate the price of the companies’ stocks to grossly inflated levels, and by having the stockbroker’s customer accounts purchase shares of AFHJ and SSLX stock at artificially high prices in the market at the same time that Harary’s nominees sold the shares into the market. Harary and the Florida stockbroker closely coordinated these buy and sell orders to assure that Harary’s nominees could sell the AFHJ and SSLX shares to the broker’s customers at grossly inflated prices. Thereafter, Harary and the Florida stockbroker secretly split profits from the fraudulent sales of AFHJ and SSLX stock to the broker’s customers. In certain instances, Harary secretly gave envelopes of cash to the Florida stockbroker at a Florida gas station. In other instances, in order to disguise the payment of hundreds of thousands of dollars of secret kick-back payments to the Florida stockbroker, nominees of Harary made payments totaling approximately $820,000 to a company controlled by the Florida stockbroker for 170,000 restricted shares of AFHJ even though the restricted stock was not worth anything near $820,000. While Harary, the Florida stockbroker and other co-conspirators profited handsomely from the stock manipulation fraud scheme, the unsuspecting customers of the Florida stockbroker were left with worthless shares of the two shell companies and lost approximately $3.8 million.
The criminal investigation of the underlying stock manipulation and broker kickback scheme aggressively continues.
In announcing the guilty plea, United States Attorney Taylor stated, “This prosecution sends a clear message to those who use shell companies, market manipulation, and broker kick back schemes to cheat investors and undermine the integrity of our securities markets. We will find you and vigorously prosecute you to the fullest extent of the law. Today marks the second time in less than three months that we have announced a successful prosecution of a multimillion dollar securities market manipulation scheme, and these actions demonstrate our unwavering commitment to protect investors and our Nation’s securities markets.”
United States Attorney Taylor, FBI Special Agent in Charge Love, and U.S. Postal Inspection Service Inspector in Charge Cottrell commended FBI Special Agent Daniel Parker and Postal Inspection Service Agent Kevin Towers for their outstanding work in vigorously investigating the case. They applauded the hard work of Securities and Exchange Commission Enforcement attorneys Joshua Felker, Matthew Skidmore, and John Lehman, and former SEC branch chief Samuel Draddy in doggedly investigating the scheme and in filing the SEC’s civil enforcement action today. Finally, they praised Assistant United States Attorneys Jonathan R. Barr and John D. Griffith, who investigated and prosecuted this matter, and Legal Assistants April Peeler, Lisa Robinson, and Teesha Tobias, who assisted in the investigation and prosecution.