Securities Industry Commentator by Bill Singer Esq

March 16, 2018

File this one under I was really impressed by the over-the-top nature of this fraud and, frankly, found myself somewhat in awe of this defendant's audacity and creativity. Self-Proclaimed "Commissioner" Of The Office Of The Commissioner, "His Excellency" Brandon Jones, Guilty Of All Charges (DOJ Press Release)
Following an eight-day jury trial in the United States District Court for the Southern District of New York, Brandon Jones a/k/a "Brandon McGeer," a/k/a "Brandon Jones-McGeer," was convicted on all three-counts of passing fictitious government obligations, wire fraud, and conspiracy to commit wire fraud. What you might ask (go ahead, ask, otherwise we're gonna be here all day -- wonderful! thanks for asking!!) did Jones do? I can't make this up but he did, so lemme go slow here. Jones proclaimed himself the "Commissioner" of the "Office of the Commissioner," which he asserted was an Intergovernmental Organization (an "IGO"). As Jones apparently told those who would listen, the IGO Office of the Commissioner was funded by the federal government for its United Nations work. Okay, so, sure, Jones made up the whole IGO Office and his exalted role of Commissioner but let's give the guy some credit for managing to work the system and extract:

hundreds of thousands of dollars in goods and services using fake government purchase orders, government transportation requests, and other government payment documents.  Among many others, JONES defrauded a former Ambassador to the United Nations, who JONES lured into providing consulting services while working to secure funding for a humanitarian aid project that, due to JONES' fraud, never came to fruition.  JONES also obtained hundreds of thousands of dollars in free hotel stays, airline tickets, and other goods and services.

Among the things that I admire about Jones is that he thought big and dared to go to the edge and even over. Turns out that he had employees. Yup, not only did Commissioner Jones make up the Office of the Commissioner but he apparently hired Sandra Zongo as his "Deputy Commissioner." Alas, employee Zongo was convicted in 2017 of one count of impersonating an official or employee of the United States government; one count of wire fraud; one count of passing fictitious obligations; and one count of attempted benefits fraud.  

Now, not to get too carried away here, but, before DOJ stepped in here and arrested and tried Jones and Zongo, they were the subjects of a bitter extradition demand from the Kingdom of Wakanda. Apparently, Jones was some Chancellor in charge of the nation's Vibranium reserves and then he allegedly got involved with some porn actress and there was some lion goddess and he paid money to be transported out of the kingdom and wound up in New York's Orange County in a town called Wawayanda. Apparently he made his way to Philadelphia and then into New York City and seems to have hired some folks in Canada to book him a return flight to Wakanda under an assumed name.

Westchester Hedge Fund Manager Pleads Guilty To Securities Fraud (DOJ Press Release)
Former Scronic Macro Fund hedge-fund manager Michael Scronic pled guilty to one count of securities fraud guilty in connection with defrauding 45 investors of over $22 million from April 2010 to October 2017.  As set forth in part in the DOJ Press Release, Scronic:

told investors that the Fund had positive returns in all but one of the 22 quarters from January 2012 through June 2017, with the highest reported quarterly return being 13.4 percent in the fourth quarter of 2014.  In reality, the Fund lost money in 28 out of 29 quarters of its operation, with a total net loss of about $15.7 million before commissions.  The Fund's only positive quarter was its first quarter of operation in 2010.

As a result of these trading losses, the total assets SCRONIC claimed the Fund had in each quarter far exceeded its actual assets.  For example, SCRONIC sent account statements to investors that together showed total fund assets of $21.7 million as of June 30, 2017.  In actuality, on that date, the combined balance of SCRONIC's brokerage and bank accounts was just $102,376.
In addition to losing money on trades, SCRONIC used investor money for personal expenses.  His personal expenditures averaged more than $500,000 including monthly rent of $12,275 for his primary residence in Westchester, New York, mortgage payments on a vacation home in Stratton, Vermont, fees for multiple beach and country clubs, including a $30,000 payment to the Stratton Mountain Club in July 2017, and miscellaneous items charged to credit cards in amounts averaging more than $15,000 a month.

Merrill Lynch Employee and AllianceBernstein Work It Out In Unfair Competition Dispute ( Blog)
Everything is good until it's not. Particularly when it comes to an employee's decision to move on to a competitor. Once we add "former" to an employee's status, all hell often breaks out. At times, it all starts off with we love ya, we don't want ya to leave, watta we gotta do to get you to stay. Then it becomes good riddance to ya -- you were never a team player anyway. Then someone pours gasoline on a floor. Then someone lights and then tosses a match. And before you know it, we've set the building and everyone in it on fire. Other times, calmer heads seem to prevail and commonsense seems to squeeze its way into the midst of a lot of anger. In a recent FINRA arbitration, we got a AllianceBerstein former employee who apparently found peace and happiness at Merrill Lynch, but not so much peace and happiness as to preclude his former employer from filing a FINRA arbitration seeking seven figures in damages and an injunction. And then -- will Wall Street miracles never cease? -- but the combatants apparently sat down, tired to see it my way and your way, worked things out, and life goes on and everyone is happy, particularly the lawyers if they got paid. READ

(DOJ Press Release)
After having been arraigned on a three-count federal Indictment, Eberhard Reichert, the former Technical Manager of the Major Projects division of Siemens Business Services GmbH & Co. OGH (SBS), pled guilty to one count of conspiring to violate the anti-bribery, internal controls and books and records provisions of the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud. The plea is in connection with the payment of tens of millions of dollars in bribes to Argentine government officials to secure, implement and enforce a $1 billion contract to create national identity cards. READ the FULL TEXT PLEA AGREEMENT.
Navdeep Arora, a former partner in the Chicago office of McKinsey & Company Inc., pled guilty to one count of wire fraud in connection with having plotted with a former internal consultant at State Farm Mutual Automobile Insurance Co., Matthew Sorensen, to defraud both companies out of phony consulting fees. Additionally, Arora fraudulently obtained from McKinsey, State Farm and other McKinsey clients work-related travel reimbursements for what were personal trips. Arora was sentenced to two years in federal prison. Sorensen pled guilty to wire fraud and was sentenced to one year and one day in federal prison. As set forth in part in the DOJ Press Release;

According to the charges, their fraud scheme began in 2007.  Arora and Sorensen used two corporate entities - "Gabriel Solutions" and "Andy's BCB" - to defraud their employers out of the phony fees.  Sorensen billed McKinsey for the bogus work purportedly performed by the companies, while Arora allocated the fees to the State Farm projects to which he was assigned.  As a result, McKinsey and State Farm paid $38,265 for consulting services purportedly performed by "Andy's BCB," and $452,710 in fees billed by "Gabriel Solutions." 

Sorensen pocketed a large majority of the money, while Arora received a substantial salary and benefits from McKinsey for maintaining its business relationship with State Farm.

Executive of Yacht Sharing Club Admits to Operating Investment Fraud Scheme (DOJ Press Release)
President, CEO, and CFO of Waters Club, Andrew Deme, pled guilty to one count of conspiracy to commit mail and wire fraud in connection with an investment fraud scheme involving the solicitation of investors and business partners in a yachting venture. Waters Club promoters, Thomas Heaphy, Jr. and Brian Ferraioli, who recruited at least 12 investors to pay a total of at least $1,289,500 for Waters Club shares) pled guilty to the same charge. Heaphy's total gain from the scheme was $307,658, and Ferraioli's total gain was $297,546. As set forth in part in the DOJ Press Release, Deme admitted that:

promoters he hired made certain misrepresentations to prospective investors in Waters Club, including that money would be used to develop the business and fund the operations of Waters Club, and that promoters were not being paid commissions for recruiting investors.  In truth, DEME knew that approximately half of all the money paid by investors for shares of Waters Club was paid to the promoters as sales commissions.  Due in part to the payments to promoters, which totaled approximately $605,204, Waters Club lacked the capital to develop its membership-based club, did not pursue an IPO, and the shares purchased by investors were unsalable.