Among recent enforcement actions were the arrest of a former attorney on contempt charges in the wake of violations of the Employee Retirement Income Security Act.
In addition, the Securuties and Exchange Commission has charged the operators of a shell factory with creating phony companies and, in another case, charged two attorneys with fraud for defrauding escrow clients, while the Financial Industry Regulatory Authority charged a company and its CEO with fraudulent municipal bond sales.
Former Attorney Held for Contempt in ERISA Violations Case
A disbarred attorney and former employee benefit administrator has been arrested by federal marshals on a bench warrant after a court found him in contempt of orders to transfer assets in an ERISA case.
John Koresko V is being held pending his cooperation with a court order that would have had him transfer to the court-appointed independent fiduciary $1.68 million in assets he had taken from the Regional Employers Assurance Leagues Voluntary Employees' Beneficiary Association and the Single Employer Welfare Benefit Plan Trusts. The court also ordered him to transfer the title of ownership to real estate in the Caribbean island of Nevis that Koresko purchased using trust assets.
In February 2015, the court had awarded nearly $40 million to more than 400 death benefit plans across the country. The award resolved a 2009 U.S. Department of Labor lawsuit that followed an investigation by the Employee Benefits Security Administration that found Koresko and other defendants diverted tens of millions of dollars in plan assets through more than 21 accounts using more than 18 different entities at more than eight different banks.
The scheme spanned more than 12 years and saw assets from the plans' trusts used for real estate purchases in South Carolina and Nevis, to pay outside attorneys, lobbying expenses, operational expenses of Penn-Mont Benefit Services Inc., and Koresko's law firms, and for Koresko's personal expenses, such as boat rentals and utilities.
The court ordered Koresko to give the independent fiduciary power of attorney over the Nevis bank account, but instead he failed to comply, transferring the $1.68 million to another bank account under his control. He has also failed to transfer the real estate title as ordered by the court. As a result he was found in contempt of the court's orders and ordered to surrender to the Office of the U.S. Marshal, to be held until he complied; this he also failed to do. He was subsequently arrested.
SEC Charges Shell Factory Operators
A California stock promoter and a New Jersey lawyer have been charged by the SEC with fraud for creating sham companies and selling them until they were stopped by the SEC.
According to the agency, Imran Husain and Gregg Evan Jaclin essentially operated a shell factory enterprise by filing registration statements to form various startup companies and misleading potential investors to believe each company would be operating and profitable. The pair never intended to make the companies they started functional, instead simply planning to make money from their sale as empty shells. Husain and Jaclin created nine shell companies and sold seven, using essentially the same pattern. Husain created a business plan for each company, never intending to complete more than a few initial steps, and then convinced a friend, relative or acquaintance to become a puppet CEO to approve and sign corporate documents at his direction.
For his part, Jaclin supplied bogus legal documents that Husain used to conduct sham private sales of a company's shares of stock to "straw shareholders" who were recruited and given cash to pay for the stock they purchased plus a commission. Some of the recorded shareholders were not even real people.
The pair filed registration statements for initial public offerings, claiming that a particular business plan would be implemented when they had no intention of doing so. They also failed to include in the registration statements any mention of Husain starting and controlling the company.
They then filed phony quarterly and annual reports once a company was publicly registered, using a lot of the same faked information they'd already used in the registration statements.
Husain brought in about $2.25 million in total proceeds when the empty shell companies were sold, and Jaclin and his firm received nearly $225,000 for their legal services.
