SEC: New York Pitchman, 73, Hawked ‘Illegal Offering’ For Murdoch Security & Investigations Inc. By Spinning Tall Tale Of ‘Anti-Piracy’ And ‘Anti-Terror’ Success On The ‘High Seas’
EDITOR’S NOTE: In the past 24 hours, the SEC has filed charges against two firms purportedly in the business of preventing terrorism. Read the PP Blog’s story about the first firm here.
The cavalcade of senior citizens implicated in securities schemes continues — as does the story about the bizarre nature of recent fraud cases in the white-collar arena.
Robert Goldstein, 73, of New York City, has been accused in federal court by the SEC of orchestrating a $1 million offering fraud for Murdoch Security & Investigations Inc. (MSI), a firm that allegedly placed ads in the Wall Street Journal last year promising “repayment of principal plus 22 percent interest per year.”
MSI also placed ads in Barron’s and Investor’s Business Daily for its securities, which were unregistered, the SEC said.
Goldstein was MSI’s senior vice president. His 53-year-old boss — Connecticut-based MSI CEO William C. Vassell — also has been accused by the SEC of orchestrating the alleged offering fraud.
But advertising in prominent publications to drive business to the firm was only part of the scam, the SEC said. Lying to customers who responded to the ads also drove the fraud, the agency alleged.
Described by the SEC as MSI’s “primary salesperson,” Goldstein “provided investors with a wide array of false and otherwise misleading information in an effort to sell the 22% Notes,” the agency said.
The falsities included “statements about the Company’s revenues, existing assets and overseas operations,” the SEC alleged.
Investors were told tales of fabulous success in Mexico, fantastic revenues for 2010 and the company’s “explosive” growth potential. And, according to the SEC, Goldstein spun a yarn that MSI’s “anti-piracy” and “anti-terror” business was “probably one of the largest … on the high seas” in 2011 and “that such business, including in Somalia and Yemen, was expected to yield $100 million to $300 million in revenue for MSI in subsequent years.”
In reality, the SEC said, “MSI’s internal documents reflect revenues that did not approach the numbers conveyed to potential investors; its total assets according to those documents were approximately $4 million, and it had no overseas operations whatsoever, let alone significant revenues from Mexico or a major presence “on the high seas.”
“The plan Goldstein outlined for investors, in explaining how MSI could afford to offer such high yields on the 22% Notes, focused on what Goldstein described as MSI’s expectation to purchase six or seven security companies to fuel increased revenues,” the agency continued.
“Contrary to this supposed plan, MSI not only failed to purchase any security companies with the money obtained from investors in the Notes; nearly all of the money raised from those investors was spent to fund Goldstein’s and Vassell’s salaries, fund the payments on the Notes themselves, and pay for various other of MSI’ s ongoing claimed expenses,” the agency alleged.