Securities Fraud Round-up

Fort Lauderdale, FLA scheme that resulted in charges of securities fraud, stock fraud, and other stock and securities violations was brought to light in the Sunshine State recently. The South Florida Business Journal (SFBJ) reported on November 25 that Timothy J. Huff, the former CEO of GlobeTel Communications Corp., pleaded not guilty in connection with a 16-count indictment for conspiracy to commit securities fraud.

Huff allegedly participated in a $20 million scheme to fraudulently inflate GlobeTel's revenue between 2002 and 2004. He is charged with falsifying financial reports, committing wire fraud, and lying to GlobeTel's outside auditor.

According to the summary in the SFBJ, the defendants created fraudulent invoices worth millions and reported fictitious transactions between GlobeTel and various telecom companies with regard to the purchase and sale of telecom minutes.

However, the US Attorney for the Southern District of Florida reports that "GlobeTel never bought or sold anything related to those invoices. Huff allegedly lied to the company's outside auditors and provided the falsified general ledger and created fraudulent CDRs to corroborate the fraudulent invoices."

Five years ago, in 2004 GlobeTel sold its assets to Sanswire, an enterprise that designs and builds specialized airships for the carriage of wireless communication. The deal was worth $2.8 million.

In January of last year the former CFO of GlobeTel pleaded guilty to charges that he had failed to report to the Internal Revenue Service (IRS) $2.7 million in stock compensation paid by the company to him as well as other corporate officers.

In October, a civil action was filed against Huff by the Securities and Exchange Commission.

Meanwhile, US Fed News reported on November 25 that Mark Alan Shapiro, Irving Stitsky, and William B. Foster were found guilty in a Manhattan court on charges of securities fraud, wire fraud, mail fraud and conspiracy after they stole more than $18 million from over 150 investors through private placement offerings.

The three founded a group of companies that operated under the name Cobalt, which purportedly engaged in the acquisition and development of multifamily real estate properties throughout the US. It is alleged that they established a telemarketing center in Great Neck, New York, where telephone calls were made to prospective Cobalt investors. The defendants and their employees solicited funds by making false and misleading oral and written representations about the investment for which the investors' funds were solicited.

The three men were each found guilty on two counts of securities fraud, one count of wire fraud, one count of mail fraud and one count of conspiracy.