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Jury Finds Former CEO Guilty in $110 Million Stock Fraud Case

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New York, NYThe former chief executive officer (CEO) of Industrial Enterprises of America Inc. was recently found guilty for playing a role in a $110 million stock fraud scheme, according to Bloomberg.

The news source reports that James W. Margulies was convicted in New York State Supreme Court on a number of charges including conspiracy, larceny and falsifying business records. He will reportedly be sentenced on August 9.

"The defendant’s pump-and-dump scheme artificially inflated stock prices before he sold off the shares, leaving honest investors holding worthless stock," said Manhattan District Attorney Cyrus R. Vance in a statement.

Margulies—a Cleveland, Ohio resident—was indicted along with 62-year-old Florida native John D. Mazzuto in May 2010 for allegedly creating the stock fraud scheme by falsely inflating stock prices, according to the news provider.

Mazzuto, who previously served as managing director at the former Chemical Bank, pleaded guilty to similar charges and testified against Margulies at the trial. Acting state Supreme Court Justice Gregory Carro reportedly set bail at $1.5 million, which was more than twice the bail at arraignment as Margulies was deemed to be a flight risk.

Prosecutors had accused Mazzuto of using money garnered from the scheme to purchase a new $3 million home in Southampton, New York, as well as a $2.5 million home in Palm Beach Gardens, Florida, according to the news source.

Margulies was accused of using the $7 million he obtained from the scheme to pay off a mortgage and back taxes, as part of his strategy to get out from "under a mountain of debt," according to Assistant District Attorney Garrett Lynch.

While Margulies and Mazzuto will undoubtedly face stiff penalties for their roles in the stock fraud scheme, a New Jersey company and its CEO were also recently accused of defrauding investors, according to The Record.

The news source reports that New Jersey authorities have accused medical technology company Energex Systems, Inc. and CEO Thomas J. Fagan of defrauding nearly 800 investors and using the funds to purchase jewelery, vacations and for political donations, among other things.

The lawsuit, filed by the New Jersey Bureau of Securities in Superior Court in Hackensack, claims Fagan spent more than $2 million in money from investors on himself and his wife, which would reportedly constitute a violation of the state's Uniform Securities Law.

"(Thomas) Fagan allegedly used investors' hard-earned money as his personal piggy bank," explained Attorney General Paula T. Dow, according to the news source. "We are bringing this action to hold Fagan accountable."


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