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   Non-TechGENI: GenesisIntermedia.com Inc


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To: afrayem onigwecher who wrote (495)7/6/2003 3:31:47 PM
From: StockDung
   of 574
 
A Diamond Is Forever: amfar.org

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To: StockDung who wrote (476)1/12/2004 11:46:04 PM
From: trueblood986
   of 574
 
I dont get what this has to do with GENI

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From: StockDung4/10/2004 4:07:02 PM
   of 574
 
Adnan Khashoggi:Substantial rewards are offered for information leading to the assets of:Adnan Khashoggi
adnankhashoggi.com

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To: tradermike_1999 who wrote (440)1/10/2005 12:51:01 PM
From: StockDung
   of 574
 
.GENI Ramy El-Batrawi fans. madcowprod.com

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To: trueblood986 who wrote (503)2/8/2005 6:19:12 AM
From: Glenn Petersen
   of 574
 
Financial Commentator Arrested for Fraud

nytimes.com

By BLOOMBERG NEWS

Published: February 8, 2005

A financial commentator who appeared on CNBC, CNN and Bloomberg Television was arrested yesterday on charges of failing to disclose that he received more than $1 million in cash and stock from a marketing company whose shares he promoted.

Courtney Smith, 53, was arrested at his Manhattan apartment after a nine-count indictment from a federal grand jury, according to the United States attorney's office in Los Angeles. Mr. Smith owns Courtney Smith & Company, a money management firm in New York.

Mr. Smith promoted the stock of GenesisIntermedia, which is now defunct, as a "very hot speculative pick" and "very cheap from my perspective" in television appearances from late 1999 to mid-2001, according to the indictment. Unknown to viewers, Mr. Smith had received $100,000 cash and company shares valued at $1.2 million, the indictment said.

The Securities and Exchange Commission also sued Mr. Smith yesterday for fraud in United States District Court in Los Angeles. The suit seeks unspecified monetary penalties.

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From: StockDung3/2/2005 7:21:15 PM
   of 574
 
LUNCH WITH THE CHAIRMAN
by SEYMOUR M. HERSH
Why was Richard Perle meeting with Adnan Khashoggi?

Issue of 2003-03-17
Posted 2003-03-10

At the peak of his deal-making activities, in the nineteen-seventies, the Saudi-born businessman Adnan Khashoggi brokered billions of dollars in arms and aircraft sales for the Saudi royal family, earning hundreds of millions in commissions and fees. Though never convicted of wrongdoing, he was repeatedly involved in disputes with federal prosecutors and with the Securities and Exchange Commission, and in recent years he has been in litigation in Thailand and Los Angeles, among other places, concerning allegations of stock manipulation and fraud. During the Reagan Administration, Khashoggi was one of the middlemen between Oliver North, in the White House, and the mullahs in Iran in what became known as the Iran-Contra scandal. Khashoggi subsequently claimed that he lost ten million dollars that he had put up to obtain embargoed weapons for Iran which were to be bartered (with Presidential approval) for American hostages. The scandals of those times seemed to feed off each other: a congressional investigation revealed that Khashoggi had borrowed much of the money for the weapons from the Bank of Credit and Commerce International (B.C.C.I.), whose collapse, in 1991, defrauded thousands of depositors and led to years of inquiry and litigation.

Khashoggi is still brokering. In January of this year, he arranged a private lunch, in France, to bring together Harb Saleh al-Zuhair, a Saudi industrialist whose family fortune includes extensive holdings in construction, electronics, and engineering companies throughout the Middle East, and Richard N. Perle, the chairman of the Defense Policy Board, who is one of the most outspoken and influential American advocates of war with Iraq.

The Defense Policy Board is a Defense Department advisory group composed primarily of highly respected former government officials, retired military officers, and academics. Its members, who serve without pay, include former national-security advisers, Secretaries of Defense, and heads of the C.I.A. The board meets several times a year at the Pentagon to review and assess the country’s strategic defense policies.

Perle is also a managing partner in a venture-capital company called Trireme Partners L.P., which was registered in November, 2001, in Delaware. Trireme’s main business, according to a two-page letter that one of its representatives sent to Khashoggi last November, is to invest in companies dealing in technology, goods, and services that are of value to homeland security and defense. The letter argued that the fear of terrorism would increase the demand for such products in Europe and in countries like Saudi Arabia and Singapore.

The letter mentioned the firm’s government connections prominently: “Three of Trireme’s Management Group members currently advise the U.S. Secretary of Defense by serving on the U.S. Defense Policy Board, and one of Trireme’s principals, Richard Perle, is chairman of that Board.” The two other policy-board members associated with Trireme are Henry Kissinger, the former Secretary of State (who is, in fact, only a member of Trireme’s advisory group and is not involved in its management), and Gerald Hillman, an investor and a close business associate of Perle’s who handles matters in Trireme’s New York office. The letter said that forty-five million dollars had already been raised, including twenty million dollars from Boeing; the purpose, clearly, was to attract more investors, such as Khashoggi and Zuhair.

Perle served as a foreign-policy adviser in George W. Bush’s Presidential campaign—he had been an Assistant Secretary of Defense under Ronald Reagan—but he chose not to take a senior position in the Administration. In mid-2001, however, he accepted an offer from Secretary of Defense Donald Rumsfeld to chair the Defense Policy Board, a then obscure group that had been created by the Defense Department in 1985. Its members (there are around thirty of them) may be outside the government, but they have access to classified information and to senior policymakers, and give advice not only on strategic policy but also on such matters as weapons procurement. Most of the board’s proceedings are confidential.

As chairman of the board, Perle is considered to be a special government employee and therefore subject to a federal Code of Conduct. Those rules bar a special employee from participating in an official capacity in any matter in which he has a financial interest. “One of the general rules is that you don’t take advantage of your federal position to help yourself financially in any way,” a former government attorney who helped formulate the Code of Conduct told me. The point, the attorney added, is to “protect government processes from actual or apparent conflicts.”

Advisory groups like the Defense Policy Board enable knowledgeable people outside government to bring their skills and expertise to bear, in confidence, on key policy issues. Because such experts are often tied to the defense industry, however, there are inevitable conflicts. One board member told me that most members are active in finance and business, and on at least one occasion a member has left a meeting when a military or an intelligence product in which he has an active interest has come under discussion.

Four members of the Defense Policy Board told me that the board, which met most recently on February 27th and 28th, had not been informed of Perle’s involvement in Trireme. One board member, upon being told of Trireme and Perle’s meeting with Khashoggi, exclaimed, “Oh, get out of here. He’s the chairman! If you had a story about me setting up a company for homeland security, and I’ve put people on the board with whom I’m doing that business, I’d be had”—a reference to Gerald Hillman, who had almost no senior policy or military experience in government before being offered a post on the policy board. “Seems to me this is at the edge of or off the ethical charts. I think it would stink to high heaven.”

Hillman, a former McKinsey consultant, stunned at least one board member at the February meeting when he raised questions about the validity of Iraq’s existing oil contracts. “Hillman said the old contracts are bad news; he said we should kick out the Russians and the French,” the board member told me. “This was a serious conversation. We’d become the brokers. Then we’d be selling futures in the Iraqi oil company. I said to myself, ‘Oh, man. Don’t go down that road.’” Hillman denies making such statements at the meeting.

Larry Noble, the executive director of the Washington-based Center for Responsive Politics, a nonprofit research organization, said of Perle’s Trireme involvement, “It’s not illegal, but it presents an appearance of a conflict. It’s enough to raise questions about the advice he’s giving to the Pentagon and why people in business are dealing with him.” Noble added, “The question is whether he’s trading off his advisory-committee relationship. If it’s a selling point for the firm he’s involved with, that means he’s a closer—the guy you bring in who doesn’t have to talk about money, but he’s the reason you’re doing the deal.”

Perle’s association with Trireme was not his first exposure to the link between high finance and high-level politics. He was born in New York City, graduated from the University of Southern California in 1964, and spent a decade in Senate-staff jobs before leaving government in 1980, to work for a military-consulting firm. The next year, he was back in government, as Assistant Secretary of Defense. In 1983, he was the subject of a New York Times investigation into an allegation that he recommended that the Army buy weapons from an Israeli company from whose owners he had, two years earlier, accepted a fifty-thousand-dollar fee. Perle later acknowledged that he had accepted the fee, but vigorously denied any wrongdoing. He had not recused himself in the matter, he explained, because the fee was for work he had done before he took the Defense Department job. He added, “The ultimate issue, of course, was a question of procurement, and I am not a procurement officer.” He was never officially accused of any ethical violations in the matter. Perle served in the Pentagon until 1987 and then became deeply involved in the lobbying and business worlds. Among other corporate commitments, he now serves as a director of a company doing business with the federal government: the Autonomy Corporation, a British firm that recently won a major federal contract in homeland security. When I asked him about that contract, Perle told me that there was no possible conflict, because the contract was obtained through competitive bidding, and “I never talked to anybody about it.”

Under Perle’s leadership, the policy board has become increasingly influential. He has used it as a bully pulpit, from which to advocate the overthrow of Saddam Hussein and the use of preëmptive military action to combat terrorism. Perle had many allies for this approach, such as Paul Wolfowitz, the Deputy Secretary of Defense, but there was intense resistance throughout the bureaucracy—most notably at the State Department. Preëmption has since emerged as the overriding idea behind the Administration’s foreign policy. One former high-level intelligence official spoke with awe of Perle’s ability to “radically change government policy” even though he is a private citizen. “It’s an impressive achievement that an outsider can have so much influence, and has even been given an institutional base for his influence.”

Perle’s authority in the Bush Administration is buttressed by close association, politically and personally, with many important Administration figures, including Wolfowitz and Douglas Feith, the Under-Secretary of Defense for Policy, who is the Pentagon’s third-ranking civilian official. In 1989, Feith created International Advisors Incorporated, a lobbying firm whose main client was the government of Turkey. The firm retained Perle as an adviser between 1989 and 1994. Feith got his current position, according to a former high-level Defense Department official, only after Perle personally intervened with Rumsfeld, who was skeptical about him. Feith was directly involved in the strategic planning and conduct of the military operations against the Taliban in Afghanistan; he now runs various aspects of the planning of the Iraqi war and its aftermath. He and Perle share the same views on many foreign-policy issues. Both have been calling for Saddam Hussein’s removal for years, long before September 11th. They also worked together, in 1996, to prepare a list of policy initiatives for Benjamin Netanyahu, shortly after his election as the Israeli Prime Minister. The suggestions included working toward regime change in Iraq. Feith and Perle were energetic supporters of Ahmad Chalabi, the controversial leader of the anti-Saddam Iraqi National Congress, and have struggled with officials at the State Department and the C.I.A. about the future of Iraq.

Perle has also been an outspoken critic of the Saudi government, and Americans who are in its pay. He has often publicly rebuked former American government officials who are connected to research centers and foundations that are funded by the Saudis, and told the National Review last summer, “I think it’s a disgrace. They’re the people who appear on television, they write op-ed pieces. The Saudis are a major source of the problem we face with terrorism. That would be far more obvious to people if it weren’t for this community of former diplomats effectively working for this foreign government.” In August, the Saudi government was dismayed when the Washington Post revealed that the Defense Policy Board had received a briefing on July 10th from a Rand Corporation analyst named Laurent Murawiec, who depicted Saudi Arabia as an enemy of the United States, and recommended that the Bush Administration give the Saudi government an ultimatum to stop backing terrorism or face seizure of its financial assets in the United States and its oil fields. Murawiec, it was later found, is a former editor of the Executive Intelligence Review, a magazine controlled by Lyndon H. LaRouche, Jr., the perennial Presidential candidate, conspiracy theorist, and felon. According to Time, it was Perle himself who had invited Murawiec to make his presentation.

Perle’s hostility to the politics of the Saudi government did not stop him from meeting with potential Saudi investors for Trireme. Khashoggi and Zuhair told me that they understood that one of Trireme’s objectives was to seek the help of influential Saudis to win homeland-security contracts with the Saudi royal family for the businesses it financed. The profits for such contracts could be substantial. Saudi Arabia has spent nearly a billion dollars to survey and demarcate its eight-hundred-and-fifty-mile border with Yemen, and the second stage of that process will require billions more. Trireme apparently turned to Adnan Khashoggi for help.

Last month, I spoke with Khashoggi, who is sixty-seven and is recovering from open-heart surgery, at his penthouse apartment, overlooking the Mediterranean in Cannes. “I was the intermediary,” he said. According to Khashoggi, he was first approached by a Trireme official named Christopher Harriman. Khashoggi said that Harriman, an American businessman whom he knew from his jet-set days, when both men were fixtures on the European social scene, sent him the Trireme pitch letter. (Harriman has not answered my calls.) Khashoggi explained that before Christmas he and Harb Zuhair, the Saudi industrialist, had met with Harriman and Gerald Hillman in Paris and had discussed the possibility of a large investment in Trireme.

Zuhair was interested in more than the financial side; he also wanted to share his views on war and peace with someone who had influence with the Bush Administration. Though a Saudi, he had been born in Iraq, and he hoped that a negotiated, “step by step” solution could be found to avoid war. Zuhair recalls telling Harriman and Hillman, “If we have peace, it would be easy to raise a hundred million. We will bring development to the region.” Zuhair’s hope, Khashoggi told me, was to combine opportunities for peace with opportunities for investment. According to Khashoggi, Hillman and Harriman said that such a meeting could be arranged. Perle emerged, by virtue of his position on the policy board, as a natural catch; he was “the hook,” Khashoggi said, for obtaining the investment from Zuhair. Khashoggi said that he agreed to try to assemble potential investors for a private lunch with Perle.

The lunch took place on January 3rd at a seaside restaurant in Marseilles. (Perle has a vacation home in the South of France.) Those who attended the lunch differ about its purpose. According to both Khashoggi and Zuhair, there were two items on the agenda. The first was to give Zuhair a chance to propose a peaceful alternative to war with Iraq; Khashoggi said that he and Perle knew that such an alternative was far-fetched, but Zuhair had recently returned from a visit to Baghdad, and was eager to talk about it. The second, more important item, according to Khashoggi and Zuhair, was to pave the way for Zuhair to put together a group of ten Saudi businessmen who would invest ten million dollars each in Trireme.

“It was normal for us to see Perle,” Khashoggi told me. “We in the Middle East are accustomed to politicians who use their offices for whatever business they want. I organized the lunch for the purpose of Harb Zuhair to put his language to Perle. Perle politely listened, and the lunch was over.” Zuhair, in a telephone conversation with me, recalled that Perle had made it clear at the lunch that “he was above the money. He said he was more involved in politics, and the business is through the company”—Trireme. Perle, throughout the lunch, “stuck to his idea that ‘we have to get rid of Saddam,’” Zuhair said. As of early March, to the knowledge of Zuhair, no Saudi money had yet been invested in Trireme.

In my first telephone conversation with Gerald Hillman, in mid-February, before I knew of the involvement of Khashoggi and Zuhair, he assured me that Trireme had “nothing to do” with the Saudis. “I don’t know what you can do with them,” he said. “What we saw on September 11th was a grotesque manifestation of their ideology. Americans believe that the Saudis are supporting terrorism. We have no investment from them, or with them.” (Last week, he acknowledged that he had met with Khashoggi and Zuhair, but said that the meeting had been arranged by Harriman and that he hadn’t known that Zuhair would be there.) Perle, he insisted in February, “is not a financial creature. He doesn’t have any desire for financial gain.”

Perle, in a series of telephone interviews, acknowledged that he had met with two Saudis at the lunch in Marseilles, but he did not divulge their identities. (At that time, I still didn’t know who they were.) “There were two Saudis there,” he said. “But there was no discussion of Trireme. It was never mentioned and never discussed.” He firmly stated, “The lunch was not about money. It just would never have occurred to me to discuss investments, given the circumstances.” Perle added that one of the Saudis had information that Saddam was ready to surrender. “His message was a plea to negotiate with Saddam.”

When I asked Perle whether the Saudi businessmen at the lunch were being considered as possible investors in Trireme, he replied, “I don’t want Saudis as such, but the fund is open to any investor, and our European partners said that, through investment banks, they had had Saudis as investors.” Both Perle and Hillman stated categorically that there were currently no Saudi investments.

Khashoggi professes to be amused by the activities of Perle and Hillman as members of the policy board. As Khashoggi saw it, Trireme’s business potential depended on a war in Iraq taking place. “If there is no war,” he told me, “why is there a need for security? If there is a war, of course, billions of dollars will have to be spent.” He commented, “You Americans blind yourself with your high integrity and your democratic morality against peddling influence, but they were peddling influence.”

When Perle’s lunch with Khashoggi and Zuhair, and his connection to Trireme, became known to a few ranking members of the Saudi royal family, they reacted with anger and astonishment. The meeting in Marseilles left Perle, one of the kingdom’s most vehement critics, exposed to a ferocious counterattack.

Prince Bandar bin Sultan, who has served as the Saudi Ambassador to the United States for twenty years, told me that he had got wind of Perle’s involvement with Trireme and the lunch in Marseilles. Bandar, who is in his early fifties, is a prominent member of the royal family (his father is the defense minister). He said that he was told that the contacts between Perle and Trireme and the Saudis were purely business, on all sides. After the 1991 Gulf War, Bandar told me, Perle had been involved in an unsuccessful attempt to sell security systems to the Saudi government, “and this company does security systems.” (Perle confirmed that he had been on the board of a company that attempted to make such a sale but said he was not directly involved in the project.)

“There is a split personality to Perle,” Bandar said. “Here he is, on the one hand, trying to make a hundred-million-dollar deal, and, on the other hand, there were elements of the appearance of blackmail—‘If we get in business, he’ll back off on Saudi Arabia’—as I have been informed by participants in the meeting.”

As for Perle’s meeting with Khashoggi and Zuhair, and the assertion that its purpose was to discuss politics, Bandar said, “There has to be deniability, and a cover story—a possible peace initiative in Iraq—is needed. I believe the Iraqi events are irrelevant. A business meeting took place.”

Zuhair, however, was apparently convinced that, thanks to his discussions with Trireme, he would have a chance to enter into a serious discussion with Perle about peace. A few days after the meeting in Paris, Hillman had sent Khashoggi a twelve-point memorandum, dated December 26, 2002, setting the conditions that Iraq would have to meet. “It is my belief,” the memorandum stated, “that if the United States obtained the following results it would not go to war against Iraq.” Saddam would have to admit that “Iraq has developed, and possesses, weapons of mass destruction.” He then would be allowed to resign and leave Iraq immediately, with his sons and some of his ministers.

Hillman sent Khashoggi a second memorandum a week later, the day before the lunch with Perle in Marseilles. “Following our recent discussions,” it said, “we have been thinking about an immediate test to ascertain that Iraq is sincere in its desire to surrender.” Five more steps were outlined, and an ambitious final request was made: that Khashoggi and Zuhair arrange a meeting with Prince Nawaf Abdul Aziz, the Saudi intelligence chief, “so that we can assist in Washington.”

Both Khashoggi and Zuhair were skeptical of the memorandums. Zuhair found them “absurd,” and Khashoggi told me that he thought they were amusing, and almost silly. “This was their thinking?” he recalled asking himself. “There was nothing to react to. While Harb was lobbying for Iraq, they were lobbying for Perle.”

In my initial conversation with Hillman, he said, “Richard had nothing to do with the writing of those letters. I informed him of it afterward, and he never said one word, even after I sent them to him. I thought my ideas were pretty clear, but I didn’t think Saddam would resign and I didn’t think he’d go into exile. I’m positive Richard does not believe that any of those things would happen.” Hillman said that he had drafted the memorandums with the help of his daughter, a college student. Perle, for his part, told me, “I didn’t write them and didn’t supply any content to them. I didn’t know about them until after they were drafted.”

The views set forth in the memorandums were, indeed, very different from those held by Perle, who has said publicly that Saddam will leave office only if he is forced out, and from those of his fellow hard-liners in the Bush Administration. Given Perle’s importance in American decision-making, and the risks of relying on a deal-maker with Adnan Khashoggi’s history, questions remain about Hillman’s drafting of such an amateurish peace proposal for Zuhair. Prince Bandar’s assertion—that the talk of peace was merely a pretext for some hard selling—is difficult to dismiss.

Hillman’s proposals, meanwhile, took on an unlikely life of their own. A month after the lunch, the proposals made their way to Al Hayat, a Saudi-owned newspaper published in London. If Perle had ever intended to dissociate himself from them, he did not succeed. The newspaper, in a dispatch headlined “washington offers to avert war in return for an international agreement to exile saddam,” characterized Hillman’s memorandums as “American” documents and said that the new proposals bore Perle’s imprimatur. The paper said that Perle and others had attended a series of “secret meetings” in an effort to avoid the pending war with Iraq, and “a scenario was discussed whereby Saddam Hussein would personally admit that his country was attempting to acquire weapons of mass destruction and he would agree to stop trying to acquire these weapons while he awaits exile.”

A few days later, the Beirut daily Al Safir published Arabic translations of the memorandums themselves, attributing them to Richard Perle. The proposals were said to have been submitted by Perle, and to “outline Washington’s future visions of Iraq.” Perle’s lunch with two Saudi businessmen was now elevated by Al Safir to a series of “recent American-Saudi negotiations” in which “the American side was represented by Richard Perle.” The newspaper added, “Publishing these documents is important because they shed light on the story of how war could have been avoided.” The documents, of course, did nothing of the kind.

When Perle was asked whether his dealings with Trireme might present the appearance of a conflict of interest, he said that anyone who saw such a conflict would be thinking “maliciously.” But Perle, in crisscrossing between the public and the private sectors, has put himself in a difficult position—one not uncommon to public men. He is credited with being the intellectual force behind a war that not everyone wants and that many suspect, however unfairly, of being driven by American business interests. There is no question that Perle believes that removing Saddam from power is the right thing to do. At the same time, he has set up a company that may gain from a war. In doing so, he has given ammunition not only to the Saudis but to his other ideological opponents as well.

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From: StockDung10/1/2005 6:26:35 PM
   of 574
 
"A Long Island, N.Y. Internet advertising company filed a lawsuit against CNN analyst Courtney Smith (among other defendants) for "talking up" AppOnline.com's stock when he allegedly had a stake, according to an article in the New York Law Journal earlier this year. Cyber Media reportedly asserts that it agreed to a sale of the company to Apponline.com in a stock-for-stock purchase agreement after Apponline.com principals directed Cyber Media officers to watch a CNN program in which Smith said that Apponline.com was a "double your money stock." The article said Cyber Media alleged that Smith was an officer in the venture capital fund Inculab, whose stock was directly tied to Apponline.com, and that he benefited from the "double your money stock" statement."

3/14/02 | |

Seven Indicted In Internet Mortgage Fraud Scheme

By Sam Garcia
MortgageDaily.com

The U.S. Attorney's Long Island office has filed two indictments against seven defendants in 2 cases related to a bankrupt online mortgage lender. Filed in the U.S. District Court, Eastern District of New York, the indictment accuses the defendants of deceiving investors and warehouse lenders, manipulating the publicly traded shares of bankrupt AppOnline.com, Inc. and using warehouse funds -- intended for loan fundings -- for daily operations.

Previously known as Island Mortgage Network Financial Corporation, the publicly traded company's "chief venture" was Island Mortgage Network, Inc. a retail residential mortgage banker with more than 50 offices in 17 states by June 2000. According to the indictment, the company changed its name to AppOnline.com in 1999.

The defendants named in the first case are Carl Delia, Donald Catapano and Craig Brandwein, each a registered representative; and George Carhart & Rocco Siclari, undisclosed principals of a New York broker-dealer where defendant Ashley Nemiroff served as president and trader.

Paul Skulsky -- named as a coconspirator in the case but not as a defendant -- was an undisclosed principal of AppOnline.com who owned his interest through two corporations. USA Today reported in July 2000 that Skulsky served four years in prison for tax evasion, mail fraud and racketeering in connection with a cable TV company called Cable/Tel, according to public records. His brother, Jeff Skulsky, was president of AppOnline.com.

The U.S. Attorney alleges that "a principal goal of the coconspirators was to manipulate" the share price of AppOnline.com "so that it would remain artificially high." Some of the defendants are accused of accepting substantial undisclosed payments -- in the form of cash, securities and other items of value -- as compensation for recommending and selling the stock to investors. According to the indictment, the secret payments were often as much as 50% of the price of the securities involved.

Several companies were allegedly used by the defendants to hide their ownership.

A separate indictment was filed against Jeffrey Schneider, a CPA and auditor accused of using "a number of misleading accounting entries" to hide AppOnline.com's true financial condition. Schneider was extensively involved in the accounting work for AppOnline.com, according to the indictment, and eventually maintained an office at the company.

That indictment accuses AppOnline.com of directing warehouse lenders -- including Residential Mortgage Services, Prudential Securities Credit Corp. and Greenwich Capital Financial Products -- to wire mortgage funding proceeds to escrow accounts secretly controlled by AppOnline.com and its principals. The company was able to use warehouse proceeds from one loan to make up the "haircut" -- or two percent of the loan that it was supposed fund -- on other loans. It also allegedly used the warehouse proceeds to illegally fund its operating expenses.

The indictment said that eventually, the company began falsely representing that loans were ready to close. If the loan did not close within five days, AppOnline.com would go to another warehouse lender to fund the loan and payoff the previous warehouse lender. By June 2000, the company had $37 million in outstanding loans due and needed $30 million to cover outstanding checks. At that point, AppOnline.com's primary warehouse lender shut down the line. This was followed by a revocation of its license by the New York State Banking Department and a Chapter 11 bankruptcy petition.

A July 2000 Specialty Lender Weekly article said that at that point, the company had collected fees from consumers in connection with roughly $150 million in loans that had yet to close. That story went on to say that AppOnline.com's acquisition strategy suggested that it had been urgently chasing cash or cash-ready assets. In just over a year, the company reportedly made nine acquisitions, primarily of small mortgage banks that do only originations.

The second indictment went on to say that Schneider's accounting improprieties enabled AppOnline.com to provide financial statements to the Securities and Exchange Commmisiion and to its warehouse lenders that allowed it to remain in business far longer than it would have with legitimate financial statements. The warehouse liabilities were disguised in the financial statements as a payable to a related party. This debt, which ultimately grew to approximately $47 million, was partially offset by the issuance of more than 18 million shares of AppOnline.com's stock.

A Long Island, N.Y. Internet advertising company filed a lawsuit against CNN analyst Courtney Smith (among other defendants) for "talking up" AppOnline.com's stock when he allegedly had a stake, according to an article in the New York Law Journal earlier this year. Cyber Media reportedly asserts that it agreed to a sale of the company to Apponline.com in a stock-for-stock purchase agreement after Apponline.com principals directed Cyber Media officers to watch a CNN program in which Smith said that Apponline.com was a "double your money stock." The article said Cyber Media alleged that Smith was an officer in the venture capital fund Inculab, whose stock was directly tied to Apponline.com, and that he benefited from the "double your money stock" statement.



Copyright © 2002 MortgageDaily.com
Distributed by
Mortgage Bankers Association
Washington, DC

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From: StockDung10/23/2005 4:58:24 PM
   of 574
 
His wealth brought him closer to the most prominent Saudi families. In his book, "The Kingdom: Arabia and the House of Saud" (Harcourt Brace Jovanovich, 1981), Robert Lacey describes bin Laden's ties with Adnan Kashoggi of the famous Saudi family. Mohammed bin Laden was indirectly responsible for Adnan Kashoggi's fortune, writes Lacey.

In the 1950s, Kashoggi returned to Saudi Arabia from the United States. He met with Mohammed bin Laden, who was a friend of his father. Bin Laden told him that he was urgently in need of trucks. Kashoggi promised to help. He put bin Laden in contact with an American truck manufacturer whom he'd known during his college years.

According to Lacey, a half-million-dollar deal was closed several weeks later and Kashoggi received $25,000 in commission from the American manufacturer. He sent the check to bin Laden, who promptly sent back a check for double the amount. Don't be ashamed to take a commission, he told Kashoggi. And this is how Kashoggi's career as a middleman began, writes Lacey.

64.233.187.104

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To: Glenn Petersen who wrote (506)12/3/2005 7:17:13 AM
From: Glenn Petersen
   of 574
 
A jury lets Courtney Smith off the hook:

Commentator Acquitted in Fraud Trial

By BLOOMBERG NEWS
Published: December 3, 2005

Courtney D. Smith, a financial commentator who was accused of failing to disclose payments by the now-defunct GenesisIntermedia to promote the company's stock, was acquitted by a federal jury.

The jury in Los Angeles acquitted Mr. Smith, 53, of all 10 counts on Thursday, Thelen Reid & Priest, the law firm representing him said yesterday. The district court previously dismissed one charge for lack of evidence, the firm said. Mr. Smith owned a money management firm in New York and appeared on CNBC, CNN and Bloomberg Television.

Prosecutors failed to persuade the jury that deals Mr. Smith conducted with GenesisIntermedia were sham transactions to hide compensation in exchange for stock promotions on financial TV programs, George Newhouse Jr., Mr. Smith's lawyer, said.

The evidence showed that they were proper business transactions and that Mr. Smith disclosed that he held a big position in GenesisIntermedia after he sold his Web site to the company in exchange for stock, Mr. Newhouse said.

Mr. Smith still faces a civil suit.

nytimes.com

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To: Glenn Petersen who wrote (510)12/5/2005 10:41:41 AM
From: StockDung
   of 574
 
"A Long Island, N.Y. Internet advertising company filed a lawsuit against CNN analyst COURTNEY SMITH (among other defendants) for "talking up" AppOnline.com's stock when he allegedly had a stake, according to an article in the New York Law Journal earlier this year. Cyber Media reportedly asserts that it agreed to a sale of the company to Apponline.com in a stock-for-stock purchase agreement after Apponline.com principals directed Cyber Media officers to watch a CNN program in which SMITH said that Apponline.com was a "double your money stock." The article said Cyber Media alleged that SMITH was an officer in the venture capital fund Inculab, whose stock was directly tied to Apponline.com, and that he benefited from the "double your money stock" statement."

3/14/02 | |

Seven Indicted In Internet Mortgage Fraud Scheme

By Sam Garcia
MortgageDaily.com

The U.S. Attorney's Long Island office has filed two indictments against seven defendants in 2 cases related to a bankrupt online mortgage lender. Filed in the U.S. District Court, Eastern District of New York, the indictment accuses the defendants of deceiving investors and warehouse lenders, manipulating the publicly traded shares of bankrupt AppOnline.com, Inc. and using warehouse funds -- intended for loan fundings -- for daily operations.

Previously known as Island Mortgage Network Financial Corporation, the publicly traded company's "chief venture" was Island Mortgage Network, Inc. a retail residential mortgage banker with more than 50 offices in 17 states by June 2000. According to the indictment, the company changed its name to AppOnline.com in 1999.

The defendants named in the first case are Carl Delia, Donald Catapano and Craig Brandwein, each a registered representative; and George Carhart & Rocco Siclari, undisclosed principals of a New York broker-dealer where defendant Ashley Nemiroff served as president and trader.

Paul Skulsky -- named as a coconspirator in the case but not as a defendant -- was an undisclosed principal of AppOnline.com who owned his interest through two corporations. USA Today reported in July 2000 that Skulsky served four years in prison for tax evasion, mail fraud and racketeering in connection with a cable TV company called Cable/Tel, according to public records. His brother, Jeff Skulsky, was president of AppOnline.com.

The U.S. Attorney alleges that "a principal goal of the coconspirators was to manipulate" the share price of AppOnline.com "so that it would remain artificially high." Some of the defendants are accused of accepting substantial undisclosed payments -- in the form of cash, securities and other items of value -- as compensation for recommending and selling the stock to investors. According to the indictment, the secret payments were often as much as 50% of the price of the securities involved.

Several companies were allegedly used by the defendants to hide their ownership.

A separate indictment was filed against Jeffrey Schneider, a CPA and auditor accused of using "a number of misleading accounting entries" to hide AppOnline.com's true financial condition. Schneider was extensively involved in the accounting work for AppOnline.com, according to the indictment, and eventually maintained an office at the company.

That indictment accuses AppOnline.com of directing warehouse lenders -- including Residential Mortgage Services, Prudential Securities Credit Corp. and Greenwich Capital Financial Products -- to wire mortgage funding proceeds to escrow accounts secretly controlled by AppOnline.com and its principals. The company was able to use warehouse proceeds from one loan to make up the "haircut" -- or two percent of the loan that it was supposed fund -- on other loans. It also allegedly used the warehouse proceeds to illegally fund its operating expenses.

The indictment said that eventually, the company began falsely representing that loans were ready to close. If the loan did not close within five days, AppOnline.com would go to another warehouse lender to fund the loan and payoff the previous warehouse lender. By June 2000, the company had $37 million in outstanding loans due and needed $30 million to cover outstanding checks. At that point, AppOnline.com's primary warehouse lender shut down the line. This was followed by a revocation of its license by the New York State Banking Department and a Chapter 11 bankruptcy petition.

A July 2000 Specialty Lender Weekly article said that at that point, the company had collected fees from consumers in connection with roughly $150 million in loans that had yet to close. That story went on to say that AppOnline.com's acquisition strategy suggested that it had been urgently chasing cash or cash-ready assets. In just over a year, the company reportedly made nine acquisitions, primarily of small mortgage banks that do only originations.

The second indictment went on to say that Schneider's accounting improprieties enabled AppOnline.com to provide financial statements to the Securities and Exchange Commmisiion and to its warehouse lenders that allowed it to remain in business far longer than it would have with legitimate financial statements. The warehouse liabilities were disguised in the financial statements as a payable to a related party. This debt, which ultimately grew to approximately $47 million, was partially offset by the issuance of more than 18 million shares of AppOnline.com's stock.

A Long Island, N.Y. Internet advertising company filed a lawsuit against CNN analyst COURTNEY SMITH (among other defendants) for "talking up" AppOnline.com's stock when he allegedly had a stake, according to an article in the New York Law Journal earlier this year. Cyber Media reportedly asserts that it agreed to a sale of the company to Apponline.com in a stock-for-stock purchase agreement after Apponline.com principals directed Cyber Media officers to watch a CNN program in which SMITH said that Apponline.com was a "double your money stock." The article said Cyber Media alleged that SMITH was an officer in the venture capital fund Inculab, whose stock was directly tied to Apponline.com, and that he benefited from the "double your money stock" statement.

Copyright © 2002 MortgageDaily.com
Distributed by
Mortgage Bankers Association
Washington, DC

Home | Previous Page

Wayne M. Carlin
Regional Director (WC-2114)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Northeast Regional Office
233 Broadway
New York, New York 10279
(646) 428-1510

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,

-against-

PAUL SKULSKY,
JEFFREY SKULSKY,
EDWARD R. CAPUANO,
CINDY L. EISELE,
JOSEPH CASUCCIO,
JEFFREY J. SCHNEIDER,
AARON CHAITOVSKY,
ROBERT GLASS,
ASHLEY NEMIROFF,
ROCCO SICLARI,
GEORGE A. CARHART,
HOWARD ZELIN,
CARL D. D'ELIA,

CRAIG A. BRANDWEIN, and

DONALD CATAPANO,

Defendants.

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CV-02-1524 (DRH)
COMPLAINT
PLAINTIFF DEMANDS
TRIAL BY JURY

Plaintiff Securities and Exchange Commission ("Commission"), for its complaint against Defendants Paul Skulsky, Jeffrey Skulsky, Edward R. Capuano ("Capuano"), Cindy L. Eisele ("Eisele"), Joseph Casuccio ("Casuccio"), Jeffrey J. Schneider ("Schneider"), Aaron Chaitovsky ("Chaitovsky"), Robert Glass ("Glass"), Ashley Nemiroff ("Nemiroff"), Rocco Siclari ("Siclari"), George A. Carhart ("Carhart"), Howard Zelin ("Zelin"), Carl D. D'Elia ("D'Elia"), Craig A. Brandwein ("Brandwein"), and Donald Catapano ("Catapano") (collectively, "Defendants"), alleges as follows:

SUMMARY

1. From May 1997 through June 2000, AppOnline.com, Inc. ("AppOnline"), a now-bankrupt mortgage company, engaged in two simultaneous schemes that defrauded AppOnline's public investors. First, AppOnline diverted more than $60 million that was supposed to be used to fund mortgage loans in order to pay AppOnline's operating expenses and, thereafter, covered up the truth in its publicly-filed financial reports. Second, AppOnline manipulated the public market for AppOnline common stock by paying bribes in exchange for three brokerage firms recommending the purchase of AppOnline stock to their retail customers, thereby defrauding those retail customers and the investing public.

2. Paul Skulsky (a previously-convicted felon and undisclosed control person of AppOnline), Jeffrey Skulsky (AppOnline's President), Capuano (AppOnline's Chief Executive Officer), Eisele (AppOnline's Chief Financial Officer), Casuccio (an outside auditor), Schneider (an outside auditor), Chaitovsky (an outside auditor), and Glass (an outside auditor) all participated in the financial fraud scheme. As the control persons of AppOnline, Paul Skulsky, Jeffrey Skulsky, and Capuano directed the financial fraud. Jeffrey Skulsky, Capuano, and Eisele signed false financial reports filed with the Commission. Eisele, Casuccio, and Schneider implemented the financial fraud. Casuccio, Schneider, Chaitovsky, and Glass issued fraudulent audit opinions concerning AppOnline's financial statements.

3. Paul Skulsky also directed the market manipulation scheme. Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano (collectively, "Broker Defendants") all participated in the market manipulation scheme by receiving bribes from Paul Skulsky in exchange for recommending the purchase of AppOnline stock to retail customers. By paying these bribes, Paul Skulsky created an artificial market for AppOnline stock, which distorted both the trading volume and price for AppOnline stock. As a result, 1.4 million shares of AppOnline stock were sold to unsuspecting investors for more than $5.5 million.

4. As a result of the foregoing, and as further described below,

Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano have engaged in, and unless enjoined, will continue to engage, directly or indirectly, in acts, practices, or courses of business, that constitute violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5.

Chaitovsky and Glass, have engaged in, and unless enjoined, will continue to engage, directly or indirectly, in acts, practices, or courses of business, that constitute violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and Section 10A of the Exchange Act, 15 U.S.C. § 78j-1.

Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider, have engaged in, and unless enjoined, will continue to engage, directly or indirectly, in conduct that constitutes a violation of Section 13(b)(5) of the Exchange Act, 15 U.S.C. §§ 78m(b)(5), and Rule 13b2-1, 17 C.F.R. § 240.13b2-1.

Paul Skulsky, Jeffrey Skulsky, and Capuano have engaged in, and unless enjoined, will continue to engage, directly or indirectly, or as controlling persons within the meaning of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), in conduct that constitutes a violation of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§ 78m(a) and 78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

Eisele, Casuccio, Schneider, Chaitovsky, and Glass, have engaged in, and unless enjoined, will continue to engage in conduct that, directly or indirectly violates, or that aids and abets within the meaning of Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), violations of, Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§ 78m(a) and 78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.
JURISDICTION AND VENUE

5. The Commission brings this action to pursuant Section 20(b) of the Securities Act, 15 U.S.C. § 77t(b), and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), and seeks permanent injunctions to restrain and enjoin the Defendants from engaging in the acts, practices and courses of business alleged herein. The Commission also seeks an order requiring Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano to disgorge their ill-gotten gains and pay prejudgment interest thereon. The Commission also seeks civil monetary penalties, pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3), against all Defendants. Finally, the Commission seeks an order, pursuant to Section 20(e) of the Securities Act, 15 U.S.C. § 77t(e), and Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2), barring Paul Skulsky, Jeffrey Skulsky, and Capuano from acting as an officer or director of a public company.

6. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d) and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a), and Sections 21(d), 21(e) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.

7. Venue lies in this Court pursuant to Section 22(a) of the Securities Act, 15 U.S.C. § 77v(a), and Section 27 of the Exchange Act, 15 U.S.C. § 78aa. Certain of the transactions, acts, practices and courses of business alleged herein occurred within the Eastern District of New York. For instance, AppOnline maintained its principal place of business in Melville, New York, and all of the defendants engaged in certain acts in the Eastern District of New York.

8. Defendants, directly or indirectly, have each made use of the means or instrumentalities of interstate commerce, the means or instruments of transportation or communication in interstate commerce, and/or the mails, in connection with the acts, practices and courses of business alleged herein.

DEFENDANTS

9. Paul Skulsky, age 58, resides in Woodmere, New York. From 1997 to 2000, Paul Skulsky served as a de facto senior officer and director of AppOnline. In 1985, Paul Skulsky was convicted of criminal mail fraud, racketeering, and tax evasion charges in connection with the sale of securities in a multi-million dollar tax shelter scheme.

10. Jeffrey Skulsky, age 50, resides in New York, New York. Jeffrey Skulsky was AppOnline's President and a director from November 1998 to June 2000. He is the brother of Paul Skulsky.

11. Capuano, age 53, is a resident of Larchmont, New York. Capuano was AppOnline's Chief Executive Officer ("CEO") from May 1997 through June 2000.

12. Eisele, age 37, a resident of East Northport, New York, was AppOnline's Chief Financial Officer ("CFO") from 1997 through June 2000.

13. Casuccio, age 49, is a resident of Hauppauge, New York. Casuccio audited AppOnline's financial statements for the fiscal years ended December 31, 1997 and December 31, 1998.

14. Schneider, age 37, is a resident of Commack, New York. Schneider audited AppOnline's financial statements for the fiscal year ended December 31, 1998. Schneider also performed extensive test work for the audit of AppOnline's December 31, 1999 financial statements.

15. Chaitovsky, age 45, is a resident of Plainview, New York. Chaitovsky audited AppOnline's December 31, 1999 financial statements.

16. Glass, age 59, is a resident of New York, New York. Glass reviewed and approved the audit of AppOnline's December 31, 1999 financial statements.

17. Nemiroff, age 59, is a resident of Great Neck, New York. Nemiroff was a registered principal of Ash & Co., Inc. ("Ash"), a defunct broker-dealer formerly located in New York, New York.

18. Siclari, age 45, a resident of Nyack, New York, was an undisclosed principal at Ash.

19. Carhart, age 53, a resident of Fort Lee, New Jersey, was an undisclosed principal at Ash.

20. Zelin, age 46, is a resident of Woodbury, New York. Zelin was a registered principal at Worthington Capital Group, Inc. ("Worthington"), a now defunct New York broker-dealer.

21. D'Elia, age 31, is a resident of Hicksville, New York. During 1997 and early 1998, D'Elia was a registered representative ("RR") at Worthington.

22. Brandwein, age 42, is a resident of Commack, New York. During 1998, Brandwein was a RR and, with Catapano, ran the Garden City, New York office of International Bond & Share ("IBS"), a now defunct broker-dealer. Brandwein later worked at IBS's office located in Syosset, New York.

23. Catapano, age 45, is a resident of Oceanside, New York. During 1998, Catapano was a RR and, with Brandwein, ran the Garden City office of IBS.

RELEVANT NON-PARTY

24. AppOnline is a Delaware corporation that had its home office in Melville, New York. AppOnline was a mortgage company from 1997 through June 2000. Between May 1997 and April 1999, AppOnline was known as IMN Financial, Inc. and operated under the Island Mortgage Network trade name. By April 2000, AppOnline had fifty branch offices in over twenty states. AppOnline's Melville office handled all loan decisions and record-keeping functions. Beginning in May 1997, AppOnline's stock was quoted on the NASD's Over-the-Counter Electronic Bulletin Board. In September 1999, AppOnline's stock began trading on the American Stock Exchange. Between 1997 and 2000, AppOnline shares traded at prices between $0.60 and $7 per share. On July 19, 2000, AppOnline filed for bankruptcy and ceased operations.

FACTS

Background

25. AppOnline provided mortgage loans to prospective homeowners. AppOnline obtained the funds for these mortgage loans through lines of credit from lending institutions known as "warehouse banks." Immediately following the closing of a mortgage loan, AppOnline would sell the mortgage loan to various financial institutions on the secondary mortgage market. AppOnline would use the proceeds of that sale to repay the warehouse bank. AppOnline's revenues consisted primarily of the points and other fees paid by borrowers in connection with originating the mortgage loans.

26. In May 1997, AppOnline's common stock began trading publicly after a merger with a shell corporation. At that time, AppOnline's senior management consisted of Paul Skulsky, Jeffrey Skulsky, and Capuano. Paul Skulsky was responsible for arranging financing for AppOnline's operations and acquisitions; Jeffrey Skulsky was responsible for day to day management of AppOnline's administrative operations; Capuano was responsible for AppOnline's relationships with warehouse banks and supervision of its sales offices. While Jeffrey Skulsky and Capuano were named officers of AppOnline, Paul Skulsky never received a formal title at AppOnline because he wanted to hide the fact that a convicted felon was acting as one of AppOnline's senior officers and directors.

27. During 1997, AppOnline began filing annual and quarterly reports with the Commission. Shortly after becoming a public company, AppOnline began losing money from its operations because it was expanding its operations through acquisitions, but the mortgage fees generated from those acquisitions did not cover the expenses of the expanding operations.

28. AppOnline's management began to cover its operating losses by diverting for other uses the funds that had been loaned to AppOnline for specific use as mortgage loans by the warehouse banks. When a particular mortgage loan was then ready to close, AppOnline delivered the funds required for that particular loan from any funds available (i.e., including funds obtained for other pending mortgage loans). Additionally, if a specific mortgage loan did not close and AppOnline needed to return the loan funds to a warehouse bank, AppOnline would use any available funds to repay the warehouse bank, including funds that were supposed to be used for other mortgage loans. Over time, this practice evolved into a type of Ponzi scheme, whereby AppOnline used later funds received from warehouse banks to fund earlier mortgage loans.

AppOnline's December 31, 1997 Financial Statements Were False And Misleading

29. On its internal financial books and records, AppOnline recorded the amount wrongfully diverted from mortgage loan funds as a liability to certain escrow agents involved in the transfer of the mortgage loan funds. In fact, AppOnline owed the diverted funds to its warehouse banks. When it came time to report publicly its financial statements, AppOnline further disguised its growing liability to its warehouse banks by creating a phantom payable to The Skulsky Trust, a related party controlled by Paul Skulsky and Jeffrey Skulsky. Then, to reduce the amount supposedly owed to The Skulsky Trust, Paul Skulsky and Casuccio directed Eisele to offset certain debts supposedly owed to AppOnline by other related parties controlled by Paul Skulsky and Jeffrey Skulsky against AppOnline's liability to The Skulsky Trust. Thus, in addition to fraudulently describing the debt as owed to The Skulsky Trust, AppOnline also violated Generally Accepted Accounting Principles ("GAAP") by offsetting the supposed receivables from other related parties against The Skulsky Trust payable.

30. On March 31, 1998, AppOnline filed a Form 10-KSB for the fiscal year ended December 31, 1997, which included AppOnline's 1997 financial statements. Capuano signed AppOnline's December 31, 1997 Form 10-KSB as CEO, president and a director. Eisele signed the Form 10-KSB as CFO.

31. The 1997 Form 10-KSB was false and misleading because it: (a) failed to disclose Paul Skulsky's management role at AppOnline; (b) misrepresented AppOnline's liabilities because it failed to disclose that AppOnline had incurred a liability of at least $4.9 million to the warehouse banks and, instead, falsely reported that AppOnline owed approximately $4.9 million to The Skulsky Trust when, in fact, AppOnline did not owe The Skulsky Trust anything; and (c) understated AppOnline's operating loss by an additional $700,000 by ignoring certain commission expenses and overstating income from management fees.

AppOnline's December 31, 1998 Financial Statements Were False And Misleading

32. During 1998, AppOnline's operations continued to lose money. Additionally, because AppOnline had diverted funds designated for specific mortgage loans to pay its operating expenses during 1997, AppOnline also had to replace those funds so that those mortgage loans could close. In response, AppOnline misappropriated even more funds from warehouse banks. To help conceal the increasing debt to its warehouse banks, AppOnline continued to: (a) falsely report that it owed that debt to The Skulsky Trust; and (b) wrongfully offset receivables from other related parties against AppOnline's phony debt to The Skulsky Trust.

33. In addition to continuing the ongoing financial fraud concerning its debt to warehouse banks, during 1998, Paul Skulsky, Capuano, and Casuccio artificially removed several money-losing subsidiaries from AppOnline's financial reports. Specifically, in March 1998 and October 1998, AppOnline entered into two phony sale transactions with Northport Industries, Inc. ("Northport"), a shell corporation controlled by Paul Skulsky. Through these transactions, AppOnline appeared to have sold certain subsidiaries to Northport, but AppOnline continued to manage the subsidiaries. Northport executed a note payable to AppOnline for the subsidiaries, and also agreed to pay AppOnline a management fee of $50,000 per month. Through these paper transactions, AppOnline avoided recognizing approximately $2.4 million in losses sustained by the subsidiaries. Paul Skulsky, Capuano, and Casuccio knew that the Northport transactions were not arms-length transactions and that they served no business purpose except to enable AppOnline to avoid reporting the losses incurred by its subsidiaries.

34. On April 15, 1999, AppOnline filed an amended Form 10-KSB for the year ended December 31, 1998. Capuano signed the Form 10-KSB as CEO, Eisele signed as CFO, and Jeffrey Skulsky signed as President. The Form 10-KSB reported $787,297 in income from operations.

35. The 1998 Form 10-KSB was false and misleading because it: (a) failed to disclose the management role of Paul Skulsky; (b) failed to disclose that AppOnline owed at least $10.4 million to the warehouse banks and, instead, stated that AppOnline owed approximately $10.4 million to The Skulsky Trust when, in fact, it owed nothing to The Skulsky Trust; (c) failed to report at least $2.4 million in 1998 operating losses attributable to the subsidiaries that were the subject of phony sales to Northport; and (d) inflated revenues and underreported other expenses by approximately $735,000. Thus, instead of reporting $787,297 in operating income, AppOnline's 1998 Form 10-KSB should have reported an operating loss of at least $3.2 million.

AppOnline's December 31, 1999 Financial Statements Were False And Misleading

36. By December 31, 1999, AppOnline had misappropriated approximately $47 million from its warehouse banks. By the end of 1999, Paul Skulsky, Jeffrey Skulsky, and Capuano decided to remove AppOnline's phony liability to The Skulsky Trust from AppOnline's balance sheet without recognizing any liability to the warehouse banks. To accomplish this, among other things, AppOnline issued 18,191,534 shares of AppOnline stock to The Skulsky Trust in exchange for extinguishing the debt AppOnline purportedly owed to The Skulsky Trust.

37. On April 14, 2000, AppOnline filed with the Commission a Form 10-K for the year ended December 31, 1999, which included AppOnline's financial statements. Capuano signed the filing as CEO and chairman of the board, Eisele signed as CFO, treasurer and principal accounting officer, and Jeffrey Skulsky signed as AppOnline's president and a director.

38. The 1999 Form 10-K was false and misleading because it: (a) failed to disclose the management role of Paul Skulsky; (b) omitted the $47 million liability to warehouse banks while stating that the previous purported debt to The Skulsky Trust had been exchanged for AppOnline equity securities; and (c) understated expenses and overstated revenues by approximately $1.5 million.

Other False and Misleading Public Filings

39. In addition to the false and misleading annual reports described above, AppOnline filed quarterly reports that also contained the same type of financial misrepresentations described above. Capuano signed each of the Forms 10-QSB and 10-Q filed from 1998 to 2000, including the March 31, 1999 Form 10-QSB, as AppOnline's president, principal executive officer and principal financial officer.

40. AppOnline's false and misleading financial statements for fiscal years 1997 and 1998 were also incorporated in registration statements filed by AppOnline. For example, AppOnline filed a Form S-1 with the Commission on December 29, 1999, which was materially misleading because it reported the false payable to The Skulsky Trust. Specifically, the Form S-1 falsely stated that approximately $15.9 million was owed to The Skulsky Trust as of September 30, 1999 when, in fact, substantially more funds were owed to the warehouse banks, as of that time.

AppOnline's Auditors Participated In The Financial Fraud Scheme

41. Casuccio audited AppOnline's 1997 financial statements and issued an audit opinion that falsely stated that AppOnline's financial statements were prepared in conformity with GAAP and that the audits were conducted in accordance with Generally Accepted Auditing Standards ("GAAS"). Casuccio and Schneider audited AppOnline's 1998 financial statements and issued an audit opinion that falsely stated that those financial statements were prepared in conformity with GAAP and that the audits were conducted in accordance with GAAS. In fact, the 1997 and 1998 financial statements were not prepared in conformity with GAAP and the audits were not conducted in accordance with GAAS.

42. In addition to serving as manager of the 1998 audit, Schneider served as an internal auditor for AppOnline during the 1999 audit, and he helped prepare the 1999 financial statements. Specifically, Schneider prepared schedules, including an analysis of AppOnline's mortgage inventory, for the 1999 audit conducted by Chaitovsky and Glass.

43. Chaitovsky and Glass audited AppOnline's 1999 financial statements and issued an audit opinion, which Glass signed, that falsely stated that AppOnline's financial statements were prepared in conformity with GAAP and that the audit was conducted in accordance with GAAS. In fact, the 1999 financial statements were not prepared in conformity with GAAP and the audit was not conducted in accordance with GAAS.

44. Prior to completing their audit of the 1999 financial statements and issuing the false audit opinion, Chaitovsky and Glass learned that AppOnline had filed prior false financial statements with the Commission. Specifically, Chaitovsky and Glass learned that AppOnline's financial statements contained in the Form 10-QSB for the period ended September 30, 1999 were materially false in that they failed to include losses associated with AppOnline's Internet division. After learning that an illegal act had occurred, Chaitovsky and Glass failed to inform the appropriate level of AppOnline's management and make sure that AppOnline's audit committee was adequately informed concerning the illegal act that had been detected by Chaitovsky and Glass. Nor did Chaitovsky or Glass notify the Commission that they had learned about material false filings by AppOnline during the course of their audit of AppOnline's financial statements.

Paul Skulsky And Others Manipulated The
Public Market For AppOnline Common Stock

45. In May 1997, AppOnline wrongfully issued 2.2 million shares of free-trading stock to two nominee corporations controlled by Paul Skulsky. As a result, Paul Skulsky controlled more than 2/3 of all outstanding free-trading shares of AppOnline stock. Thereafter, throughout the period from May 1997 through at least April 1999, Paul Skulsky engaged in a series of actions to manipulate the public market for AppOnline stock. In addition to entering into the agreements to pay bribes to brokerage firms described below, Paul Skulsky purchased shares of AppOnline stock on the public market to prop up artificially the price of AppOnline stock whenever his other schemes were not achieving the public market results desired by Paul Skulsky. AppOnline used the inflated public market price for its stock to make a series of acquisitions of privately-held mortgage companies in exchange, in part, for artificially inflated AppOnline stock.

Ash Agreement

46. In mid-1997, Paul Skulsky met Nemiroff, Carhart, and Siclari. Nemiroff, Siclari, and Carhart entered into an agreement with Paul Skulsky whereby they agreed to direct Ash to sell shares of AppOnline stock controlled by Paul Skulsky to Ash retail customers in exchange for bribes equal to approximately 45% of the net proceeds from the sale of AppOnline stock.

47. Pursuant to this agreement, from July 1997 through December 1997, Ash sold more than 250,000 AppOnline shares to its retail customers for approximately $900,000.

48. Nemiroff, Ash's trader, executed the AppOnline transactions at Ash. Paul Skulsky paid Nemiroff, Siclari, and Carhart the bribes by transferring stock to entities controlled by Siclari and Carhart. Siclari and Carhart then sold the AppOnline stock received from Paul Skulsky and split the proceeds with Nemiroff.

Worthington Agreement

49. In approximately July 1997, Paul Skulsky and Zelin entered into an agreement pursuant to which Worthington would sell AppOnline stock to Worthington's retail customers in exchange for bribes equal to approximately 50% of the net proceeds from the sale of AppOnline stock.

50. Pursuant to this agreement, between June 1997 and April 1998, Worthington sold over one million shares of AppOnline stock to its customers for approximately $4.3 million.

51. Paul Skulsky paid Zelin the bribes by transferring AppOnline stock to Worthington's inventory account, and Zelin then directed that this stock be sold to Worthington's retail customers. Zelin obtained a portion of the proceeds from Worthington's sale of AppOnline stock. D'Elia also received bribes from Paul Skulsky and Zelin in exchange for selling, and directing other Worthington RRs to sell, AppOnline stock to Worthington's retail customers.

IBS Agreement

52. In late 1997 or early 1998, Paul Skulsky entered into an agreement with Brandwein and Catapano at IBS. Paul Skulsky agreed to pay bribes to Brandwein and Catapano equal to approximately 50% of the net proceeds from sales of AppOnline stock to IBS retail customers.

53. From January to March 1998, Brandwein sold more than 50,000 shares of AppOnline stock to IBS retail customers. From January to March 1998, Catapano caused other RRs at IBS, including Brandwein, to sell AppOnline stock to their customers. As a result, during January to March 1998, IBS retail customers purchased approximately 100,000 AppOnline shares for approximately $360,000.

54. Paul Skulsky paid Brandwein and Catapano approximately $180,000 in bribes in exchange for the sales of AppOnline stock to IBS retail customers.

FIRST CLAIM FOR RELIEF

Violations of Section 17(a) of the Securities Act, Section 10(b)
of the Exchange Act, and Rule 10b-5

(Financial Fraud Scheme -
Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider)

55. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

56. Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider, directly or indirectly, singly or in concert, by use of the means or instrumentalities of interstate commerce, or of the mails, in the offer and sale, and in connection with the purchase or sale, of AppOnline securities, knowingly or recklessly: (a) employed devices, schemes and artifices to defraud; (b) obtained money or property by means of, or otherwise, made untrue statements of material fact, or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of AppOnline securities and upon other persons.

57. As part and in furtherance of the violative conduct, Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider engaged in a fraudulent scheme to conceal AppOnline's true financial condition and, among other things, made material misrepresentations and omissions in AppOnline's Forms 10-KSB, 10-K, 10-QSB, and 10-Q filed during 1997 through 2000. Paul Skulsky and Casuccio, among other things, formulated AppOnline's plan to disguise its debt to the warehouse banks as a phantom liability to The Skulsky Trust, and orchestrated the sham sales of money-losing subsidiaries to Northport. Eisele monitored AppOnline's misappropriation of funds from the warehouse banks and then mischaracterized the debt to the warehouse banks as a debt to The Skulsky Trust in AppOnline's financial statements. Capuano and Jeffrey Skulsky signed AppOnline's Forms 10-KSB and 10-K, and Capuano signed the Forms 10-QSB and 10-Q, which included the financial statements that contained materially false and misleading information. Casuccio and Schneider prepared audit opinions that falsely represented that they had performed audits in accordance with GAAS and that AppOnline's financial statements had been prepared in conformity with GAAP.

58. The misrepresentations and omissions described in paragraphs 25 - 44 and 57 were material.

59. Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider each knew, or were reckless in not knowing, that AppOnline's Forms 10-KSB, 10-K, 10-QSB, and 10-Q contained material misrepresentations and failed to disclose material information.

60. By reason of the foregoing, Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider, singly or in concert, directly or indirectly, violated and unless enjoined will again violate, Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.

SECOND CLAIM FOR RELIEF

Violations of Section 10(b) of the Exchange Act and Rule 10b-5
(Financial Fraud Scheme - Chaitovsky and Glass)

61. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

62. Chaitovsky and Glass, directly or indirectly, singly or in concert, by use of the means or instrumentalities of interstate commerce, or of the mails, in connection with the purchase or sale of AppOnline securities, knowingly or recklessly: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material fact, or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of AppOnline securities and upon other persons.

63. As part and in furtherance of the violative conduct, Chaitovsky and Glass engaged in a fraudulent scheme to conceal AppOnline's true financial condition and, among other things, made material misrepresentations and omissions in AppOnline's Form 10-K for the year ended December 31, 1999. Chaitovsky and Glass prepared an audit opinion that falsely stated they had performed an audit in accordance with GAAS and that AppOnline's financial statements had been prepared in conformity with GAAP.

64. The misrepresentations and omissions described in paragraphs 25 - 44 and 63 were material.

65. Chaitovsky and Glass each knew, or were reckless in not knowing, that AppOnline's 1999 Form 10-K contained material misrepresentations and failed to disclose material information.

66. By reason of the foregoing, Chaitovsky and Glass, singly or in concert, directly or indirectly, violated and unless enjoined will again violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.

THIRD CLAIM FOR RELIEF

Violations of Section 17(a) of the Securities Act and Sections 10(b)
of the Exchange Act and Rule 10b-5

(Market Manipulation Scheme -
Paul Skulsky, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano)

67. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

68. Paul Skulsky, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano, directly or indirectly, singly or in concert, by use of the means or instrumentalities of interstate commerce, or of the mails, in the offer and sale, and in connection with the purchase or sale of AppOnline securities, knowingly or recklessly: (a) employed devices, schemes and artifices to defraud; (b) obtained money or property by means of, or otherwise made untrue statements of material fact, or have omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; and/or (c) engaged in acts, practices and courses of business which operated or would have operated as a fraud or deceit upon purchasers of AppOnline securities and upon other persons.

69. As part and in furtherance of the violative conduct, Paul Skulsky, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano engaged in a fraudulent scheme in which Paul Skulsky paid bribes to Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano to sell AppOnline stock to their respective brokerage firms' retail customers, and manipulated the public market for AppOnline stock by, among other things, artificially subsidizing the public market and distorting both the trading volume and price for AppOnline stock.

70. Paul Skulsky, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano acted knowingly or recklessly.

71. In addition, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano failed to disclose to the retail customers of their respective broker-dealers who purchased AppOnline stock that Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano were receiving compensation equal of approximately 45%-50% of the proceeds from sales of AppOnline stock. Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano also failed to direct RRs to disclose the additional compensation and the RRs did not make any such disclosures when selling the AppOnline stock to their customers.

72. By reason of the foregoing, Paul Skulsky, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano, singly or in concert, directly or indirectly, violated and unless enjoined will again violate Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.

FOURTH CLAIM FOR RELIEF

Violations of Section 13(b)(5) of
the Exchange Act and Rule 13b2-1

(Falsification of Corporate Books and Records and Circumvention of Internal Controls -
Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider)

73. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

74. Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider each knowingly circumvented or knowingly failed to implement a system of internal accounting controls sufficient to provide reasonable assurance, among other things, that transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles, or any other criteria applicable to such statements.

75. Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider each knowingly falsified, directly or indirectly, or caused to be falsified books, records and accounts of AppOnline that were subject to Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A).

76. By reason of the foregoing, Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, and Schneider have violated, and unless enjoined will again violate, Section 13(b)(5) of the Exchange Act, 15 U.S.C. § 78m(b)(5), and Rule 13b2-1, 17 C.F.R. § 240.13b2-1.

FIFTH CLAIM FOR RELIEF

Violations of Section 13(a) of the
Exchange Act and Rules 12b-20, 13a-1, and 13a-13

(Corporate Reporting Violations -
Liability of Paul Skulsky, Jeffrey Skulsky, and Capuano)

77. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

78. AppOnline failed to file with the Commission, in accordance with the rules and regulations prescribed by the Commission, such annual and quarterly reports as the Commission has prescribed and AppOnline failed to include, in addition to the information expressly required to be stated in such reports, such further material information as was necessary to make the statements made therein, in light of the circumstances in which they are made, not misleading, in violation of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13. As described above, the Forms 10-KSB and 10-K and Forms 10-QSB and 10-Q were false and misleading because they misstated AppOnline's financial condition, including among other things, its liabilities, income and expenses.

79. By reason of the foregoing, AppOnline violated Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

80. At all times relevant hereto, Paul Skulsky, Jeffrey Skulsky, and Capuano each was a controlling person of AppOnline for the purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).

81. By reason of the foregoing, Paul Skulsky, Jeffrey Skulsky, and Capuano are each liable as controlling persons, pursuant to Section 20(a) of the Exchange Act, for AppOnline's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13, and unless enjoined they will again violate, Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

SIXTH CLAIM FOR RELIEF

Violations of Section 13(a) of the
Exchange Act and Rules 12b-20, 13a-1, and 13a-13

(Corporate Reporting Violations -
Liability of Eisele, Casuccio, and Schneider)

82. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

83. AppOnline failed to file with the Commission, in accordance with the rules and regulations prescribed by the Commission, such annual and quarterly reports as the Commission has prescribed and AppOnline failed to include, in addition to the information expressly required to be stated in such reports, such further material information as was necessary to make the statements made therein, in light of the circumstances in which they are made, not misleading, in violation of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13. As described above, the Forms 10-KSB and 10-K and Forms 10-QSB and 10-Q were false and misleading because they misstated AppOnline's financial condition, including among other things, its liabilities, income and expenses.

84. By reason of the foregoing, AppOnline violated Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

85. At all times relevant hereto, Eisele, Casuccio, and Schneider knew of AppOnline's violations described in paragraphs 83-84.

86. At all relevant times, Eisele, Casuccio, and Schneider substantially assisted in AppOnline's conduct in violation of Section 13(a) and Rules 12b-20, 13a-1, and 13a-13.

87. By reason of the foregoing, Eisele, Casuccio, and Schneider engaged in conduct that constitutes aiding and abetting, within the meaning of Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), of AppOnline's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13, and unless enjoined they will again violate Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

SEVENTH CLAIM FOR RELIEF

Violations of Section 13(a) of the
Exchange Act and Rules 12b-20 and 13a-1

(Corporate Reporting Violations - Liability of Chaitovsky and Glass)

88. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

89. AppOnline failed to file with the Commission, in accordance with the rules and regulations prescribed by the Commission, such annual reports as the Commission has prescribed and AppOnline failed to include, in addition to the information expressly required to be stated in such reports, such further material information as was necessary to make the statements made therein, in light of the circumstances in which they are made, not misleading, in violation of Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. §§ 240.12b-20 and 240.13a-1. As described above, the Form 10-K for FY 1999 contained financial statements that were false and misleading because they misstated AppOnline's financial condition, including among other things, its liabilities, income and expenses.

90. By reason of the foregoing, AppOnline violated Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1.

91. At all times relevant hereto, Chaitovsky and Glass knew of AppOnline's violations described in paragraphs 89-90.

92. At all relevant times, Chaitovsky and Glass substantially assisted AppOnline's conduct in violation of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1.

93. By reason of the foregoing, Chaitovsky and Glass aided and abetted, within the meaning of Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), AppOnline's violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1, and unless enjoined they will again violate Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. §§ 240.12b-20 and 240.13a-1.

EIGHTH CLAIM FOR RELIEF

Violations of Section 13(b)(2) of the Exchange Act

(Corporate Recordkeeping and Internal Control Violations -
Liability of Paul Skulsky, Jeffrey Skulsky, and Capuano)

94. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

95. AppOnline failed to:

make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflected the transactions and dispositions of its assets; and

devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:

transactions were executed in accordance with management's general or specific authorization;

transactions were recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for assets;

access to assets was permitted only in accordance with management's general or specific authorization; and

the recorded accountability for assets was compared with the existing assets at reasonable intervals and appropriate action was taken with respect to any differences,
in violation of Section 13(b)(2) of the Exchange Act, 15 U.S.C § 78m(b)(2). As described above, AppOnline's internal accounting controls were insufficient to cause AppOnline to prepare its 1997, 1998, and 1999 annual or quarterly financial statements in accordance with GAAP.
96. At all relevant times hereto, Paul Skulsky, Jeffrey Skulsky, and Capuano each were controlling persons of AppOnline for the purposes of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a).

97. By reason of the foregoing, Paul Skulsky, Jeffrey Skulsky, and Capuano are each liable as controlling persons, pursuant to Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), for AppOnline's violations of Section 13(b)(2) of the Exchange Act; and unless they are enjoined, Paul Skulsky, Jeffrey Skulsky, and Capuano will again engage in conduct that would render them liable for violations of Section 13(b)(2) of the Exchange Act.

NINTH CLAIM FOR RELIEF

Violations of Section 13(b)(2) of the Exchange Act

(Corporate Recordkeeping and Internal Control Violations -
Liability of Eisele, Casuccio and Schneider)

98. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

99. At all times relevant hereto, Eisele, Casuccio, and Schneider knew of AppOnline's violations described in paragraph 95.

100. At all times relevant hereto, Eisele, Casuccio, and Schneider substantially assisted AppOnline's conduct in violation of Section 13(b)(2) of the Exchange Act.

101. By reason of the foregoing, Eisele, Casuccio, and Schneider engaged in conduct that constitutes aiding and abetting, within the meaning of Section 20(e) of the Exchange Act, 15 U.S.C. § 78t(e), of AppOnline's violations of Section 13(b)(2) of the Exchange Act, and unless enjoined they will again violate Section 13(b)(2) of the Exchange Act.

TENTH CLAIM FOR RELIEF

Violations of Section 10A of the Exchange Act

(Chaitovsky and Glass)

102. The Commission realleges and incorporates by reference herein each and every allegation contained in paragraphs 1 - 54.

103. Chaitovsky and Glass, while auditing AppOnline's December 31, 1999 financial statements detected or otherwise became aware of information indicating that an illegal act had or may have occurred.

104. Chaitovsky and Glass failed to take the steps required by Section 10A of the Exchange Act. In particular, Chaitovsky and Glass failed to determine whether it was likely an illegal act had occurred, and, if so, to consider the possible effect of the illegal act on AppOnline's financial statements. Chaitovsky and Glass also failed to take appropriate remedial action, including, informing the appropriate level of AppOnline management and assuring that AppOnline's audit committee was adequately informed with respect to the illegal act. Finally, Chaitovsky and Glass failed to notify the Commission that, during the course of their audit of AppOnline's financial statements, they had learned of material misstatements in AppOnline's previously-filed financial reports.

105. By reason of the foregoing, Chaitovsky and Glass have violated, and unless enjoined they will again violate, Section 10A of the Exchange Act, 15 U.S.C. § 78j-1.

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests a Final Judgment:

I.

Permanently enjoining Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Chaitovsky, Glass, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, Catapano, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.

II.

Permanently enjoining Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, Catapano, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a).

III.

Permanently enjoining Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from future violations of Section 13(b)(5) of the Exchange Act, 15 U.S.C. § 78m(b)(5), and Rule 13b2-1, 17 C.F.R. § 240.13b2-1.

IV.

Permanently enjoining Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating, directly or indirectly, as a controlling person, or as an aider and abettor, of Sections 13(a) and 13(b)(2) of the Exchange Act, 15 U.S.C. §§ 78m(a) and 78m(b)(2), and Rules 12b-20, 13a-1, and 13a-13, 17 C.F.R. §§ 240.12b-20, 240.13a-1, and 240.13a-13.

V.

Permanently enjoining Chaitovsky, Glass, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating, directly or indirectly, or as an aider or abettor, Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a), and Rules 12b-20 and 13a-1, 17 C.F.R. §§ 240.12b-20 and 240.13a-1.

VI.

Permanently enjoining Chaitovsky, Glass, their agents, servants, employees, attorneys, and all persons in active concert or participation with them who receive actual notice of the injunction by personal service or otherwise, and each of them, from violating, directly or indirectly, Section 10A of the Exchange Act, 15 U.S.C. § 78j-1.

VII.

Ordering Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, and Catapano to disgorge the ill-gotten gains they received as a result of their violations of the federal securities laws and to pay prejudgment interest thereon.

VIII.

Ordering Paul Skulsky, Jeffrey Skulsky, Capuano, Eisele, Casuccio, Schneider, Nemiroff, Siclari, Carhart, Zelin, D'Elia, Brandwein, Catapano, Chaitovsky, and Glass to pay civil money penalties, pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d) and/or Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).

IX.

Permanently barring Paul Skulsky, Jeffrey Skulsky, and Capuano from acting as an officer or director of a public company, pursuant to Section 21(d)(2) of the Exchange Act, 15 U.S.C. § 78u(d)(2).

X.

Granting such other and further relief as the Court may deem just and proper.

Dated: New York, New York
March 12, 2002

___/s/_________________________
WAYNE M. CARLIN (WC-2114)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
Northeast Regional Office
233 Broadway
New York, New York 10279
(646) 428-1510

Of Counsel:
Kay L. Lackey
Robert Knuts
Paul G. Gizzi
Jonathan A. Roberts

sec.gov

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