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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

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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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From: StockDung1/12/2006 9:06:38 PM
   of 574
 
Alumni of notorious brokerage firms find work in `boiler rooms'

BY CHRISTOPHER CAREY
Posted on Tue, Jun. 22, 2004
St. Louis Post-Dispatch

ST. LOUIS - (KRT) - The securities industry thought it had seen the last of Frank L. Palumbo.

His Florida-based stock brokerage, J.W. Gant & Associates, shut down under regulatory pressure in 1992.

The National Association of Securities Dealers ruled that the firm had fraudulently marked up the prices of three obscure stocks for which it controlled trading.

The NASD also barred Palumbo for life from associating with any of its member firms and ordered him to pay $762,500 in fines and restitution.

But a St. Louis Post-Dispatch investigation into unlicensed offshore brokerages revealed that Palumbo and several colleagues from J.W. Gant are back in business on the other side of the Atlantic, pushing shares of obscure U.S. companies.

So are alumni of other notorious U.S. brokerage firms.

The Post-Dispatch identified nearly 30 Americans who have been disciplined by the Securities and Exchange Commission, the NASD, the Commodity Futures Trading Commission or other regulatory bodies and now work at unlicensed, offshore brokerages, known as "boiler rooms."

Because most of the people who work for the boiler rooms use aliases, the number could be far higher. The stock sale rings extend from Europe to Asia and have targeted investors in 20 countries.

Here's how some of them operate.

European investors in 2000 started getting unsolicited calls from brokers offering shares in Spantel Communications, an upstart long-distance company targeting the Spanish telephone market.

The brokers said they worked for Goodman Hart Associates on Spain's Costa del Sol. They offered "pre-initial public offerings" of stock at prices ranging from $4 to $6.50 a share.

Spantel became listed in the United States on the Nasdaq Over-the-Counter Bulletin Board the following year but not through a public offering. Instead, it merged with a publicly traded shell company and moved its home base to Miami.

SEC filings show that Spantel was controlled by Mohamed A. Khashoggi, the son of arms dealer Adnan Khashoggi.

The filings show that Palumbo and two other former J.W. Gant brokers also were large Spantel shareholders and held key positions in the company.

What's more, SEC filings and other documents show that Spantel insiders had direct links to the boiler rooms pushing the company's shares. For example:

Spantel's early SEC filings listed Conor D. O'Connor as its technical director.

The Internet sites for two boiler rooms that peddled Spantel's shares were registered under his name.

The Internet domain registration for a third brokerage, Goodman Hart, listed O'Connor as the e-mail contact.

O'Connor acknowledged that he worked as a consultant for Spantel and that his other business set up the sites.

"I own an Internet company," he said. "We register domain names for hundreds of firms. Some of the ones that you mentioned look vaguely familiar, but I wouldn't know much more than that."

Investors who bought Spantel shares said the transactions were processed through Clearing Services on the Costa del Sol.

The address that Clearing Services used in a December 2001 SEC filing disclosing its ownership of 6.3 million Spantel shares was the same as the address that Palumbo used in his disclosure statement the same day. Palumbo identified himself as Spantel's corporate secretary and the holder of 1 million shares.

One investor contact at Clearing Services was another American, Robert J. Carlin.

However, Spantel's SEC filings listed him as manager of one of its subsidiaries.

Carlin also had been compliance director for J.W. Gant, the person responsible for ensuring that the brokerage did not violate state or federal securities regulations. And he was majority owner of a San Francisco-based brokerage that shut down in 1997 after a raid by the SEC and FBI.

Besides Spantel, the boiler rooms pushed shares of a privately held company, Adrentacar. Its vision: to turn its cars into rolling billboards, giving advertisers a new method of exposure and offering drivers a break on rental rates.

Adrentacar's Internet site featured images of vehicles wrapped in the logos of McDonald's Corp., Coca-Cola Co. and other major consumer product companies - none of which had signed contracts for the service.

The boiler rooms offered Adrentacar at prices ranging from $4 to $6.50 a share. They told investors the money would finance an expansion, which in turn would lead to a lucrative public stock offering.

Meanwhile, Spanish authorities issued warnings that the boiler rooms, Goodman Hart and Morgan Paris and Co., were offering investments despite being unlicensed.

Like Spantel, Adrentacar never filed for an initial public offering. Instead, it merged into European Day Spa Holding Co., the other stock the boiler rooms were promoting. Adrentacar investors got one share of European Day Spa stock for every Adrentacar share they held.

The combined company, European Diversified Holdings Inc., has headquarters in Evergreen, Colo. Its shares currently trade for 25 cents.

Spantel's stock recently closed at 29 cents.

Recently, some investors who bought Spantel shares from Goodman Hart and Morgan Paris heard from a new Spanish boiler room with a new offer: They could exchange their holdings for stock in another publicly traded U.S. company, Franchise Holdings International Inc.

However, that company stopped submitting financial reports to the SEC more than a year ago. The last report listed Carlin as president and Khashoggi as a director.

Daniel Sterk, of Fort Lauderdale, Fla., has been on the SEC's radar screen for more than a decade.

The agency filed a fraud suit in 1994, alleging that he sold unregistered shares in a wireless cable TV venture. He settled the suit without admitting or denying guilt, and agreed to surrender more than $1 million in proceeds.

Then he made his way to Bangkok, Thailand, and its teeming boiler room trade.

After working for other operators, he set up his own shop in 2000. Thai authorities raided the boiler room in August 2001, putting it out of business. They filed charges against Sterk and a partner, Stephen R. Casciola, saying they ran an unauthorized securities firm that defrauded foreign investors.

Sterk and Casciola fled Thailand, evading arrest.

Private investigators working for investors say Sterk and Casciola relocated to Eastern Europe and ran a new string of boiler rooms from Hungary and Romania.

Their first boiler room, Livingstone Asset Management, claimed to have headquarters in Geneva but operated from Budapest, Hungary.

Livingstone peddled shares in several American companies, including Slender Life International Inc. of Boca Raton, Fla.

Sterk did business with Slender Life under the alias Daniel C. Worthington and Casciola as Steve Corso.

Slender Life's deal with Livingstone and its successor, Cambridge Global Ltd., gave those brokerages the right to buy 10 million shares of the privately held company's stock at 20 cents a share. The boiler rooms resold the shares at prices as high as $3.90.

Another boiler room, Amherst International, peddled Slender Life bonds, which brokers said could be converted to stock. Investors were told that the proceeds would finance the privately held weight loss company's expansion in the United States and Europe and that the company would go public this spring at $15 a share.

But in November, investor complaints led Hungarian authorities to raid the Budapest boiler room. Three people were taken into custody, but Sterk and Casciola again avoided arrest.

Slender Life's president, Larry Pettit, resigned in January and was succeeded by Thom Scott, a vice president and director of marketing. In a letter to shareholders in March, Scott acknowledged that the company's partners were in the boiler room business.

"Frankly, they were all very intelligent, well-spoken, and financially sophisticated," he wrote in the letter to stockholders. "And, the venture capital operations that they developed looked and ran like completely legitimate brokerage or venture capital firms."

Scott also acknowledged that Worthington was actually Sterk.

He disclosed that Slender Life's foreign partners had ownership interests in the company's flagship weight loss center in Boca Raton and an unfinished one in Vienna, Austria.

And he noted that an audit of Slender Life's finances revealed that the company had never been paid for 2 million shares of stock that had been issued to the boiler rooms.

Scott outlined a recovery plan for shareholders that relied on two former managers of the European boiler rooms to help raise additional capital.

One of them is Randolph E. Beimel. He is a former vice president of Hibbard Brown & Co., a U.S. boiler room shut down by authorities eight years ago. For his role in that company's activities, the National Association of Securities Dealers barred him from associating with any member firm and fined him $100,000.

Hibbard Brown was expelled from the NASD in 1996, fined $10 million and ordered to pay $8.7 million to defrauded customers.

One NASD document said Beimel dictated sales scripts for Hibbard Brown brokers, containing "highly aggressive purchase recommendations, baseless price predictions and material misrepresentations and omissions."

Beimel is now on Slender Life's board of directors and has returned to Eastern Europe to handle investor relations. The company plans to offer additional stock to those shareholders, Scott said, and will use the proceeds to pay off debt, buy the Boca Raton and Vienna weight loss centers, and provide seed capital for expansion.

"Frankly, without additional capital, it would be nearly impossible to continue operations, let alone grow Slender Life," he wrote in the letter to shareholders.

Paul Richard Bell, another American with a checkered past, once worked for Sterk in Bangkok.

More recently, he has operated Premium Placements, a boiler room selling "pre-initial public offering" shares in a number of companies, including International Biometrics Inc. of Newport Beach, Calif.

Bell, who once hosted a radio show on investments in Washington, is no stranger to U.S. and international regulators.

In 1992, he settled fraud charges with the U.S. Commodity Futures Trading Commission. He was fined $100,000 and barred from the industry for life.

Three years ago, Australian authorities boarded a jetliner at Brisbane Airport and arrested Bell, who had been selling shares on behalf of boiler rooms in Thailand and the Philippines. He was charged with making false and misleading statements to investors and offering securities to Australians without proper disclosure.

Bell, who used the alias Dr. Richard King in Australia, pleaded guilty on 21 counts. He was sentenced to two six-month prison terms, which were suspended with the posting of a "good behavior" bond. He also paid a fine equal to $6,200.

The SEC filed an unrelated fraud suit the following year against Bell and First Florida Communications Inc., a public company whose shares traded on the over-the-counter market.

The agency said Bell, as chairman of First Florida, grossly inflated the value of its assets and misrepresented its access to funding in a meeting with prospective investors.

Bell did not respond to the complaint; last summer a judge issued a default ruling and ordered him to give up $75,000 in ill-gotten gains and pay a civil penalty of $110,000.

Bell also was permanently barred from serving as an officer or director of any public company.

Documents show that one of Bell's partners in Premium Placements is Mark Hutcherson, former majority owner of Dunhill Financial Group Inc., a commodities firm based in Atlanta.

The Commodities Futures Trading Commission filed a fraud suit against Hutcherson and Dunhill Financial in 1999, saying they misrepresented the risks and potential returns of investing in commodities and options.

The agency noted that 94 percent of Dunhill Financial's customers lost money, with the total exceeding $8 million.

Hutcherson settled the charges without admitting or denying guilt. He agreed to pay a $10,000 fine and $8.31 million in restitution and to never again seek registration as a commodities broker.

At least one American who worked in the offshore boiler rooms did so while on the run from U.S. authorities.

Donald Craig O'Neill of Lighthouse Point, Fla., was indicted in May last year on 20 counts of fraud and 20 counts of money laundering in connection with an alleged foreign-currency investment scheme that took in $13.7 million.

Federal prosecutors charged that he misappropriated at least $10 million of the money to finance trips, gambling junkets and other personal expenses.

O'Neill fled the country and was added to the Miami FBI office's most-wanted list last fall.

The FBI's poster noted that O'Neill's travels had included Australia, Saudi Arabia and Romania.

Indeed, while a fugitive, he worked as a manager in one of Sterk's boiler rooms in Bucharest, Romania.

O'Neill, a 5-foot-8, 275-pound bulldog of a man, used the alias Don Grant and claimed that he once played football for the Tampa Bay Buccaneers.

O'Neill's days as a fugitive ended in March, when he was apprehended in Rome.

The FBI declined to comment on how it tracked him down or whether its agents knew he was working in the offshore boiler room business.

---

© 2004, St. Louis Post-Dispatch.

Visit the Post-Dispatch on the World Wide Web at stltoday.com

Distributed by Knight Ridder/Tribune Information Services.

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From: StockDung1/12/2006 9:19:56 PM
   of 574
 
Spantel Revenues and Profits Rise, Khashoggi Resigns from Board
Thursday June 10, 2004 3:52 pm ET

FUENGIROLA, Spain, June 10, 2004 (PRIMEZONE) -- Spantel Communications Inc. (OTC BB:SPAL.OB - News), a provider of telecommunications services within Spain, announced today that revenues for April increased to $1,699,265 from $1,309,131 and had gross profits of $173,013 versus a loss of $17,100 compared to April 2003. The 27.5% increase in revenues and change from a loss to a profit is largely attributable to improved efficiency in the company's telemarketing division and the increased traffic from the agreements entered into earlier this year.
The company also announced today the resignation of Mohamed A. Khashoggi from the Board of Directors that will become effective on July 12, 2004. According to Spantel's president, Jose Ramon Basterra, ``Mohamed has been with the company since inception and was instrumental in negotiating many of the major agreements we have made, as well as helping us attain our carrier license.'' Mr. Basterra continued, ``His many other business interests have made it difficult for him to devote the time he feels is necessary to properly serve on the board and therefore, he felt it was in the best interest of Spantel and our shareholders that he resign.''

Spantel has formed an executive committee to appoint a replacement to finish Mr. Khashoggi's term on the board and expects this to be completed prior July 12th, 2004.

Spantel Communications, Inc. is a provider of telecommunications services throughout Spain. To learn more about Spantel, visit the Company's website at spantel.es.

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the competitive environment in the telecommunications industry in general and in the Company's specific market areas, inflation, changes in costs of goods and services and economic conditions in general. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission.

Contact:
Spantel Communications Inc.
Mr. Robert Carlin
+34.607.514.906
+34.952.66.93.29
invest@spantel.es

--------------------------------------------------------------------------------
Source: Spantel Communications Inc.

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From: StockDung2/20/2006 10:38:15 AM
   of 574
 
Chandraswami wants Khashoggi to be summoned

PTI
Sunday, February 19, 2006 11:22 IST

NEW DELHI: Godman Chandraswami has moved a Delhi court seeking recording of the testimony of Saudi Arabia-based international arms dealer Adnan Khashoggi as his defence witness in a Foreign Exchange Regulation Act case against him here.

dnaindia.com

Chandraswami wants Khashoggi to be summoned

PTI
Sunday, February 19, 2006 11:22 IST

NEW DELHI: Godman Chandraswami has moved a Delhi court seeking recording of the testimony of Saudi Arabia-based international arms dealer Adnan Khashoggi as his defence witness in a Foreign Exchange Regulation Act case against him here.

In an application before Additional Chief Metropolitan Magistrate Kamini Lau, Nemichand Jain, better known as Chandraswami, has requested the court to examine Khashoggi, who lives in Riyadh, via video-conferencing.

The court will take up his application on Monday.

Chandraswami's counsel K K Manan told the court that Khashoggi's examination as a defence witness was vital in establishing that his client had no knowledge of the transaction that he is supposed to have made.

Chandraswami is being tried on a complaint made by the Enforcement Directorate for acquiring and transferring Pounds Sterling 6,000 in violation of FERA provisions.

According to the ED, Chandraswami had filed a defamation suit against Lakhubhai Pathak before the Queen's Bench Division in London.

The London court had in November 1986 directed Chandraswami to deposit 6,000 pounds as security for the defendant's costs.

According to the ED, the deposit, allegedly paid by the godman's devotees, was violative of Section 8(1) of the Act which prohibits acquiring or otherwise transacting in foreign exchange without obtaining general or special permission from the Reserve Bank of India.

However, countering ED's complaint, Khashoggi, in an affidavit filed in the Delhi court, has stated that he had deposited the amount in the London court.

Khashoggi, who claims to be a close friend of the godman, admitted in the affidavit to having deposited the sum without informing Chandraswami, as it was a "small amount" for him.

The godman has contended that Khashoggi's deposition in the court would help establish that he had no knowledge of the transaction and thus no offence would be made out against him.

Meanwhile, appearing for the Enforcement Directorate, counsels A K Vali and N K Matta argued that the international arms merchant could not be summoned as a witness in the case.

In the event of Khashoggi submitting false evidence, they said, there was no way he could be prosecuted for perjury, since India does not have an extradition treaty with the Kingdom of Saudi Arabia, where he lives.

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From: StockDung2/20/2006 9:11:02 PM
   of 574
 
Court rejects Chandraswami's request

New Delhi, Feb 20: A court here today dismissed godman Chandraswamy's application seeking to summon Saudi Arabia-based international arms dealer Adnan Khashoggi as a witness in a FERA (Foriegn Exchange Regulation Act) case.

Additional Chief Metropolitan Magistrate (ACMM) Kamini Lau rejected the application of the controversial godman, which had requested the court to examine Khashoggi, who lives in Riyadh, via video conferencing as his defence witness.

Chandraswami is being tried on a complaint made by the Enforcement Directorate (ED) for acquiring and transferring Pounds Sterling 6,000 in violation of FERA provisions. (Agencies)

Published: Monday, February 20, 2006

chennaionline.com.

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From: StockDung2/20/2006 11:12:18 PM
   of 574
 
THE GENI LENDERS: How a Saudi Arms Dealer and His Cronies Used a Penny Stock to Wipe Out a Minnesota Brokerage Firm
By Stephanie Ayres
June 2005
Los Angeles, California
GenesisIntermedia.com Inc was a small company based in Van Nuys, California whose main business activity was placing internet kiosks in shopping centers. But to penny stock traders and a group of high-stakes manipulators, it was GENI, a Nasdaq stock with some shady associates which was used as the vehicle of two manipulation scheems which collided abruptly when GENI's stock price crashed just after September 11, 2001.

In addition to the large losses this caused to public shareholders, there was also news that GENI's crash somehow had also brought down two securities firms, one in New Jersey and the other in Minnesota. These were not penny stock boiler rooms. How could a single penny stock manipulation cause so much havoc?

The GENI Founders
The miniscule GenesisIntermedia.com Inc filed for its initial public offering (IPO) of common stock in June 1999. The company planned to issue 2 million shares with the almost equally unknown Millennium Financial Group as its lead underwriter. The company's CEO was identified as Ramy El-Batrawi (who is reported to sometimes use the name Remy Al-Batswani), not exactly a household name to attract attention. For most people, including some who would later be affected by the stock's rise and fall, GENI's IPO was a non-event.

It was not until some eight months later, about February 2000, that El-Batrawi's somewhat more notorious business associate emerged from the shadows to begin buying enormous quantities of GENI stock. This big buyer was Ultimate Holdings, a Bermuda company controlled by reputed Saudi Arabian arms dealer Adnan Khashoggi, who had been a key figure in the clandestine dealings of the late 1980s known as the "Iran-Contra Affair." The Iran-Contra scandal encompassed a series of events in which which certain US government officials had allegedly schemed with Khashoggi and others to illegally sell military parts to the Government of Iran (which was subject to a US embargo on such trade) and then misappropriate the proceeds of those sales to secretly make illegal payments to support a Central American paramilitary group known as the "Contras," who were also subject to a Congressional ban on receipt of US military assistance.

In the course of the controversial congressional hearings to sort out the underground financial and arms networks which were used to carry out these deals, Khashoggi, an independent international arms dealer, was identified as a facilitator in the secret deal between the Americans and the Iranians. Since the days of Iran-Contra, Khashoggi acquired another type of notoriety.

For years he has been a fugitive from the Government of Thailand, which charged him as one of the key figures in the collapse of the Bangkok Bank of Commerce, described by the Thais as one of the largest financial scandals in the history of their country. A former official of the Bangkok Bank of Commerce, Rakesh Saxena, is also wanted by the Thai government and has been reported living in western Canada under the surveillance of the Canadian government.

El-Batrawi is frequently identified in court documents related to the GENI case as a longtime business associate of Khashoggi, but the exact nature of that relationship, what deals they worked on, or the origins and background of El-Batrawi, for that matter, are all somewhat murky.

All of this lends an air of intrigue to the GENI scheme which sometimes distracts attention from what the schemers were up to. This was no ordinary pump-and-dump scheme. Apparently not content with the mere millions that the average stock manipulation can generate, the GENI schemers seemingly had larger ambitions. Their plan involved a practice called securities lending. It was truly devious.

How stock lending works
The loaning of stocks among brokerage firms is an activity largely unknown to small investors. Some securities firms allow wealthy customers to sell stocks short. Short sellers expect a stock's price to drop, borrow stock to sell with the intention of replacing the stock when the price does drop. If the price rises instead, the short seller must still replace the stock, but will have to do so at a loss instead of a profit.

A brokerage firm may need to borrow stock from another broker to accomodate short-selling customers, and there are other legitimate activities that may cause a firm to need shares which it does not currently hold. Many brokerages which borrow or loan securities have accounts with a clearinghouse called the Depository Trust Company through which loaned securities pass on their way from one brokerage to another.

Securities lending among properly-licensed securities firms (who are the only ones who are legally eligible to do this) is subject to regulation by the SEC. It is effectively an exception to the restriction on lending activities by brokerage firms and investment banks adopted as a reform after the 1930s Depression.

Investigations of the 1929 stock market crash singled out margin lending (where brokers loan customers the money to buy stocks) as an important factor aggravating the widespread impoverishment which followed the crash. Not just the wealthy, it was found, but many average Americans had been borrowing to gamble on the stock market in the 1920s. They lost not only their own money, but ended up owing debts on stocks that became worthless.

Because of this problem, the ability of brokerages to loan money to individuals to buy stocks has been strictly limited since then. Loans between brokerage firms are treated differently. The firm borrowing stock will put up cash or cash-equivalent collateral (such as certain US Treasury securities) equal to the stock's market-value at the time of the loan.

This is an important feature for the GENI story. If during the course of the loan the market value of the borrowed securites changes significantly, the borrower must adjust the collateral amount accordingly. (1)

For example, if 10,000 shares of a stock called ABC was loaned when the market price was $10 per share, the borrower would put up $100,000 of collateral. If the price went up to $15 per share, the borrower would have to put up an additional $50,000 of collateral with the stock lender. If the price went down to $5 per share, the stock lender would return $50,000 of collateral to the borrower. This is illustrated in the following diagram:

Lending GENI
Herein lies the key to the alleged GENI manipulation scheme. The GENI principal El-Batrawi and his associate Khashoggi's Ultimate Holdings held a majority of the company's shares. They loaned shares of GENI stock to a brokerage firm, which loaned them to another brokerage firm. which loaned them to another brokerage firm, which loaned them to yet another brokerage firm. This last firm, which was the real borrower, put up the cash collateral, which was passed from firm to firm back down the line to the lenders, El-Batrawi and Ultimate Holdings.

Meanwhile, El-Batrawi and Ultimate began issuing upbeat public statements about GENI's prospects. They allegedly made secret payments to at least one television stock commentator, Courtney Smith, who reportedly touted GENI on networks such as CNN, CNBC, and Bloomberg. As the public pump-and-dump scheme got underway, the buying pushed the price up. This meant more collateral for the lenders-- El-Batrawi and Ultimate. (2).

But when the stock price crashed-- the lenders (El-Batrawi and Ultimate)-- were then supposed to return much fo the collateral they had received to adjust for the lower market price. But when GENI's stock price crashed, they had disappeared.

In the meantime, the original securities borrower had passed the securities to other firms in the chain and recovered its collateral from them. So the firms in the middle of the chain were the ones who were stuck with the almost worthless GENI stock and unable to recover the collateral which had ballooned to over $200 million by September 2001. Here was the really big squeeze, which according to lawsuits filed over this case, was intentionally engineered by the GENI principals and a group of brokerage firm insiders.

The Brokerage Insiders
It would take more than the usual network of penny stock boiler rooms and promoters to pull off such a scheme. For this GENI hooked up with some allegedly corrupt insiders. One of these insiders, Richard Evangelista, worked at Native Nations Securities in New Jersey, the brokerage that borrowed the GENI stock from Ultimate and El-Batrawi. Another was Wayne Breedon, who managed securities lending at the Toronto, Ontario office of Deutsche Bank Securities, which became the "real" borrower in the chain, the last to receive the GENI stock and which put up the cash collateral.

Guarding the gate to this fraudsters' goldmine was Kenneth D'Angelo, a New Jersey businessman and convicted felon whose experience with fraudulent stock-lending schemes dated back to the 1980s. Before going with Deutsche Bank, Breedon had worked at D'Angelo's RBF International, a company which drew on D'Angelo's particular expertise to act as a finder of securities for lending purposes.

In the GENI scheme, D'Angelo brought El-Batrawi and Ultimate to Native Nations which borrowed large quantities of GENI stock from them. Native Nations re-loaned the stock (via several intermediaries) to Deutsche Bank Securities, where Breedon allegedly arranged for the cash collateral to flow back to Native Nations and then to El-Batrawi and Ultimate. As the stock price rose, Deutsche Bank sent additional cash collateral down the line to El-Batrawi and Ultimate.

A lawsuit filed by the bankruptcy trustee of the firm hardest hit by the scheme alleges that El-Batrawi and Khashoggi never intended to pay back this "collateral," that D'Angelo, Evangelista, and Breedon were aware of this, and planned to receive large payoffs for helping them loot the brokerage firm that was stuck with covering the collateral on the GENI stock.

If this was the case, then who would return Deutsche Bank Securities' cash collateral, which had soared to over $200 million as the firm piled up over 5 million shares of GENI and the stock price soared from its IPO value of $8.50 per share to about $60 per share by 2001? The GENI figures had allegedly absconded with the cash they received (what they did with it is still a mystery), and Native Nations Securities did not have enough cash to cover the loss.

There were other securities firms in this stock-loaning chain who, alleged the bankruptcy trustee's case, were being set up for the squeeze. First in line was MJK Clearing Inc of Minneapolis. Evangelista, the Native Nations conspirator, contacted MJK's securities lending manager, Thomas Brooks, and convinced him to borrow GENI stock which was to be re-loaned to several other brokerage firms.

MJK was to be merely a conduit. Since this was not unusual and Deutsche Bank was to be the final borrower, MJK presumably had no reason to be concerned and agreed to participate. Thus MJK Clearing and several other brokerage firms became borrowers and lenders of GENI. Cash collateral passed through their hands on its way from Deutsche Bank to Native Nations and on to El-Batrawi and Khashoggi.

Sometime in mid 2001 Breedon at Deutsche Bank Securities began to reduce the bank's exposure to loss by returning GENI stock to some of the other firms in the chain. These firms returned Deutsche Bank Securities' collateral and replaced Deutsche Bank Securities as the final borrower of the stock.

When GENI's stock price crashed in the confusion following the events of September 11, 2001, these firms looked to MJK Clearning to recover collateral because of the price drop. MJK in turn looked to Native Nations, which had nowhere to look because the alleged recipients of the cash-- El-Batrawi and Ultimate-- were nowhere to be found.

The Aftermath
Native Nations had no cash to pay MJK and closed down. MJK was still being pressed for a collateral payment of about $60 million by brokerages holding GENI stock. MJK had insufficient cash to cover this and notified NASD and the SEC of the shortage. The Securities Investor Protection Corporation (SIPC) was called in . SIPC is an organization which insures against the failure of brokerage firms. MJK Clearing quickly became the largest case in the SIPC's history. MJK Clearing filed bankruptcy on or about September 27, 2001.

A trustee appointed by the bankruptcy court was charged with presiding over the orderly liquidation of MJK's affairs and also of investigating the situation that had led to its rapid demise. Out of this investigation came a major lawsuit filed by the MJK trustee, Minnesota attorney James P. Stephenson, against Deutsche Bank, Deutsche Bank Securities, Breedon, RBF, D'Angelo, Evangelista, GenesisIntermedia.com Inc, El-Batrawi, Ultimate Holdings, Khashoggi, and Bradford Keiller, a Las Vegas attorney and businessman who had allegedly participated int he public trading of GENI stock which helped drive the price up.

When the stock crashed, MJK was being called upon for about $60 million of collateral, but it was owed about $209 million by Native Nations, which was forced into bankruptcy in 2002 (3). The firm had claimed in public statements that a "rogue broker" (presumably Evangelista) had altered its books to cover up information about the stock lending scheme.

Evangelista had been with the firm since about 1993 as a senior officer. Until early 2001 Native Nations had been called Freeman Securities Inc. A change of ownership resulted in the name change. Freeman/Native Nations had been cited in an SEC action in 1993 over stock-loan dealings with Kenneth D'Angelo. According to the MJK trustee's complaint, Native Nations had been the weak link in the scheme. The conspirators allegedly had tried to avoid a decline in the GENI price so that no one would demand collateral from Native Nations.

Clues about inappropriate securities lending came with the outside audit of Native Nations financial statements for the year 2000. Someone reportedly altered stock loan information on the firm's records to show that the stock which had been borrowed from Ultimate and El-Batrawi had come instead from other other securities firms. Auditor confirmation letters sent to these firms revealed that they were not the lenders of the GENI stock. Confronted with this information, Native Nations allegedly prepared a formal stock lending agreement with the real lenders of the GENI stock, such as Ultimate Holdings, falsely identifying Khashoggi's Ultimate as a securities broker-dealer.

The complexity of this scheme served to prolong the time needed to investigate it. Except for the bankruptcy trustee's civil case, there have been isolated actions by authorities against several, but not all, participants in the scheme:

1. Native Nations Securities: filed bankruptcy in August 2002. The MJK trustee reported filing a creditor claim for about $226 million to enforce a June 2002 court judgment against Native Nations in favor of MJK.

2. MJK Clearing Inc: assumed the brunt of the scheme's effects (along with the SIPC) which covered certain of its customer accounts. MJK filed bankruptcy almost immediately after the GENI crash and ceased operations, causing the sudden and unexpected loss of about 200 jobs of its former employees.

3. Thomas Brooks: MJK's stock loan manager was sued by the SEC in June 2003. The complaint alleged that Brooks contributed to the fraud by letting Native Nations talk him into not demanding collateral from the New Jersey firm as part of the lending arrangement over the GENI stock and the ICII bonds. The SEC also alleged that Native Nations promised to pay MJK higher fees for this consideration, and that Brooks was in a position to profit personally from this, since MJK reportedly paid him 30% of its revenue from the stock-lending conduit activities his department generated. The SEC also alleged that Brooks falsified records at MJK concerning the arrangement with Native Nations.

4. Kenneth D'Angelo: pleaded guilty in September 2003 to criminal charges of conspiracy to commit securities fraud and wire fraud in a federal case in Los Angeles. D'Angelo and RBF International were sued by the SEC in September 2003.

5. Courtney Smith: arrested February 7, 2005 after being charged in a nine-count indictment by a federal grand jury in Los Angeles, including one count of conspiracy and eight counts of federal securities law violations for his alleged conspiracy with GENI principals to tout the stock on national television and elsewhere in exchange for undisclosed compensation laundered through his girlfriend's business.

6. GenesisIntermedia.com Inc: GENI stock was relegated to the "pink sheets." The MJK trustee reports that neither El=Batrawi or Khashoggi filed answers in his lawsuit and reportedly haven't filed answers in a class action securities suit over GENI in which they were named. Their whereabouts were apparently unknown. What they did with the approximately $160 million they made off with is also unknown.

***

(1) The practice is called "marking the securities to market."

(2) El-Batrawi and Ultimate Holdings were identified in most court fiings as the only holders of enough shares to have been able to provide the quantities of stock that were actually loaned.

(3) Most of the $209 million owed by Native Nations to MJK Clearing for securities loan collateral was for loans of GENI stock. However a smaller portion of this total related to lending of the corporate bonds of Imperial Credit Industries Inc. (ICII), the parent company of Southern Pacific Bank of Torrance, California.

In a type of subplot to the GENI story, two businessmen, Michael Riley and William Curtis, schemed to get control of ICII by buying up its corporate debt, an old robber baron tactic, except that Riley and Curtis used the Native Nations-Deutsche Bank securities-lending chain to finance the purchase of the bonds themselves.

Riley and Curtis arranged to buy ICII bonds. Before the settlement date when they had to pay for these bonds, Riley and Curtis loaned them to Native Nations-- in exchange for cash collateral which ultimately came from Deutsche Bank via MJK Clearing and other firms. According to the MJK bankruptcy trustee's complaint, Riley and Curtis used the cash they received to pay for the bonds they had already loaned. Allegedly they obtained control of over 50% of ICII's outstanding bonds and bullied their way onto the company's board.

ICII was vulnerable because it had been incurring large losses, over $150 million in both 2000 and 2001, much of this related to subprime automobile loan financing and other activities of its subsidiary, Southern Pacific Bank, which was closed in February 2003 by the California Commissioner of Financial Institutions. According to a February 7, 2003 statement from the FDIC, Southern Pacific Bank had about $1 billion of assets (outstanding loans) and about $850 million of deposits. The FDIC estimated the cost of its failure to the Bank Insurance Fund at about $134.5 million.

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FINANCIAL CRIME NEWS, June 2005
© STEPHANIE AYRES 2004-2005 ALL RIGHTS RESERVED

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To: StockDung who wrote (516)3/19/2006 3:00:40 AM
From: Dr. von Paleske
   of 574
 
Dr. von Paleske

In the evening of 27th December 2005 the Financial Editor of the leading German Business Daily “Financial Times Deutschland” received a phone call from Africa. I told him that am phoning him from Gaborone in Botswana.

"Are you aware, that the biggest German Bank, Deutsche Bank is involved in a huge and dirty scandal, that involves Saudi Arms dealer Adnan Khashoggi, the Uncle of Dodi Fayed, the last partner of Diana Princess of Wales and a slew of criminal stockbrokers in the US?” I asked him.

The editor was in disbelief.

However the material that I had collected and faxed on that very evening convinced him, this was a scandal and two days later it was front page.

The head of the lending department at Deutsche Bank in Toronto/Canada, Wayne Breedon, in cohort with a slew of dubious stockbrokers, one of them a convicted felon for stock fraud, in a complicated lending scheme had allegedly fraudulently pumped up the stock of a company by the name of Genesis Intermedia.

The Company, then listed on the New York Stock exchange, was built around a book by a John Gray “Men are from Mars and Women are from Venus” He certainly forgot to add, that criminal stockbrokers and arms dealers are from hell.

The company was owned by another company by the name of Ultimate Holdings, based on the Bahamas and owned by Adnan Khashoggi.

Adnan Khashoggi has quite a bit of luggage to carry.

He was involved in the Iran-Contra affair in the 80s, in which weapons were sold to Iran by the Pentagon and the returns were used to finance a rebel group in Nicaragua, the Contras, everything illegal of course.

Just half a year, before the Genesis Intermedia fraud started, he and his old friend Rakesh Saxena, had allegedly linked up together with the international boiler room gangster Amador Pastrana for a huge international fraud.

Saxena is the man, who allegedly defrauded the Bangkok Bank of Commerce together with it’s then CEO Jalichandra to the tune of 2.2 billion US Dollars and thereby caused the Asian Banking Crisis in 1997.

His friend Khashoggi also benefited and allegedly got a 140 million US Dollar "non repayable" loan from the Bangkok Bank of Commerce.

To avoid being arrested, Saxena left Thailand just in time and fled to Canada with allegedly 88 million US Dollars "pocket money", not to retire there, but to continue his stressful work.

First involved with Tim Spicer, then CEO of Sandline, a mercenary company, in a coup in Sierra Leone which was later called the "Arms to Africa Affair" that nearly brought down the Blair government.

Tim Spicer is now the boss of the AEGIS mercenary company, busy on a 293 million Pentagon contract in Iraq, making headlines, his mercenaries were allegedly killing civilians. Involved in the Sierra Leone coup also Tony Buckingham, former owner of the mercenary company Sandline, and also a director and founder of Heritage Oil, listed on the Toronto Stock Exchange.

That was obviously not enough. Saxena was until recently allegedly fraudulently active in Britain (West Shore Ventures) South Africa (Platinum Asset Management) and then Botswana (Investor Relations) , as the Sunday Standard and I here revealed in August 2005.

He is refugee in Canada since 1996, constantly on the phone from self paid house arrest, snail justice to an extradition request from Thailand.

Khashoggi, Saxena and Pastrana together bought a bank in Vienna/Austria by the name of General Commerce Bank, from where they allegedly organized international fraud to the tune of 1 Billion US Dollars in 2000/2001, until the bank was forcibly closed by the authorities. With them the convicted criminals Regis Possino, Sherman Mazur and Raoul Berthaumieu.

Victims came from many countries including Australia, Britain, South Africa.

Even though the fraud at the General Commerce Bank was known, when Deutsche Bank executive Breedon started his fraud allegedly with the knowledge of his superiors, nobody stopped him. Money talks.

Breedon managed to offload Khashoggi’s shares of Genesis Intermedia with massive help of Deutsche Bank in Toronto not on the stock market, where the price would have collapsed, but by lending them to other brokers after he and his accomplices had pumped up the stock .

Khashoggi and his accomplice El Batrawi were grateful for the ill gotten gains.

They organized prostitutes, parties, dinners, sports tickets and cash for the Breedon-Gang.

Come 9/11, the stock price collapsed, the Broker Houses wanted to give the shares back to Khashoggi for cash, but Khashoggi was nowhere to be found.

He and El Batrawi had walked away with 130 million US Dollars cash to carry

As a result, several broker houses suffered heavy losses, two of them went bankrupt, amongst them MJK in Minneapolis, where 200 employees lost their jobs.

Deutsche Bank denied any wrongdoing.

However the taped telephone conversations of the Breedon-Gang allegedly showed the opposite.

The court date was set for 18th January 2006.

Facing overwhelming evidence against them, straight away from the beginning, Deutsche Bank finally before Christmas settled out of court, after four years of denying any responsibility , now paying for everything and still denying any wrongdoing. They promised to pay 270 million US Dollars plus costs. This settlement has been accepted by the bankruptcy court in Minneapolis/Minnesota/USA on 18th January 2006.

Meanwhile the CEO of Deutsche Bank, Ackermann, is preparing himself for another round in the criminal court case in connection with a sale of a German Mobile Phone company to Vodafone.

All scandals, including the one in connection with the closure of the “Open Property Fund “ have not led to his dismissal, to the contrary. His contract was renewed recently and his position elevated. A scandal in it’s own right.

Dr. Alexander von Paleske
Head, Department of Oncology
Princess Marina Hospital
Gaborone/Botswana/Africa
Ex-Barrister-at-Law, High Court Frankfurt (M) E-Mail avpaleske@botsnet.bw


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To: StockDung who wrote (490)3/27/2006 2:44:10 PM
From: DrAvPaleske
   of 574
 
Dr. Alexander von Paleske
Head, Department of Oncology
Princess Marina Hospital
Gaborone/Botswana
Ex-Barrister-at-Law, High Court, Frankfurt (M), Germany
E-Mail avpaleske@botsnet.bw



The continuously rising price of Gold, now above 540 US Dollars per ounce, has driven mine companies to search for Gold.

The “yellow metal” is predominantly found in the Southern Hemisphere,
and often the production of gold is accompanied by destruction of the environment, because it needs Cyanide, a very toxic substance, two teaspoons of a 2% solution kill a man. An overflow of cyanide containing fluid from a gold mine in Romania a couple of years ago led to massive pollution of a river, killing all the fish, reminding us to the perils of gold production..

In focus are now two gold mines of a Canadian mining company by the name of Barrick, one in Chile, Pascua Lama, and the other one in Australia, close to Lake Cowal.

Lets first of all have a look at the company and it’s actors.

Barrick Gold was founded and largely financed by Adnan Khashoggi in conjunction with a Peter Munk in 1983 in Toronto/Canada.
Khashoggi has quite a bit of luggage to carry.
He is well known as an international arms dealer, however let’s focus also on his financial deals, or his crooking, to be precise.
Apart from being involved in the Iran Contra Affair, in which weapons were sold to Iran via Israel by the Pentagon and the proceeds were used to finance a right wing terror group in Nicaragua, called the Contras, Khashoggi was deeply involved in the Bank of Credit an Commerce International (BCCI), a massive washing machine for dirty Dollars from shady arms deals and drug cartels.
The Medellin drug cartel of Columbia was a most welcome client of that bank.
The bank was forcibly closed in 1992.
No problem for Khashoggi, he knew other crooks to work with.

Next came Rakesh Saxena, adviser to the Bangkok Bank of Commerce, together with the CEO Krirkiat Jalichandra, who was sentenced to 30 year in prison one year ago for defrauding the bank to the tune of 2,2 billion US Dollars and thus causing the Asian Banking Crisis in 1997.

Khashoggi got from the duo Jalichandra/Saxena a "loan"amounting to 140 million US Dollars in 1994. He is therefore now wanted by the Thai authorities for fraud.

And he continued to work with Saxena, who fled from Thailand to Canada just in time.
They bought in 2000 the General Commerce Bank in Vienna/Austria, together with the international stock fraudster Amador Pastrana and the convicted criminals Regis Possino, Raoul Berthamieu, and Sherman Mazur, and turned it into a center of international stock fraud, the fraud amounting, according to press reports, to one billion US Dollar.
The bank was forcibly closed in 2001.
One billion in one year

Khashoggi was also involved in a stock lending fraud-scandal in the US around the company "GenesisIntermedia" in 2001 , together with a convicted fraudster by the name of d'Angelo and a slew of criminal stock brokers plus a strip bar owner in Las Vegas.

Khashoggi and his friend El-Batrawi in the end walked away with 140 million US Dollars, two broker houses filed for bankruptsy and 200 employees lost their jobs in Minneapolis/Minnesota/USA.

The other cofounder and now boss is Peter Munk. He also has a bit of luggage to carry.
He owned a stereo equipment producing company in Nova Scotia/Canada, supported with public funds, and at the brink of bankruptsy he quickly sold the shares before they plunged, stock fraud or insider trading is another word for that.

Doesn’t matter, what is more divine, than to forgive and despite this scandal and through the connections of his partner in bankruptsy he rose from the ashes – in the aristocratic circles of London and then in Australia and finally came back home to Canada with Adnan Khashoggi, two dubious birds of the same feather albeit different faith, founding Barrick Gold.

The company was rumbling along until G.H.W. Bush, the senior, came for help and for less than 10.000 Dollars they bought from the state a piece of land, whose underground had gold worth 10 billion US Dollars, later on this was called by US President Bill Clinton’s Interior Secretary Babbitt “the biggest gold heist since the days of Butch Cassidy”. And with this “Gold Heist” Barrick shot from insignificance to a global player.

After Bush lost the elections to Bill Clinton in 1992, he became a direct player on board of Barrick, a new home away from home and well paid.
With him Karl-Otto Poehl, former President of the German Federal Reserve Bank (Bundesbank) and member of the Social Democratic Party and the former Canadian Prime Minister Brian Mulroney.

Now the ship Barrick with its prominent officers could set sail and travel to it’s next destination, Africa, Zaire to be precise. This country, now called Democratic Republic of Congo, was at the brink of civil war-doesn’t matter, better prices for the mineral rights especially when you negotiate with two parties, old robber Mobuto Sese Seko and new stealing hand, Laurent Kabila.
However the civil war lasted too long, so let’s go for the next destination, Tanzania.
The company Sutton, at this time advised and later on owned by Barrick was owning a mine by the name of Bulyanhulu.
A good thing to exploit, if there were not thousands of small scale miners with their families, who were digging legally already there for gold.
Sutton chased them away with Bulldozers and police, allegedly 50 miners died during this clearing operation, buried alive in the shafts.

Barrick does not want to hear the allegations, because, according to them, they are untrue. May be it was a festival?

However investigative journalist Greg Palast in conjunction with the human rights lawyer Tundu Lissu in Dar-es-Salaam brought a report in the British newspaper “Observer” and called it nothing else than a scandal..

Barrick sued, Greg Palast and Lissu insisted and a delegation of NGO’s, visiting Tanzania in 2002 had discovered some indications, that the story was in fact true, however their work was not actively supported by the Government, to say the least.

With Bush’s and Mulroney’s support, Barrick got a huge World Bank loan, to develop the mine, a friend in need, even when on the payroll, is a friend indeed.

Now Barrick is active in Australia and Chile, in both countries facing massive resistance, bigger than the poor miners in Tanzania could build up.

In Chile, Barrick wants to dig for gold high up in the Andes Mountains and remove glaciers there, that are vital for the water supply of a community in the desert.

And in Australia Lake Cowal is habitat for endangered species.

It looks, as if Barrick is facing stiff resistance globally now.

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From: StockDung4/8/2006 2:15:03 PM
   of 574
 
DISPATCHES - The house that Kashoggi built
nationmedia.com
Story by BERTHA KANGONGOI
Publication Date: 3/17/2006
I had bought into the saying that money can’t buy happiness, until I visited the Ol Pejeta House, which stands in a private game reserve, a few kilometres from Nanyuki town.


Exquisite is no word strong enough to describe the house. But there’s more to the magic of this place than the marvel of grace and tranquillity: It used to be one of the holiday homes of the Saudi Arabian billionaire Adnan Khashoggi.

If it is claimed that Khashoggi was famed for his flamboyant spending, then this is part of the testimony to the claim. Adnan Khashoggi was, and perhaps still is, larger than life.

He built the Ol Pejeta house after acquiring 22,000 acres of land as his private game reserve where he kept lions and cheetahs at the house’s entrance.

His staff, it is said, would slaughter a cow everyday for the four lions. Reality or fiction, it is hard to tell. But in his heyday, Kashoggi was said to be the world’s biggest arms dealer.

Well money is one thing and taste is quite another but Khashoggi seems to have been well-endowed in both.

From the outside, the Ol Pejeta house looks just like another massive house. The striking thing from this point is the extensive private grounds and a beautiful brick terrace just outside the front door.

But once inside, everything takes on a grand scale. The reception is palatial, with a huge, round mahogany table where the rich and the famous would sip their drinks as they waited to meet the billionaire.

The living room alone fits one and a half tennis courts and is not cluttered with all sorts of collections and hangings on the wall. There is only one big painting hanging on the wall, called “Leopard Rain’. It’s the picture of a halfway spotted leopard, with more spots raining on it from above.

Here art imitates life as it is at the Ol Pejeta conservancy, on which the house stands. It is prohibited to wander outside the house’s fenced compound to avoid running into a wild animal. It is also that sense of closeness to danger when you are so safe, that makes the house a magical adventure.

For a man idolised in songs and novels in the 70s, coming into this house makes it easy to imagine how Khashoggi lived. I figure the diminutive billionaire walking from the living room, through the TV hall and out into his private pool, glass of wine on one hand and a model on the other.

But when everyone talks about Khashoggi, it becomes hard to separate fact from fiction.

Eunice Kahindo, the Ol Pejeta housekeeper who was a teacher at a nearby school when Khashoggi visited the school only remembers a few things about the man.

“He came here for holiday only twice a year,” she says. “He came with a group of women, usually his girlfriends while the wife and the kids would visit at another time in the year”.

Like the popular line, Khashoggi spared no treasure to live in pleasure. But nothing beats his innovation in self-amusement.

In his dining room is a pulley whose belts were missing. This, the housekeeper explains used to pull a boat-shaped big basket whose belts ran across the room. “He would put fruits, sweets or chocolates in the basket and would use the pulley to lower the basket onto the dining table to amuse his guests. But that was not as far as it went. For his own amusement, it said, he would have one of his girlfriends get into the basket and would move her around the room using the pulley before lowering her onto the dining table.

The pulley remains but the belts and the boat shaped basket are missing.
From the dining room is the kitchen, which alone comes in three rooms. There is first the utensils room, which is just cupboards with plates and mugs and all sorts of cutlery. The next is a small room with two big sinks — this I call the cleaning room. Lastly there is the biggest of all the three rooms that make the kitchen – the cooking area. I’ve only seen this kind of kitchen in movies or royalty documentaries.

Here I was standing in one and I just couldn’t believe how much space food and eating it occupied in some people’s life. If space were to determine the amount of food eaten in a house, I am almost at starvation point! And the kitchen door leads outside to more sinks, perhaps for cleaning the uniforms of the 120-plus stalwarts who worked for Khashoggi.

Today, there are only about ten workers in the house. They cater for the guests who hire the house for exclusive events. The running theme of the house is wood furnishings, rugs and simple elegance – elegance in simplicity.

There is a wall-to-wall dirty-white Persian rug in the living room, matching the cream of the elegant seats. The fireplace is decorated to detail with two bronze lion heads at its base while the wooden plank over the fireplace is done in abstract carving giving the whole place a rare originality.

When we come into what used to be Mrs Khashoggi’s bedroom on the first floor, on one wing of the house, photojournalist Joan Pereruan goes into moaning. “This is not only breath taking but also depressing,” she says.

The massive bed is one of the main wonders of the house. It is a 12 by 12 ft affair, a little raised from the floor and with impressions at the head that look like clouds. Like it is in most rooms, there are banana shaped lampshades by the two sides of the bed. Closets line one side of the room. But on opening them, one discovers that they are actually part of an escape door that leads down stairs.

Khashoggi lived large and dangerously. For all its beauty, two tennis courts and a paved path that leads to the airstrip, this must have been one of the least of Khashoggi’s properties. It is said that after he was declared persona non grata by Kenyan government, Khashoggi staked the house and all the private reserve in a poker game in Spain, which explains how the house changed hands.

But since last year, the house, and the Sweet Waters tented camp, five kilometres from the house came under the management of the Serena hotels.

“We hire the house out for exclusive social groups,” says Dixon Ondieki the general manager of both the camp and the house.

“This house has a way of changing people,” says Eunice Kahindo, the housekeeper. “I see people come in looking beaten or otherwise indifferent but once they get into the house, that changes. They brighten up. Perhaps it’s the vastness, the brightness and the magic of the place,” she says. “Whatever it is, something just happens”

I think it’s the magic of the larger-than-life Khashoggi that rubbed off on the house!




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To: StockDung who wrote (519)4/14/2006 12:38:03 AM
From: Glenn Petersen
   of 574
 
S.E.C. Accuses Saudi Financier and Executive of Stock Fraud

By BLOOMBERG NEWS
Published: April 14, 2006

A Saudi Arabian financier and a former executive of a defunct California telemarketing company were sued yesterday by federal regulators over claims that they orchestrated a $130 million stock loan and manipulation scheme.

The suit was filed by the Securities and Exchange Commission against Adnan Khashoggi, the Saudi financier, and Ramy El-Batrawi, who was chief executive of GenesisIntermedia, a telemarketing company formerly based in Van Nuys, Calif. Mr. Khashoggi and Mr. El-Batrawi owned 85 percent of GenesisIntermedia.

According to the lawsuit, filed in United States District Court in Los Angeles, the two men lent 15 million GenesisIntermedia shares to Deutsche Bank Securities while artificially inflating the stock price.

"El-Batrawi, Khashoggi and others also drove up the price of the stock by engaging in large numbers of buys and sells," the S.E.C. said in the suit. "The buys and sells were often done in small lots of 100 to 500 shares, amplifying the false appearance of general investor interest."

A California jury acquitted a financial commentator, Courtney D. Smith, last year of charges he failed to disclose payments he received from GenesisIntermedia to promote the company's stock.

Lawyers for Mr. El-Batrawi and Mr. Khashoggi could not be immediately located for comment. An S.E.C. lawyer, Kara Brockmeyer, said the agency had not determined who their lawyers were. Mr. El- Batrawi has no listed telephone number in Los Angeles, and Mr. Khashoggi's whereabouts is not known, according to the complaint.

Trading in GenesisIntermedia was halted in September 2001 after the shares fell 65 percent. The wreckage caused the failure of the intermediary brokers that handled the loans to Deutsche Bank Securities and saddled the Securities Investor Protection Corporation with a $42 million payout.

Mr. Khashoggi is best known as an arms broker in the Iran-Contra scandal of the mid-1980's, when he served as middleman for illegal sales of weapons to Iran.

nytimes.com

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