Pages

Wednesday, April 07, 2010

Stock Fraud

Defendants Sentenced for Telemarketing Stock Fraud Scheme Defendants Ran Boiler Room Operation that Targeted Foreign Investors


April 7, 2010 - ATLANTA, GA—JOHN A. REECE, 57, of St. Augustine, Florida, and PATRICK J. SOLTIS, 47, of Hoschton, Georgia were sentenced today by United States District Judge Clarence Cooper to federal prison for operating a telemarketing scheme in Marietta, Georgia, that defrauded dozens of foreign individuals into investing hundreds of thousands of dollars in fraudulent companies.

United States Attorney Sally Quillian Yates said of the case, “These defendants ran an investment boiler room operation using telemarketers to pressure their unsuspecting victims into investing thousands of dollars in a variety of phony ventures. The defendants have now been sentenced to federal prison and ordered to pay restitution to their innocent victims.”

REECE was sentenced to six years and six months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $582,639. SOLTIS, who cooperated with the government and received a sentence reduction as a result, was sentenced to three years and five months in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $301,601. REECE was convicted of these charges after pleading guilty on January 11, 2010. SOLTIS was convicted after pleading guilty on October 15, 2008.

According to United States Attorney Yates, the charges and other information presented in court: REECE and SOLTIS lied to investors in 2002 to entice them to invest in a shell company, Wolf & Soltis Holdings, LLC. Through telemarketers they hired to sell the stock in unsolicited transactions, the defendants falsely claimed that Wolf & Soltis had substantial business operations and plans to expand in a number of areas. In fact the company was bogus, had no operations, assets, revenues, or even employees, other than the hired telemarketers.

As part of the scheme, the defendants claimed that they owned a private bottled water company, were involved with the University of Minnesota to develop a tree species that grew more quickly, and owned a cosmetics company for which entertainment personality Raquel Welch was the spokesperson. All of these claims were false. In truth, the defendants pocketed the lion’s share of the money they received from investors and used the rest to pay their telemarketers, telephone bills, and related expenses. After a disagreement with SOLTIS, REECE began to operate a second fraudulent telemarketing scheme through an entity he operated known as “Wellington Group,” purportedly selling shares in “Australian Biofund Investments, Ltd.” (ABIL), based on material misrepresentations and omissions. REECE retained the vast majority of the money invested in Wellington, but failed to disclose that fact and even falsely informed investors that there was no commission associated with their investments.

To execute their fraud, REECE and SOLTIS ran a boiler room with high-pressure telemarketers they hired to call hundreds of potentially vulnerable victims each day from call lists they had purchased. In addition to providing call lists to the telemarketers, REECE developed scripts for them to use in selling the fraudulent investments. The call lists targeted foreign investors in English speaking countries. The defendants intentionally targeted foreign investors in part to avoid, or at least delay, the scrutiny of U.S. law enforcement. As a result, the overwhelming majority of the victims live in foreign countries, primarily Australia and Canada. The defendants’ schemes resulted in a loss of over $600,000 to the victims.

This case was investigated by Special Agents of the Federal Bureau of Investigation.

Assistant United States Attorneys Stephen H. McClain and Justin S. Anand prosecuted the case. The United States was originally represented by Assistant United States Attorney Lawrence R. Sommerfeld.

No comments: