Business Crimes Hotline

From 1986 until May 2001, Reed Slatkin allegedly operated a massive Ponzi scheme in which he solicited more than $593 million from approximately 800 investors. Slatkin pleaded guilty to eight fraud counts, six counts of money laundering, and conspiracy to obstruct the SEC. He is scheduled for sentencing on June 9, 2003, at which time he faces a maximum possible sentence of 105 years in prison and fines up to $3.75 million.

From approximately 1986 to 1999, McMullin allegedly assisted Slatkin's investment activities in Slatkin's Santa Barbara office by creating and mailing investor account statements, conducting and recording stock transactions with outside brokers, and communicating with investors. The Government alleges that McMullin allegedly knew Slatkin did not purchase or sell most of the stocks that he reported to his investors, and that Slatkin's actual stock trades were far below the cumulative volume that he reported.

The SEC began investigating Slatkin in November 1999 and subpoenaed McMullin and others to testify in that investigation. Slatkin and McMullin allegedly conspired to obstruct the investigation by minimizing McMullin's role in and knowledge of Slatkin's investment activities. Slatkin allegedly sought to conceal that his investment program was a massive Ponzi scheme and that his investor account statements allegedly were fabrications designed to lull and deceive investors. McMullin allegedly agreed to help Slatkin by providing false testimony to the SEC in January 2000. In July 2001, McMullin allegedly lied to FBI and IRS agents about his own actions and his knowledge of the alleged scheme. Finally, in March 2002, McMullin allegedly lied during sworn testimony to the attorney for the court-appointed bankruptcy trustee for Slatkin's estate.

The charges against McMullin carry a maximum possible penalty of 15 years in federal prison and a fine of up to $750,000. In addition, McMullin has agreed to pay over $1.5 million in restitution to Slatkin's victims.

FLORIDA

Former Executives of GTE Data Services, Inc. Found Guilty of Fraud

A jury in the United States District Court for the Middle District of Florida found Janice L. Conley guilty of one count of conspiracy, two counts of wire fraud, and two counts of making false claims to the government. The jury also found Steven A. Cardo guilty of conspiracy and one count of wire fraud.

According to evidence presented at trial, during 1995 and 1996, Conley was the director, and Cardo was a senior manager, of GTE Data Services, Inc., a subsidiary of GTE, now known as Verizon. Witnesses testified that Conley and Cardo directed them to falsify GTE Data Services' time records and to submit false and fraudulent invoices for services provided to the government Medicare program.

Conley faces a maximum sentence of 25 years in prison, and Cardo faces a maximum sentence of 10 years in prison.

Former Corporate Officer Pleads Guilty to Securities Fraud Charges

Anthony M. Damato pleaded guilty in the United States District Court for the Southern District of Florida to a one-count Superseding Information charging him with securities fraud in connection with a fraudulent scheme to falsify the financial condition of Eagle Building Technologies, Inc., a publicly-traded Boca Raton company for which Damato served as Chairman of the Board of Directors.

Damato allegedly falsified the company records and press releases of Eagle Building Technologies. First, Damato allegedly created fraudulent bank accounts and purchase orders and diverted privately invested funds to the company, in order to give the false appearance of substantial revenue coming to the company from sales and operations in India. Second, he allegedly caused false statements to be submitted to the Securities and Exchange Commission to create the erroneous appearance that revenue was being received by Eagle Building Technologies. Third, Damato allegedly allowed an Eagle Building Technologies officer to issue misleading press releases regarding the testing and capabilities of a surveillance system of Biosterile Technology, Inc., a company represented by Eagle Building Technologies, in order to take advantage of the publicity and fear generated by widely-reported incidents of terrorist activity involving anthrax in the United States. Finally, Damato allegedly made payments in an attempt to bribe SEC employees in an effort to avoid SEC scrutiny and to conceal and perpetuate his alleged fraudulent activity.

Damato faces a statutory maximum sentence of 10 years in prison, a monetary penalty of up to $1,000,000, and mandatory restitution.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

According to evidence presented at trial, during 1995 and 1996, Conley was the director, and Cardo was a senior manager, of GTE Data Services, Inc., a subsidiary of GTE, now part of Verizon. Witnesses testified that Conley and Cardo directed them to falsify GTE Data Services' time records and to submit false and fraudulent invoices for services provided to the government Medicare program.

Conley faces a maximum sentence of 25 years in prison, and Cardo faces a maximum sentence of 10 years in prison.Anthony M. Damato pleaded guilty in the United States District Court for the Southern District of Florida to a one-count Superseding Information charging him with securities fraud in connection with a fraudulent scheme to falsify the financial condition of Eagle Building Technologies, Inc., a publicly traded Boca Raton company for which Damato served as Chairman of the Board of Directors.

Damato faces a statutory maximum sentence of 10 years in prison, a monetary penalty of up to $ 1 million, and mandatory restitution.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

CALIFORNIA

Assistant to Reed Slatkin Charged with Conspiring to Obstruct Investigation

Richard D. McMullin, of Santa Barbara, was charged with conspiring to obstruct the Securities Exchange Commission's investigation of Reed Slatkin's investment activities and making false statements during the criminal investigation and during Slatkin's bankruptcy proceedings.

From 1986 until May 2001, Reed Slatkin allegedly operated a massive Ponzi scheme in which he solicited more than $593 million from approximately 800 investors. Slatkin pleaded guilty to eight fraud counts, six counts of money laundering, and conspiracy to obstruct the SEC. He is scheduled for sentencing on June 9, 2003, at which time he faces a maximum possible sentence of 105 years in prison and fines up to $3.75 million.

From approximately 1986 to 1999, McMullin allegedly assisted Slatkin's investment activities in Slatkin's Santa Barbara office by creating and mailing investor account statements, conducting and recording stock transactions with outside brokers, and communicating with investors. The Government alleges that McMullin allegedly knew Slatkin did not purchase or sell most of the stocks that he reported to his investors, and that Slatkin's actual stock trades were far below the cumulative volume that he reported.

The SEC began investigating Slatkin in November 1999 and subpoenaed McMullin and others to testify in that investigation. Slatkin and McMullin allegedly conspired to obstruct the investigation by minimizing McMullin's role in and knowledge of Slatkin's investment activities. Slatkin allegedly sought to conceal that his investment program was a massive Ponzi scheme and that his investor account statements allegedly were fabrications designed to lull and deceive investors. McMullin allegedly agreed to help Slatkin by providing false testimony to the SEC in January 2000. In July 2001, McMullin allegedly lied to FBI and IRS agents about his own actions and his knowledge of the alleged scheme. Finally, in March 2002, McMullin allegedly lied during sworn testimony to the attorney for the court-appointed bankruptcy trustee for Slatkin's estate.

The charges against McMullin carry a maximum possible penalty of 15 years in federal prison and a fine of up to $750,000. In addition, McMullin has agreed to pay over $1.5 million in restitution to Slatkin's victims.

FLORIDA

Former Executives of GTE Data Services, Inc. Found Guilty of Fraud

A jury in the United States District Court for the Middle District of Florida found Janice L. Conley guilty of one count of conspiracy, two counts of wire fraud, and two counts of making false claims to the government. The jury also found Steven A. Cardo guilty of conspiracy and one count of wire fraud.

According to evidence presented at trial, during 1995 and 1996, Conley was the director, and Cardo was a senior manager, of GTE Data Services, Inc., a subsidiary of GTE, now known as Verizon. Witnesses testified that Conley and Cardo directed them to falsify GTE Data Services' time records and to submit false and fraudulent invoices for services provided to the government Medicare program.

Conley faces a maximum sentence of 25 years in prison, and Cardo faces a maximum sentence of 10 years in prison.

Former Corporate Officer Pleads Guilty to Securities Fraud Charges

Anthony M. Damato pleaded guilty in the United States District Court for the Southern District of Florida to a one-count Superseding Information charging him with securities fraud in connection with a fraudulent scheme to falsify the financial condition of Eagle Building Technologies, Inc., a publicly-traded Boca Raton company for which Damato served as Chairman of the Board of Directors.

Damato allegedly falsified the company records and press releases of Eagle Building Technologies. First, Damato allegedly created fraudulent bank accounts and purchase orders and diverted privately invested funds to the company, in order to give the false appearance of substantial revenue coming to the company from sales and operations in India. Second, he allegedly caused false statements to be submitted to the Securities and Exchange Commission to create the erroneous appearance that revenue was being received by Eagle Building Technologies. Third, Damato allegedly allowed an Eagle Building Technologies officer to issue misleading press releases regarding the testing and capabilities of a surveillance system of Biosterile Technology, Inc., a company represented by Eagle Building Technologies, in order to take advantage of the publicity and fear generated by widely-reported incidents of terrorist activity involving anthrax in the United States. Finally, Damato allegedly made payments in an attempt to bribe SEC employees in an effort to avoid SEC scrutiny and to conceal and perpetuate his alleged fraudulent activity.

Damato faces a statutory maximum sentence of 10 years in prison, a monetary penalty of up to $1,000,000, and mandatory restitution.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

According to evidence presented at trial, during 1995 and 1996, Conley was the director, and Cardo was a senior manager, of GTE Data Services, Inc., a subsidiary of GTE, now part of Verizon. Witnesses testified that Conley and Cardo directed them to falsify GTE Data Services' time records and to submit false and fraudulent invoices for services provided to the government Medicare program.

Conley faces a maximum sentence of 25 years in prison, and Cardo faces a maximum sentence of 10 years in prison.Anthony M. Damato pleaded guilty in the United States District Court for the Southern District of Florida to a one-count Superseding Information charging him with securities fraud in connection with a fraudulent scheme to falsify the financial condition of Eagle Building Technologies, Inc., a publicly traded Boca Raton company for which Damato served as Chairman of the Board of Directors.

Damato faces a statutory maximum sentence of 10 years in prison, a monetary penalty of up to $ 1 million, and mandatory restitution.

The Business Crimes Hotline and In the Courts were compiled by Bradley J. Bondi, Esq., an associate with Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.