South Florida may not be as fertile ground as Wall Street on the securities-fraud front, but federal authorities said the region is giving the nation’s investment capital a run for its money.
Standing side by side, South Florida’s U.S. attorney and top FBI agent said the region ranks No. 2 for securities and investment fraud investigations in the country, leading to prosecutions of 85 defendants over the past year and a half — including 15 announced Monday.
In late 2010, U.S. Attorney Wifredo Ferrer launched a federal securities fraud task force to operate like other law enforcement partnerships targeting South Florida’s No. 1 scourges — runaway healthcare and mortgage rackets.
Ferrer, in a press conference at the U.S. attorney’s office, said the main goal of the latest fraud task force is “try to restore the integrity of the securities market.”
He said that an ever-rising number of investors, from the savvy to the elderly, have lost millions of dollars in penny-stock, market-manipulation and Ponzi schemes since the economy’s boom-bust cycle of the past decade. “Prevention is the key,” he said, urging investors to educate themselves and contact the FBI or the Securities and Exchange Commission if they suspect fraud.
FBI special agent in charge John Gillies said the majority of the new securities fraud cases resulted from undercover operations targeting penny-stock companies headed by executives who allegedly conspired to carry out traditional “pump and dump” schemes. Such scams artificially inflate, or pump, the price of the penny stocks so that the perpetrators can sell, or dump, their shares for a profit.
Among those recently charged: Scott Haire, 42, of Coral Springs, who was president of a Texas corporation called Wound Management Technologies, Inc., which purportedly developed advanced wound-care products. Haire, who is expected to surrender to authorities on Wednesday, was charged with scheming to manipulate the publicly quoted share price and trading volume of WNDM common stock.
“The fraud from these stock market manipulation schemes could have defrauded numerous innocent investors out of millions of dollars,” Gillies said. But “there were no victims” because the FBI’s sting operations disrupted the scams early on, he said.
Eric Bustillo, a former Miami federal prosecutor who heads the SEC’s regional office, said he has tried to be more aggressive in civil prosecutions and in sharing information with the U.S. attorney’s office for parallel criminal cases.
“When we say we’re determined to stamp out microcap fraud, that’s not a slogan,” Bustillo said. “That’s a pledge.”
Both the SEC and U.S. attorney’s office have also worked closely in cracking down on Ponzi schemers, who enrich themselves by paying off old investors with new investors’ money.
While such schemes have been around for decades, they seemed to pop up everywhere during the real estate-driven boom. Among the region’s high-profile convictions: Fort Lauderdale lawyer Scott Rothstein and Miami businessman Gaston E. Cantens, who betrayed the trust of both investors and friends.
The latest South Florida figure to be charged: Aner Menendez.
Menendez, 47, was arrested Monday on fraud charges after he allegedly posed as the owner of a $2 million condo at the Key Biscayne Ritz Carlton to give wealthy investors the impression that he was a big success. Menendez, who rented the unit, lured in investors with promised returns ranging from 30 percent to 200 percent on trades in foreign currency, commodities and stocks through his company, De Forcade, according to an indictment.
“It was all a lie,” said Ferrer, the U.S. attorney.