The Penningtons had already sunk $25,000 into a tech company when they found themselves in a luxury suite in the Miami Dolphins’ stadium, taking in the spectacle and listening to the CEO give his time-tested sales pitch.
The host was a former Miami Dolphin himself, they had been told, and a former Miami Hurricanes player. And with his 6-foot, 3-inch frame and bulging, tattooed arms, David Coriaty looked the part. He had friends in football, including a coterie of NFL players who had trusted him enough to invest in his company, which has had several names but is now called Hawk Systems, Inc.
Months later, after more meetings and persuasion, Lynda Pennington, 67, transferred more money to invest in the company which claimed to have invented a revolutionary car security product. This time, it was everything in her 401(k): $55,800.
They lost it all.
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“Everything I’ve worked for, my savings I had from my company when we moved [from Miami to the Sarasota area] and I rolled it into an IRA, every bit of it unfortunately went to David,” Lynda said.
Coriaty never played for the Dolphins or the Hurricanes.
His most recent gridiron exploits were at Palm Beach Gardens High School. He is featured in a 1987 varsity team photo in the school’s yearbook.
A spokesman for UM said there was no record of Coriaty attending the university.
Coriaty said he never claimed to be a football player, but maybe investors were confused by his other football connections.
“I had a lot of Dolphins friends,” he said. “I had a lot of Miami Hurricane friends. I had some football player investors in the company. I used to own a sports agency that represented some Dolphins players.”
However, in a lawsuit targeting this company, a former investor alleges that one of Coriaty’s associates told him that Coriaty was an ex-Dolphin. In email records, a different couple who invested confronted Coriaty over allegedly lying about his football career. And in sworn testimony, another person said Coriaty told him he had played for the Hurricanes.
Lynda Pennington, 67, transferred more money to invest in Hawk. This time, it was everything in her 401(k): $55,800.
During its peak years, Hawk took in at least $7 million from investors, issued millions of shares of now-near-worthless stock, and plowed the money into the Dolphins luxury box, Las Vegas junkets, a Hawk logo on the ice at Panthers games, BMWs, a silver Lamborghini, Porsche payments, loans to friends and relatives, designer jewelry at Tiffany & Co., a caterer for Coriaty’s sister’s wedding, tickets to the play Wicked, even tattoo parlor bills, according to court records and bank statements.
What the company did not do — not ever — was produce an inventory of its product. The money simply dried up.
The question of culpability for Hawk’s debacle is at the center of the bitter lawsuit plodding through the Palm Beach County courts. The plaintiff, Mark Spanakos, is a former Hawk board member who alleges Coriaty, a community college dropout and former strip club manager, used his false fame to coax victims into bankrolling the company, which he then used as a grab bag to finance an outrageous lifestyle.
Hawk and its executives have been investigated by several law enforcement agencies, including Palm Beach County Sheriff’s Office, the Securities and Exchange Commission and the FBI, but none has filed criminal charges.
What the company did not do — not ever — was produce an inventory of its product.
In his court deposition, Coriaty acknowledges writing Hawk checks for his personal expenses, but says those charges were in lieu of a formal paycheck. He says he never went over his allotment. His annual salary began at $760,000 but was lowered to $500,000 when the company’s losses steepened, he said in an interview.
Hawk’s business pitch was based on a patent for a fingerprint sensor that would be installed into a car, allowing only authorized persons to start the vehicle with or without a key.
Coriaty presented it as revolutionary protection against auto theft that could also be applied to other devices like boats, ATMs, even medical records.
Investors, ranging from retirees like the Penningtons to real NFL stars, like former Baltimore Raven and current free agent Anquan Boldin, were dazzled.
The lawsuit’s long list of 65 defendants includes everyone from Hawk’s board of directors to investment bankers to Greenberg Traurig, the mega-global law firm founded in Miami that Spanakos claims advised Hawk to file false and misleading SEC reports. An emailed statement from Greenberg Traurig said the firm is “defending against what we believe to be baseless charges in this action.”
At least one of the defendants, Coriaty’s brother, served prison time for a fraud conviction.
The Hawk suit has been inching toward a jury trial since 2010.
Coriaty blames Spanakos for the meltdown, saying the company was on the verge of explosive success when Spanakos, angry about not seeing a return on his investment, sabotaged it.
Spanakos confirms he contacted the manager of one of the hosts of American Chopper when the Discovery Channel motorcycle show was slated to feature Hawk’s fingerprint sensor on a bike. Spanakos said he warned the manager that Hawk was unscrupulous. Coriaty said Spanakos threatened to sue.
Either way, the hosts did not mention Hawk or Coriaty during the episode.
“He basically stopped any sort of marketing or any sort of publicity to benefit the company. He would stop it in its tracks so the company couldn’t move forward. He did that with probably a dozen companies we were doing business with,” Coriaty said. “He is a scorned woman, that’s all it is.”
A second lawsuit was filed in 2011 by Hawk’s would-be product distributor against both Spanakos and Coriaty, saying in the complaint that Hawk “was corrupted and manipulated by its founder and other culpable parties and twisted into a criminal enterprise” that was a “blatant and obvious scheme to defraud investors.”
The distributor has since gone out of business and the case was dismissed.
He basically stopped any sort of marketing or any sort of publicity to benefit the company, he would stop it in its tracks so the company couldn’t move forward. ... He is a scorned woman, that’s all it is.
David Coriaty, former Hawk CEO
Spanakos now says he is not sure if the product was ever really invented, or it was all a farce. Coriaty points to promotional videos as proof his invention worked and that he intended to make it successful.
The Penningtons said Coriaty told them he had played for the Dolphins and that his NFL connections were a convincing factor in their decision to invest.
“He was promoting himself as an ex-University of Miami and Dolphins football player,” Lynda Pennington said. “It made us comfortable … He would constantly say that he had players that were investing in the company and the NFL had these big standards for financials with their players and who they invested with.”
When asked about the alleged practice of pretending to be an ex-Dolphin to market a business, a Dolphins spokesman wrote in an email that the organization is “aware of the incident, but will not provide any further comment.”
Luxury suites in the Dolphins’ stadium require a three-season commitment — totaling more than $350,000. Coriaty paid around $40,000 for the first few games of the season, promising to pay the rest at a later date, according to court documents and a deposition from a Dolphins sales representative, who also said Coriaty mentioned he was a former Hurricanes player. After Coriaty attended a handful of Dolphins games and still hadn’t paid, Hawk’s suite tickets were revoked.
Besides Boldin, multiple real NFL players lost money from Hawk investments: Bryant McFadden of the Pittsburgh Steelers, Greg Jones of the Jacksonville Jaguars and Alex Barron of the St. Louis Rams and Dallas Cowboys, according to the plaintiff’s legal counsel, who also personally represents the now-retired players.
Boldin gave a deposition in the case, saying he invested $250,000 that he never got back.
Boldin said he stopped communicating with Coriaty in 2010 after the NFL issued an alert warning players about Coriaty and Hawk Systems.
$22 millionA Hawk filing to the Securities and Exchange Commission shows more than $22 million in losses from Oct. 25, 2007 to Sept. 30, 2010, with $5,575 in sales.
Barron, who lives in Miramar and lost the $100,000 he invested in Hawk, said he was trying to do the right thing with his fortune by investing.
“[Coriaty] said he had spoken with other players, some older than us, some that were done playing, some that were still playing at the time,” he said. “It was a little attention-grabber like, ‘Maybe this is a good idea.’ ”
Barron was asked to invest more, he said, during a meeting at Miami Beach’s Fontainebleau resort in the summer of 2008. Other players obliged but he decided against it, he said.
During the time Hawk was soliciting more investments, it was losing cash — fast. A Hawk filing to the Securities and Exchange Commission shows more than $22 million in losses from Oct. 25, 2007, to Sept. 30, 2010, with $5,575 in sales.
When we were younger there wasn’t a whole lot of knowledge about investing and the good, the bad, the tricks of the trade.
Alex Barron, former NFL player
Barron, 33, said Coriaty’s pitches seemed tailored to NFL players, who are vulnerable because of the vast amount of wealth they acquire in a short period of time.
“When we were younger there wasn’t a whole lot of knowledge about investing and the good, the bad, the tricks of the trade,” he said.
In 2009 — too late for Barron and the others who lost money to Hawk — the NFL Players Association began an educational program to teach rookies about budgeting their new-found wealth. A few years later, the association started offering free phone appointments with financial planners.
From Vegas to the Courtroom
Those who lost money weren’t just athletes with limited financial savvy. Spanakos used to work on Wall Street and invested $1 million in Hawk. He lost that investment plus $1.5 million more in loans.
From May 5, 2008, to April 14, 2009, 180 individuals and entities invested nearly $8 million in Hawk, according to a Palm Beach County Sheriff’s Office report investigating allegations that the business was a Ponzi scheme. These numbers do not include individuals who bought stock after the company went public later in 2009.
Spanakos said he believed in Hawk until he accompanied the other board members to the SEMA Show in Las Vegas, one of the biggest auto events in the world, where they were supposed to be showcasing Hawk’s fingerprint product to car companies.
“The next thing I know, I see Dave Coriaty coming down the hallway with an entourage of people,” he said. “I get into the limo with these guys and … the kid says to me, ‘It’s a real shame we had to take regular air and we didn’t take the company jet.’ I’m like, ‘Company jet?’”
Hawk bank statements shows the company paid $44,000 to a private jet company in 2008.
Coriaty was living in a $1.3 million house in Ibis Country Club in West Palm Beach. He later defaulted on his payments and faced foreclosure, according to county court records.
If I wanted to take $40,000 a month and burn it, that’s my prerogative. It’s my money. They contracted me. It’s my money to do what I want with it.
David Coriaty, former Hawk CEO
In a marathon deposition that spanned two days and about 15 hours, Coriaty was bombarded with questions about specific expenditures, withdrawals and deposits to and from Hawk’s accounts. He repeatedly responded that he didn’t recall what specific expenditures were for or where certain deposits came from.
But some Hawk expenses he identified as “personal,” and explained that instead of writing him a paycheck every month, Hawk paid his bills.
“If I wanted to take $40,000 a month and burn it, that’s my prerogative,” he said in in the deposition. “It’s my money. They contracted me. It’s my money to do what I want with it.”
At one point in the deposition, tempers boiled over between Coriaty and Spanakos in an expletive-laced exchange.
“Shut the [expletive] up before I come over there,” Coriaty said.
“Please. The last time you did that you got slammed,” Spanakos replied.
Spanakos said one of his greatest frustrations is that Hawk stock is still trading. It’s worth less than a penny per share, yet more than six million shares have been sold within the past year.
“I’m ready to go to the Super Bowl and pay the Goodyear blimp to drop pamphlets and tell everybody,” he said. “They’ve got to stop this. I’m trying to get somebody at least to just halt them from taking money in.”
In the lawsuit, Spanakos is seeking an injunction prohibiting Hawk from trading more stock, restrictions against the defendants participating in future investment businesses, punitive damages and money to cover his legal fees.
‘Nobody paying the price’
Spanakos’ lawsuit came after he reported Hawk and Coriaty to the Palm Beach County Sheriff’s Office, the FBI and the SEC. None has charged the company or executives with any crimes.
In PBSO’s initial reports, a detective wrote that documents showed Hawk was an “organized scheme to defraud investors.” However, PBSO deferred to the FBI, and that case has since closed, according to PBSO documents.
What really hurts is when you’re, for the most part, law-abiding and you see people that are knowingly involved in a crooked enterprise and you see nobody paying the price.
Larry Pennington, Hawk investor
The then-PBSO detective declined to be interviewed. FBI spokesman Special Agent Michael Leverock said in an email that this case was “a PBSO matter” and did not respond to follow-up emails. The SEC completed its investigation in 2011 and did not recommend any enforcement action, according to a commission document.
Coriaty said the lack of criminal prosecution doesn’t provide much comfort.
“I don’t feel vindicated at all because there are a lot of people who lost all their money and their life investments into this company and the only reason they lost it is because of Mark Spanakos,” he said. “These people trusted in me, and now they think I’m to blame.”
The Penningtons said they don’t understand why law enforcement hasn’t gone forward with prosecution. They both had to come out of retirement to pick up retail jobs after they realized their savings were gone.
“What really hurts is when you’re, for the most part, law-abiding and you see people that are knowingly involved in a crooked enterprise and you see nobody paying the price,” Larry Pennington, 71, said. “It makes you wonder where the system is.”
The Penningtons heard about Hawk from one of their coworkers who had invested. After the couple wrote their first check, Coriaty took them and others on a tour of a factory in West Palm Beach called Florida MicroElectronics, where he said units of Hawk’s fingerprint car starter were being manufactured. In an interview, Coriaty said his father started the factory’s parent company.
This tour, complete with automated machinery and factory workers in blue coats, convinced the Penningtons to invest Lynda’s 401(k) in more Hawk shares. Coriaty paid their $24,500 tax penalty, although his check initially bounced.
Tony Byk, president of Florida MicroElectronics, confirmed the factory was producing units of Hawk’s fingerprint car product but said it never made it past the prototyping stage. After he was subpoenaed in the lawsuit in 2013, Byk said he ended his contract with Hawk and returned all the units they had produced.
“I had one [of Hawk’s fingerprint sensors] in my vehicle at the time, just to see how it was working out,” he said. “It worked, actually quite well. … It’s really too bad that sometimes situations end up like this.”
As recently as 2015, Coriaty and an associate secured TV slots for Hawk’s fingerprint product to appear on various specialty car shows, such as Motorhead Garage and Performance TV. They said they aim to breathe new life into the product.
Coriaty said he has a plan to get investors their money back once the lawsuit is finally over. He declined to elaborate.
“Let me put it this way: No one has lost a dime yet,” Coriaty said. “Unless they sold their stock.”
Peter Haden of WLRN News contributed to this report.