The Miami Lakes boiler room touted a purported pair of hot penny stocks — one for a company that sold infrared thermometers for dogs, the other for a firm that claimed to own a smartphone gaming portfolio with hundreds of applications.
The sales agents hyped the thermometer company, Sanomedics, by lying that former Apple and Pepsi CEO John Sculley, Miami-based IVAX Corp. Chairman Phillip Frost and “Dog Whisperer” Cesar Millan were big investors or representatives, prosecutors say.
Over the past two days, FBI agents arrested 13 defendants in the Miami and Los Angeles areas, who were charged with securities fraud by swindling $23 million from more than 770 investors nationwide, according to a federal indictment. Most of victims were senior citizens.
Two of the defendants — Craig Sizer, 48, of Miami, who founded the two companies, and Miguel Mesa, 56, of Miami Lakes, who hired sales agents to make the stock offerings — were also charged with civil violations by the Securities and Exchange Commission in Miami.
Both men, accused of misappropriating the vast majority of the funds raised from investors, have agreed to partial settlements of the SEC’s charges without admitting or denying the allegations, the agency said. Both agreed to be barred from penny stock offerings, while Sizer also agreed to be barred from serving as an officer or director of a public company. Financial penalties will be decided by a federal judge.
According to the indictment, Sizer, Mesa and the other defendants used “false and fraudulent” claims to solicit investors over the phone to buy shares of stock in Sanomedics between 2009 and 2015. Sizer and Mesa prepared scripts for sales agents who worked under Mesa’s supervision in a telephone sales room. Mesa later hired Anita Sgarro, 49, of Marina Del Rey, California, to operate another boiler room on the West Coast to sell shares of Sanomedics.
“Those who operate locally or from afar to target unsuspecting investors will ... be prosecuted,” said U.S. Attorney Wifredo Ferrer.
To conceal their true identities, several of the sales agents used false names and aliases, according to the indictment. The agents also made false statements to potential investors, including claims that they did not receive commissions or fees and were instead compensated with stocks or paid by the hour, Assistant U.S. Attorney Roger Cruz alleged. They also represented that they worked directly for Sanomedics.
To build confidence in the stock, the agents also falsely dropped the names of Sculley, Frost and the “Dog Whisperer,” implying they were major investors or company representatives, according to the indictment. As a result, more than 700 people lost $21 million.
The indictment also charged Sizer, Mesa and the others with orchestrating a similar fraud scheme to sell shares of Fun Cool Free, the software company that claimed to own a smartphone gaming portfolio with 500 applications. Mesa is accused of overseeing the boiler room operation, which prosecutors say fleeced another $1.5 million from more than 70 investors.
Authorities warned the public to be wary of investment sales pitches that sound too good to be true.
“If you are an individual investor, exercise due diligence before you invest your first dime,” George Piro, special agent in charge of the FBI’s Miami field office, said in a statement. “Do not fall prey to fantastic claims from investment sales people.”