Six people, including two from the Philadelphia region, were charged yesterday with fraud in an alleged scheme to use dummy corporations, fake brokerage accounts, and virtual offices to steal $41 million from settlement funds that were themselves set up to resolve earlier securities-fraud cases.
An accountant with a firm that was paying out investor claims from those settlement funds was labeled the "eyes and ears" for the group, advising a coconspirator on when to submit fraudulent claims and on the availability of funds. The funds had about $4.5 billion in assets.
Kevin Waltzer, 41, of Washington Crossing, Bucks County, is accused of being the leader of a ring that filed false claims to get money from the funds, according to a criminal information unsealed by the U.S. attorney for the Eastern District of Pennsylvania.
Acting U.S. Attorney Laurie Magid said that the ring, which also included a lawyer, went to great lengths to make the claims seem legitimate. Another member of the group, she said, even traveled to Singapore to mail documents to help make a fake company, KimCorp., appear real in its claim.
Waltzer's attorney, Ursula Knight, of the Boston law firm Eckert, Seamans, Chernin & Mellott L.L.C., declined comment.
Others charged in the case were Chris Penta, 38, of Southampton, Burlington County; Deborah Rice, 47, of Boca Raton, Fla.; James Hall 4th, 33, of Bel Air, Md.; Paul Negroni, 41, of Mount Kisco, N.Y.; and Stephen Porto, 51, of Boca Raton.
Those five were indicted on charges of mail fraud, wire fraud and money laundering. Penta was an accountant with Heffler Radetich in Philadelphia, according to the U.S. attorney, and Rice was a lawyer in Florida.
Waltzer is accused in a criminal information of the same charges; a criminal information usually is the prelude to a guilty plea.
The U.S. Attorney's Office said Rice, Hall, Negroni and Porto were arrested yesterday and released on bail. Waltzer is expected to surrender next week, the U.S. Attorney General's Office said.
Greg Paw, a lawyer with Pepper Hamilton L.L.P., of Philadelphia, said that Penta would surrender next week. Paw, who said he was reviewing the indictment, added that Penta was considering his options.
Magid said the victims in this case were those who were entitled to money from the settlement funds. The defendants were allegedly "stealing from a fund that was set up to pay victims who have already been wronged," she said. The FBI and the IRS investigated the case.
The settlement funds were from a trio of cases from the 1990s: the Nasdaq market-makers antitrust case, involving stock price and fee manipulation; Cendant Corp. litigation, which alleged that false statements artificially inflated stock prices; and BankAmerica Corp. litigation, which held that $372 million in losses for a bad loan were disclosed only after the merger of what became Bank of America, substantially diminishing the value of the stock.