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Archives for January 2012

15 Jan

SEC adds Metter’s Greenwich Radio Station as Defendant in Spongetech Fraud Suit

The SEC is playing tough with alleged penny stock scammer Michael Metter and his Business TalkRadio Network. The Securities and Exchange Commission filed court documents Thursday adding the radio business, which includes Greenwich station WGCH, as a relief defendant in the fraud case against Meter and his pump and dump stock Spongetech. The federal regulator says because Metter has entered a letter of intent for WAY below market value for the stations that the business basically can’t be trusted to sell itself and thus should be named as a defendant to ward off buyers not willing to pay market price. You see the reason the stations were suddenly put up for sale this summer is because the SEC says BTRN owes Spongetech shareholders millions.

I reported in September for DealFlow Media, the SEC alleged that Metter and his partner Moskowitz had basically embezzled Spongetech funds into BTRN, in 2009, and helped it pay off a $5 million debt. As a result the SEC was able to get a partial asset freeze on the radio stations checking accounts and Mr. Metter had to turn over financial signing power to this right hand man Jeff Weber. Weber just happens to also be president of the Greenwich Chamber of Commerce. Since then, Weber and Metter’s job has been to keep the stations afloat until a buyer can be found. The proceeds from the stations sale (they own 4 in Greenwich, Vegas, Pittsburg and Boston) would go to the SEC, if they win or settle their case against Meter and Spongetech, who in turn would turn over proceeds to the Spongetech victims.

The SEC stated last week in court documents they’d seen deal terms to sell BTRN stations (sans the Boston one) to an unnamed buyer for only $50k cash and a $950k unsecured, non recourse, 3-year promissory note that is expected to close at the end of January. There is also a letter of intent on the Boston station the SEC says is for way below fair market value. You see earlier last year Metter’s attorney swore in court documents there was an appraisal that showed the BTRN stations were worth more than $6 million. So you can kind of see why the SEC is a little pissey about a Metter orchestrated below market, no security to pay it back, deal going down. That would mean they let him take a $16k a month salary this whole past year to do what? Doesn’t look good for the recovery of dollars for the Spongetech victims-does it? So the regulator told the court this kind of sale isn’t getting approved by them.

Well according to a letter Metter’s attorney filed with the federal court last month, Weber (who isn’t being sued by the SEC) was also doing some funny business. Metter’s attorney, Miranda Fritz wrote, Weber was using his advantage of signatory power to force BTRN to keep his current salary and benefits for the 1st six months of 2012 while the company was trying to cut expenses. When Metter said no – he quit. Metter on his part has agreed to cut his salary from about $240k a year to $165k. His attorney filed a motion at the end of December stating Metter will take bi-weekly payments of $6,875 and supposedly the station owes him another $9,938 in expenses.

But the SEC apparently got pissed when they saw Metter blow off the rules of the court. Since Jeff Weber quit on Metter last month, and he’s the only court appointed signee of the radio biz accounts, Metter has gone back to signing checks and managing money this month — a move that technically isn’t allowed by the court. So the SEC filed a motion to also cut off his bi-weekly salary.

To be fair Metter’s attorney did tell the court, last month, he’d found a CPA with Hegen Streiff Newton & Oshiro, Marc Johnson, to take over as an independent signatory of the radio biz accounts. Remember there is no way in hell the SEC is going to let Metter have power over checking accounts with cash in them. Still the court hasn’t approved any of this, so legally BTRN shouldn’t be using its cash to you know pay staff or bills. (Which would suck for the 40 or so people the company employs.)

Paul Kisslinger, SEC attorney, wrote the court on January 12th, “Given that BTRN has continued to operate in this fashion, apparently at the direction of, or with the approval of Metter, without the entry of an order by the Court, the SEC withdraws its consent to subsections 2(d) and (e) of the Proposed Order which allow Metter to continue to draw a salary or receive any other disbursement from BTRN.”

Metter’s attorney obviously wrote a nasty reply back to the court that the SEC’s move to cut off her criminally charged client was, “inappropriate, irresponsible, and should be rejected by the court.”

Stay tuned because it’s up to Judge Dora L. Irizarry, of the Eastern District of New York Federal Court, to decide what the heck to do about Metter’s salary and the friendly deal he set up to sell the stations.

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14 Jan

Now Main Street Knows how Bear’s Jeff Verschleiser made Millions off Cheating Others

One of the central bad actors in my reporting on the alleged fraud machine Bear Stearns mortgage department was running made headlines this weekend for spending an absurd amount of greenbacks to promote his daughter’s coming of age. Jeff Verschleiser, age 43, and his wife Amy, age 41, went and bought out a popular Aspen hotel during a special local weekend celebration called Winterskol and now have a lot of people offended. Media reports estimated the Jewish family is spending between $500k to $1 million for the four-day weekend + Bat Mitzvah party. Now spending tons of money to throw a religious celebration for your teen isn’t anything new for the New York Jewish set but Matt Taibbi of Rolling Stone picked up on the notion Jeffery didn’t exactly make the dollars he’s spending this weekend honestly.

The daughter’s name is Madison Rose Verschleiser and when she’s not buzzing around the Aspen slopes entering ski races or hanging in her parents huge 2nd home at Aspen’s Stillwater Ranch area, she lives in her parents mega million Central Park-view apartment on 5th Avenue. Aspen Daily News reporters told me they saw Madison’s parents had three big LCD’s placed in the hotel lobby with their daughters face in a circle jerk of photos running repeatedly on the screens – you know because its ‘All about Madison this weekend’. I found a website, madisonaspen2012.com, created in honor of Madison’s big weekend but it looks like the family took it down after news broke on their spending habits. (Of course a google cache of the website still works.)

Readers of mine know the story about Verschleiser and his Bear Stearns trader buddy Mike Nierenberg allegedly stealing billions from their own clients during the housing boom by packaging and selling totally dysfunctional mortgage securities that helped bring down the bank. But now with Taibbi revisiting about a years’ worth of my reporting on the Bear traders’ apparent securities fraud Verschleiser is officially labeled one of Wall Street’s biggest pricks.

Taibbi Wrote:

At first, I couldn’t remember how I knew that name. But then I looked it up and saw an explosive Atlantic magazine story, published last year, called, “E-mails Suggest Bear Stearns Cheated Clients Out Of Millions.” And then I remembered that piece, and it hit me: Jeffrey Verschleiser is one of the biggest assholes in the entire world!

In one of the latest civil fraud complaints against Bear Stearns, and their owner JP Morgan, about 30 whistleblowers came forward to explain Jeff and his fellow traders were known as ‘Bear Don’t Care’ for telling third-party due diligence firms to just ignore all the mortgage loans in the billions of securities they were selling when they put their stamp of approval on the deal. A stamp that got plenty of pension funds to buy their ‘sack of shits’. It’s this ‘Don’t Care’ attitude that seems to have upset a lot of people this weekend as the pitchforks and frustrated anger rang loud and clear in the comment section of every story written on Jeff’s daughter party (there are about 9 of them). The New York Post even got one Aspen weekender to call it “a disgusting display of ill-gotten gains.”

Because of the need for the Verschleisers to have a private event in a public place, the locals can’t use their favorite watering hole at Hotel Jerome, called the J Bar, and spend their hard-earned dollars watching the Broncos make a run at the NFL playoffs because Jeffrey is all about exclusivity. It’s unclear if the Verschleisers plan to compensate the bar staff for all the lost tips this weekend – locals tell me some bartenders can make up to $1k a night on a big weekend like this. The editor of the Aspen Daily News, Carolyn Sackariason, broke more news last night reporting Verschleiser spent about $7,000 to kick out anyone wanting to use the city-owned Aspen Family Rec Center tonight so his daughter Madison and her friends can privately run around in it.

As the world is soaking in what a douchebag Jeff Verschleiser is I’m wondering how his wife feels spending the millions he made off the backs of pension funds and the rest of Bear Stearns employees who lost sooo much money when the firm failed and their stock was sold for only few bucks. Taibbi writes that Jeff’s actions helped bring down the firm but for quite a few years he was actually the gold money maker for the bank with his hand in every part of the fee earning process a mortgage security could go through (the Ambac suit points out he just didn’t do it ethically or legally). It wasn’t until mid 2007 when he pigged out buying failed subprime lender Encore, that the bank got stuck with millions of very sick wholesale mortgage loans. Loans that sucked the life out the banks regulatory capital and eventually were a part of what led to a liquidity problem. Jeff’s wife Amy, a former private school teacher and Dalton 88’ grad, happens to be on a bunch of Jewish charity boards (such as the NYC United Jewish Association) and I wonder if the charity work (aka party planning) is to clear her conscious. It’s not like she can’t read the actions of her husband that are laid out in multiple civil fraud suits citing his own emails. Given she was also a Madoff investor who lost a few bucks, you’d hope there is some twinge of pain in seeing the rest of world want to throw up over their family’s obnoxious display of wealth this weekend.

Amy appears to have grown up in an influential upper east side jewish family. Her Aunt, Elaine Turner Cooper, was a huge patron of the Whitney Museum and her 1st cousin Steven Mnuchin is now the ex-Goldman guy who runs the carcass of failed IndyMac. (It might make sense that Mnuchin helped Jeffrey get the Goldman job when JP Morgan threw him out after the Bear take over.) During her husband’s boom earning years, 2006, online real estate records show the family moved out of a upper east side duplex they bought for $10 million on Park Ave and upgraded to a full floor Central Park apartment on 5th Avenue that has only 15 apartments in the building selling for at least $16 million (They live on the third floor of 944 5th Ave, New York, NY). Property records show they also spent $16.5 million for a new custom-built 5-bedroom Aspen home at 61 Stillwater Lane in the fall of 2006. This is the same time period billions of Bear mortgage securities were created by Jeff – securities that the Netherland’s largest state pension fund just sued Mr. Verschleiser individually for his role in fraudulent inducement and multiple violations of securities laws. The suit was filed on December 7th in New York State court.

Taibbi added an update to his story with a rant on why Verschleiser hasn’t been indicted yet for allegedly stealing billions from his own clients. But the colorful Rolling Stone writer must have failed to read my story this summer about NY Assemblyman Morelle pushing his friend the NY Attorney General to start a criminal investigation into the Bear mortgage team. The AG has asked civil attorneys suing Bear/JPM to share evidence with him and I’ve spoken with people his team has interviewed- they all say he’s serious about using the Martin Act against these bad boys. Given those facts, I’m not agreeing with Taibbi’s view these guys will never get charged although it will take some political balls to get it done.

So with the NY Attorney General having a keen eye on charging Jeffrey and his fellow mortgage traders for criminal acts, a federal housing regulator gunning for him individually in their mega-billion fraud suit, and locals in Aspen pissed off by his personal exclusivity needs; do you think the Hotel Jerome manager is looking a little foolish for telling the Aspen Times a ‘nice family’ had taken over the hotel?

UPDATE 1.16.12: It appears the Verschleiser had a like-minded friend write in to the Aspen Daily News about their weekend news story ‘Renter of Jerome Under Scrutiny for Wall Street Deals’ calling the coverage mean and nasty. His logic was Jeff’s civil fraud suits are old news and he couldn’t understand why the local paper would print news about the background of a part-time resident that had just made national news. Really? First off Jeff’s civil fraud cases are ongoing news and the subject of upcoming trials and just a few weeks ago he was sued again, as a named defendant, for fraud and securities violations. Second, it’s the local papers job to tell the reader who this colorful character is considering his actions, taking over public places for the private use of friends, effected their weekend. Third, it’s actually not the papers job to promote tourism for Aspen nor should they worry about how the reporting of factual events effects dollars spent on Aspen. When that happens then they should just shut the paper down.

Editor’s Note: The link to the 5th Ave apartment is not the Verschleisers but an apartment a few floors above theirs. It is used as an illustration of what apartments in this exclusive building look like. The party photo is a snapshot of the public homepage the Verschleisers used to promote their daughter’s event. It was taken down because I just learned the photographer owns the rights to the photo and thus I don’t have permission to publish it on this site.

4 Jan

DealFlow Reporting Warned Early on Life Partners Possible Fraud

UPDATE 3-14-14: Life Partners is on a media campaign writing financial journalist boasting news that a Texas federal judge reversed a jury verdict of one court of fraud against Brian Pardo and his life settlements company. In February the SEC won on 4 of the 12 counts they brought against Pardo and Life Partners for fraud and miss representing material information in their publicly filed financial statements. But then defense counsel scored a surprise win and beat the SEC on the fraud claim because the judge basically said the jury didn’t have enough evidence to come up with the fraud verdict. The judge did allow three violations of Section 13 of the Securities Act to stand against Pardo. This means the court ruled that when he signed and filed SEC filings he miss-represented a market trend that could affect revenue, miss-represented or omitted information that would have a material affect on the company and miss represented revenue recognition.

Pardo’s internal counsel wrote me today trying to spin these charges calling them “booking, reporting, and certification violations by the CEO, Pardo, on the companies financial statements.” His counsel is also under the impression the court thinks this means Pardo did not ‘recklessly mislead’ shareholders.

In my book if you are found guilty on three counts of miss representing or omitting important info in financial statements that main street investors rely on to buy or sell the stock that doesn’t sound like a very good thing for shareholders. On the other hand this case also show that the SEC needs to hire some better lawyers because reading the judge’s decision it looks like they really blew the legal strategy at trial in this case. Reuters has a great round up of the SEC’s recent failure to get meaningful convictions against Wall Street bad boys at trial.

The SEC still needs to tell Judge James Nowlin what they want for monetary penalties on the three counts they won and said they could ask the judge to reconsider his opinion – but it’s doubtful they are willing to continue this fight.

Nowlin was appointed to the Federal bench by President Reagan. Press reports have previously identified Pardo as having strong political ties the Bush family and other Texas politicians. Pardo is likely still a millionaire facing fines he can afford to pay.

Life Partners stock went up about $.40 cents on the lawsuit news this week closing just below $3 Friday—a far cry from its $16 high.

Original Text
Three Life Partners executives were finally sued by the Securities and Exchange Commission yesterday for insider trading and accounting fraud. On December 16th 2010, Donna Horowitz senior reporter for DealFlow Media was first to report a Life Settlements trade group had sent a letter to the SEC warning about inflated prices the publicly traded company was booking for its life settlement assets. The trade group’s letter combined with Horowitz reporting on the alleged fraud by Brian Pardo CEO of Life Partners have clearly laid the ground work for this massive SEC suit against one of Texas Gov. Rick Perry’s big donors.

Today we see nearly every other finance publication playing catch up to the yearlong investigation of Dealflow Media, which included freedom of information request and in-depth sourcing from insiders victimized or involved in the alleged scheme. The Wall Street Journal today has tried to boast about a page one story they ran in late December 2010 on Life Partners, a story they basically re-jiggered after Horowitz originally broke the news.

Horowitz’s December 16th 2010 story, called Life Partners LEs Too Short?, warned investors about problems one Dallas investment club had found:

Jerry Kingston, who started the Dallas investment club, said the club was shut down because the group that hosts the web portal did not understand the life settlement asset class. He knows of no similar life settlement investment clubs.

“My goal would be to set up an [investment] club locally but I have not been able to find 5 friends to plop $10k each into an investment nobody clearly understands or does not have a moral objection to,” he said in a July email to The Life Settlements Report. “It’s really sad too given the investment environment. LPHI [Life Partners Holdings Inc.] raised over 400 new investors last month alone and those investors plowed in $30.7 million!!!”

Kingston had pitched the club on the professional networking website LinkedIn in August 2009.

Unlike the WSJ, DealFlow and Horowitz stayed on the Life Partners story with bi-weekly reports through out 2011 of investor fraud suits, Texas judges having to excuses themselves because they were too friendly with the Life Partners CEO to rule on cases, and even threats of lawsuits by Life Partners to investors who spoke out about the alleged fraud. To read over 30 articles on how Pardo executed this scheme and has continued to bully nearly anyone who challenges him, including the SEC and its auditor, you can buy single copies of Horowitz reporting here.

Pardo told journalist yesterday he plans to vigorously fight the SEC’s suit. Sam Antar, stock fraud expert, told me after the SEC suit was made public, “Criminal fraud is harder to prove and discovery is easier in civil cases. That’s why you see the SEC sue first sometimes.”

Life Partners allegedly preyed on main street investors and novice investor clubs to promote investments into its company but if you were reading DealFlow’s reporting, for over a year, you would have at least been forewarned to what regulators now think was a revenue and stock manipulation fraud.

Life Partners closed down 17 percent in trading today closing at $5.26 and the NASDAQ listed stock had a 52-week high of $16.83.

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