Six people participated in a scheme to obtain more than $40 million from some of the largest securities class-action settlements in the last 10 years, according to a Pennsylvania federal court indictment.
Between 2001 and 2007 the group allegedly created fake companies and submitted fraudulent claims to receive shares of the following settlements:
• In re BankAmerica Corp. Securities Litigation, MDL No. 1264, 2002 WL 31386049 (E.D. Mo. Sept. 30, 2002), which was settled in 2002 for $490 million.
Federal prosecutors filed the 31-count indictment against the defendants in the U.S. District Court for the Eastern District of Pennsylvania in September, and it was unsealed Nov. 20. The defendants face multiple charges, including mail and wire fraud.
According to the charges, in all three settlement agreements unnamed accounting firms acted as claims administrators responsible for distributing the settlement funds.
The firms determined how much claimants were entitled to recover based on forms and supporting documentation they submitted, the indictment says.
Kevin Waltzer, who cooperated with investigators and was charged in a separate filing, led the defendants in the scheme and recruited participants, including a Florida attorney and an employee of one of the accounting firms, the indictment says.
Waltzer's scheme involved submitting false claims showing that individuals and nonexistent companies owned the securities involved in each suit during the respective class periods, wrongfully entitling them to recover a share of the settlement, the charges say.
The conspirators created phony corporations and opened company bank accounts with false financial statements, using fake names for company executives, the indictment says.
Prosecutors say Christian Penta served as the insider in the scheme, working as an accountant at one of the accounting firms that distributed the settlement money.
He allegedly reviewed claimant forms to determine recovery entitlement, told Waltzer when it was best to submit the bogus claims and ensured that the claims appeared to be legitimate.
Waltzer enlisted Florida attorney Deborah Rice to submit claims on behalf of the nonexistent companies to give the claims further legitimacy, the indictment says.
Rice would collect the settlement shares and distribute the money according to Waltzer's instructions, prosecutors say.
Paul Negroni and James Hall filed claims in their own names in In re Nasdaq, sharing the money with Waltzer and Penta, the indictment says.
Stephen Porto allegedly posed as vice president of KimCorp PTE, a fake company that filed a claim in In re BankAmerica Corp.
Porto flew to Singapore, where the company was supposedly located, to mail documents and other false information to make the company and records appear legitimate, prosecutors allege.
All the defendants are accused of federal mail and wire fraud violations.
The indictment also charges Waltzer and Rice with money laundering. Penta faces charges of money laundering and falsifying tax returns by underreporting his gross income.
To comment, ask questions or contribute articles, contact West.Andrews.Editor@ThomsonReuters.com.
United States v. Penta et al., No. 08-550, indictment unsealed (E.D. Pa. Nov. 20, 2008).
Class Action Litigation Reporter
Volume 15, Issue 11
12/12/2008
Copyright 2008
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