D
Da Ji
Guest
May 26, 2010
2 charged in $85m stock scam
<!-- by line --> <!-- end by line --> NEW YORK - A FORMER bank director built himself a financial fiefdom out of automotive-chemical companies, then plundered it through a series of stock frauds that let him live lavishly even though he'd declared bankruptcy, prosecutors said on Tuesday. As CEO of Industrial Enterprises of America Inc, John Mazzuto illegally gave stock to friends and relatives, pumped up the share price by making the company look more profitable than it was and lied to investors, according to the Manhattan district attorney's office. The proceeds got him multimillion-dollar houses in New York's Hamptons and Florida, US$500,000 ($706,000)worth of private jet travel and the status of a major benefactor of Yale University's baseball team, prosecutors said.
Mazzuto and James Margulies - a Cleveland lawyer who was the company's finance chief and briefly succeeded Mazzuto as CEO - pleaded not guilty to grand larceny, scheming to defraud and other charges. Together, they're accused of stealing more than US$60 million from the now-bankrupt company. 'This was the wholesale looting of a public company for greed and self-enrichment,' District Attorney Cyrus Vance Jr said. Mazzuto's attorney didn't immediately return a call. Margulies' lawyer declined to comment outside court.
Mazzuto, 61, was a managing director for the former Chemical Bank before he started acquiring a series of companies in 2002 to create Industrial Enterprises, prosecutors said. Subsidiaries made antifreeze, windshield-wiper fluid and other car chemicals at plants in Pennsylvania and elsewhere. Mazzuto and Margulies began by issuing millions of shares of a type of stock that can legally be given only to employees - and funneling the shares to relatives, associates and shell companies, according to prosecutors. When the stock was sold, money was channeled back to Mazzuto and Margulies or was used to inflate the company's cash flow and boost its stock price, prosecutors said. If convicted, Margulies and Mazzuto could face up to 25 years in prison. -- AP
