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WFG COMPLAINT
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: ) CHAPTER 11 ) PITT PENN HOLDING CO., INC., et al.1, ) Case No. 09-11475 (BLS) ) (Jointly Administered) Debtors. ) ) ) Industrial Enterprises of America, Inc., on behalf of ) itself, its estate, and as assignee of certain of its ) shareholders, ) ) Plaintiff, ) Adv. Proc. No. ) v. ) ) Computershare Trust Co., Inc., National Financial ) Services LLC, WFG Investments, Inc., and ) Chris Cuzalina, ) ) Defendants. ) )
COMPLAINT
Plaintiff Industrial Enterprises of America, Inc., f/k/a Advanced Bio/Chem, Inc. (“IEAM”
or “Plaintiff”), for itself, its estate, and as assignee of certain of its shareholders and creditors,
alleges upon information and belief for its complaint against defendants Computershare Trust
Co., Inc. (“Computershare”), National Financial Services LLC (“NFS”), WFG Investments, Inc.
(“WFG”), and Christopher Cuzalina (“Cuzalina”) (collectively “Defendants”) as follows.
JURISDICTION AND VENUE
1. On May 1, 2009 (“Petition Date”), IEAM filed a voluntary petition pursuant to
Chapter 11 of the Bankruptcy Code.
1 The debtors are: Pitt Penn Holding Co. (Case No. 09-11475), Pitt Penn Oil Co. LLC (Case No. 09-11476), Plaintiff Industrial Enterprises of America, Inc. (Case No. 09-11508), EMC Packaging, Inc. (Case No. 09-11524), Today’s Way Manufacturing LLC (Case No. 09-11586), and Unifide Industries LLC (Case No. 09-11587), all of which have been jointly administered.
WFG COMPLAINT 2
2. Since the Petition Date, IEAM has continued in possession and the management
of its business as debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy
Code.
3. This Court has jurisdiction over these proceedings pursuant to 28 U.S.C. §§ 157
and 1334.
4. This proceeding constitutes a core proceeding pursuant to 28 U.S.C. § 157.
5. Venue is proper in this Court pursuant to 28 U.S.C. § 1409.
INTRODUCTION
6. This adversary proceeding arises out of a large-scale scheme to loot the Plaintiff
IEAM, a fraud that required not only the malfeasance of miscreant corporate officers, but the
willful participation of the Defendants: a transfer agent, a clearing firm, a broker-dealer, and a
registered representative.
The Mazzuto Scheme
7. As is further detailed below, the affairs of IEAM became corrupted through the
illegal conduct of a conspiracy led by John Mazzuto (“Mazzuto”) and James Margulies
(Margulies”). For ease of reference, this conspiratorial effort shall be collectively referred to as
the “Mazzuto Scheme.” The Mazzuto Scheme was a complex and deliberate association-in-fact
conceived for, and dedicated to, the commission of fraud in the operations and securities of
IEAM. The Defendants were members of the Mazzuto Scheme. IEAM, through its new
management, has identified at least a dozen other persons and entities of the Mazzuto Scheme
that acted in concert to perpetrate the illegal scheme to defraud IEAM.
8. From 2004 to 2009, the Mazzuto Scheme, through its members including the
Defendants, set out and accomplished its basic illegal aim: to insinuate itself into the governance
and operation of a publicly-traded corporation; to undermine the business affairs of that public
WFG COMPLAINT 3
corporation by falsely reporting its operations as wholly successful to increase its market value
and share price; to manipulate further the price of the public host’s stock higher through false
operations and transactions (including, but not limited to, false stock offerings, fraudulent stock
transfers and issuances, and fraudulent public statements and filings); and to “cash in” on the
fruits of illicit labors through illegal transfer and sale of IEAM’s securities.
9. In furtherance of this illegal Scheme, the Defendants engaged in a variety of
wrongful acts within their respective roles in the fraud. Specifically, the Defendants knowingly
participated in the illicit issuance and sale to the public of IEAM securities. Through the active
participation of the Defendants, a Stock Option Plan instituted by IEAM and detailed in an S-8
Filing with the Securities and Exchange Commission on or about January 24, 2005 (the “Plan”)
whereby Employees, Outside Directors and Consultants of IEAM were, under certain conditions,
eligible to receive restricted shares of IEAM stock, was illegally converted into the means by
which unrestricted stock could be issued to, and sold by, members of the Mazzuto Scheme.
10. The Scheme perpetrated by the Defendants and their co-conspirators caused direct
and proximate harm to IEAM, including monetary losses and liabilities, in excess of $150
million. Moreover, IEAM’s shareholders lost hundreds of millions more dollars as a direct and
intended result of the Defendants’ fraud.
PARTIES
11. Plaintiff IEAM is a corporation with an office at 651 Holiday Drive, Suite 300,
Pittsburgh, Pennsylvania 15220. Former officers Margulies and Mazzuto were arrested and
indicted for their roles in the fraud perpetrated on IEAM, its creditors and its investors, and the
fifty-seven count indictment (“Indictment”), which names ten additional co-conspirators, is
attached as Exhibit “1.” Meanwhile, on or about April 30, 2009, Robert L. Renck, Jr. was
appointed its CEO and President. IEAM is the assignee of its shareholders’ claims.
WFG COMPLAINT 4
12. Computershare Limited (“Computershare”) is, among other things, a global
market leader in transfer agency that operates in 17 different countries around the world.
Computershare has 12 offices in the United States. Its corporate headquarters in the United
States is located, upon information and belief, in Massachusetts. At all times relevant to this
Complaint, IEAM contracted with Computershare for the provision of professional services as
transfer agent for its securities.
13. National Financial Services, LLC (“NFS”) is, among other things, one of the
largest providers of securities brokerage services in the world. Through its global platform and
throughout the United States, NFS provides professional clearing services to broker/dealer firms.
NFS has offices in five cities throughout the Unites States and, upon information and belief,
maintains its headquarters in Boston, Massachusetts. At all times relevant to this Complaint,
NFS provided professional securities brokerage account clearing services for an account
maintained in the name of the Margulies Law Group “IOLTA” (“Interest on Lawyer Trust
Account”) account at WFG Investments, Inc.
14. WFG Investments, Inc. (“WFG”) is, among other things, a registered securities
broker-dealer with offices throughout the United States. Upon information and belief, WFG’s
United States headquarters is located in Dallas, Texas. At all times relevant to this Complaint,
WFG maintained a securities brokerage account in the name of the Margulies Law Group
IOLTA account.
15. Chris Cuzalina (“Cuzalina”) is, among other things, a registered representative
working out of WFG’s offices in Dallas, Texas. Additionally, Cuzalina is the Managing Partner
of Cascata Capital, a hedge fund located, on information and belief, at the same Dallas, Texas
offices. During all times relevant to this Complaint, Cuzalina was the registered representative
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on the WFG securities brokerage account maintained at WFG by the Margulies Law Group
IOLTA account.
Non-Defendant & Bad Actors
16. Mazzuto is, upon information and belief, currently a resident of the state of
Florida, having recently been released on bail from incarceration of the New York City
Department of Corrections. Mazzuto was in jail as a result of a pending indictment by the New
York County Grand Jury being prosecuted by the District Attorney for New York County (the
“Manhattan D.A.” or “DANY”). In that case, entitled People of the State of New York against
John D. Mazzuto and James W. Margulies, Ind. No. 2503/2010, Mazzuto is charged with two
counts of Grand Larceny in the First Degree (NY Penal Law § 155.42), Scheme to Defraud in
the First Degree (NY Penal Law 190.65 (1)(b)), Scheme to Defraud through Securities Fraud
(NY General Business Law of 352-c(5)), 51 counts of Falsifying Business Records in the First
Degree (NY Penal Law §175.10)), Conspiracy in the Forth Degree (NY Penal Law §105.10(1))
and Securities Fraud (NY General Business Law §352-c(6)). Mazzuto, with whom the
Defendants conspired, is charged arising out of his conduct while he held a prominent role in the
Mazzuto Scheme. Mazzuto was indicted for his role in taking over IEAM, manipulating its
stocks price higher through false and fraudulent business operations, and illegally cashing in on
this criminality through the perversion of the stock option plan. Mazzuto personally gained in
excess of $15 Million through the actions of his Scheme with the Defendants. A copy of the
Indictment of Mazzuto (and James W. Margulies) is attached hereto as Exhibit “1.”
17. Margulies is, upon information and belief, currently a resident of the state of
Ohio. Margulies, a co-conspirator of the Defendants, was indicted along with Mazzuto by the
New York County Grand Jury. He awaits trial on two counts of Grand Larceny in the First
Degree (NY Penal Law § 155.42), Scheme to Defraud through Securities Fraud (NY General
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Business Law §352.c-(5)), Securities Fraud (NY General Business Law 352-c(6)), 33 counts of
Falsifying Business Records in the First Degree (NY Penal Law §175.10) and Conspiracy in the
Fourth Degree (NY Penal Law 105.10). Margulies’ conspiracy with the Defendants is alleged to
have personally awarded him $6 million. Margulies’ Indictment is attached as Exhibit “1.”
18. “Unindicted Co-Conspirators 1-10” are persons named as such in the DANY
indictment of Mazzuto and Margulies as having been knowing recipients of the illicit issuances
of IEAM stock.
19. Others Known and Unknown to the Grand Jury, all referred to as “the schemers”
in the DANY indictment of Mazzuto and Margulies, are others who, like the Defendants here,
engaged in the conspiracy to defraud IEAM and participated in the Mazzuto Scheme.
FACTUAL BACKGROUND
20. As relevant here, IEAM (then known as Advanced BioChem, Inc.) began its life
in 2004 as a publicly-traded shell company holding a single asset: 15 million shares of restricted
stock in Power3 Medical Products (“Power3”). Although thinly-traded, those shares were valued
at $45 million. On August 1, 2004, Mazzuto was appointed a director of IEAM and set out to
determine how best to use that value.
21. First, on October 7, 2004, IEAM purchased all outstanding stock in EMC
Packaging, Inc. (“EMC”), a New Jersey-based packaging facility. In consideration for that
purchase, IEAM paid 2.2 million of its shares to EMC shareholders.
22. In connection with that combination, on October 15, 2004, Mazzuto was named
Vice Chairman of the Board of IEAM. A little more than a year later, in a December 15, 2005
Form 10-QSB, IEAM announced that its Board had elected Mazzuto as the company’s Chief
Executive Officer and President, ousting former president Crawford Shaw. Mazzuto would
remain IEAM’s chief executive officer for the next two years.
WFG COMPLAINT 7
23. Prior to its acquisition of EMC, IEAM’s value was not in operations—there were
none of any material impact. Instead, IEAM was expected to be a clean shell with no liabilities
and ownership of $45 million in assets that would attract investors in a public company.
Although IEAM’s Power3 stock did not prove to have that value, the asset was sufficient to meet
one of the goals: attracting investment.
24. In November 2004, shortly after its acquisition of EMC, IEAM promulgated its
2004 Stock Option Plan (“Plan”).
25. On or about January 25, 2005, IEAM filed with the United States Securities and
Exchange Commission a form S-8 registration statement for the Plan pursuant to the Securities
Act of 1933.
26. The Plan provided for the issuance of restricted shares to Employees, Outside
Directors and Consultants. Any issuance of shares outside of the terms of the Plan would be –
and, indeed, was – a violation of the securities law.
27. Beginning in January 2005, IEAM began to issue shares under the guise of the
Stock Option Plan. For the most part, at the outset, IEAM used the existence of the plan as an
artifice to provide an air of respectability for the issuance of shares. Under the terms of the Plan,
IEAM could issue restricted shares to Outside Directors, Employees and Consultants if properly
documented by Board minutes, option agreements or bona fide consulting agreements.
28. Then, in the spring of 2006, former CEO and director of IEAM, Crawford Shaw,
sued IEAM in Texas state court for claims relating to his ouster as CEO in favor of Mazzuto.
29. Mazzuto and his cohorts hatched a plan to craft a highly improper settlement
agreement between IEAM and Shaw using the Stock Option Plan. Under the terms of the
settlement, IEAM hired Shaw as a purported consultant and used IEAM stock to pay him
WFG COMPLAINT 8
$40,000 a week totaling $2 million in “consulting fees” in order to utilize the company’s Form
S-8 Stock Plan requirements, which allowed stock to be issued to consultants.
30. This “consulting” arrangement with Shaw was a sham—and a way for IEAM to
dispose of the Shaw litigation through an improper disbursement of IEAM stock in violation of
SEC rules—in several regards. First, the S-8 was not effective since IEAM was not current in its
filings. Second, any shares issued to Shaw should have been restricted. Third, it is highly
improper to issue newly issued stock based on a dollar amount to be paid at a rate of $40,000 a
week over 50 weeks by depositing shares, regardless of whether any actual “consulting” takes
place (which it did not).
31. The terms of the Shaw settlement were never disclosed in any public filing, nor
were the improper use of the Stock Option Plan.
32. The settlement of the Shaw litigation through the perversion of the Plan was a
watershed moment for the Mazzuto Scheme. After this improper use of the Plan’s S-8 stock as
an unrestricted artifice for the issuance of shares, the floodgates opened. Subsequent to May
2006, Mazzuto directed the issuance of some 12.5 million freely-trading shares under the S-8
with an aggregate value of over $70 million.
The Illegal Issuance of Plan Securities
33. The illegal issuance of shares generally proceeded along the following pattern in
relation to the Defendants:
-- A letter signed by either Mazzuto or Margulies was sent to Defendant
Computershare, IEAM’s transfer agent, to issue IEAM stock under the S-8
to the WFG/NFS account in the name of the Margulies Law Group
IOLTA;
WFG COMPLAINT 9
-- Computershare, despite the absence of any IEAM Board minutes or
opinion of any counsel supporting the Mazzuto/Margulies direction,
would send the number of shares directed to the WFG/NFS account in the
name of the Margulies Law Group IOLTA account;
-- Even a cursory review of the terms of the Plan would reveal that stock
issued under its terms was meant for Employees, Outside Directors, and
bona fide Consultants and that any stock so issued was to be restricted
and NOT free-trading;
-- The IEAM stock transferred by Computershare was unrestricted, free-
trading stock;
-- Once in the Margulies Law Group IOLTA account at WFG/NFS, the
securities were sold at the direction of Defendant Cuzalina;
-- The proceeds of the sale of this illegally issued and improperly sold stock
were wired from the Margulies Law Group IOLTA account at WFG/NFS
to the Margulies Law Group IOLTA account at National City Bank in
Cleveland, Ohio.
Computershare’s Participation
34. As previously noted at all times relevant to this Complaint, IEAM had contracted
with Computershare for the provision of professional transfer agency services. Far from
“exceeding and setting new standards for service excellence”, as Computershare grandiosely
bills itself, Computershare breached its duty of care to IEAM in such a fundamental, basic
manner constituting a clear departure from the standards of its profession and industry. Indeed,
this departure from any standard of reasonable care was so dramatic that ascriptions of fraud are
warranted.
WFG COMPLAINT 10
35. Attached hereto as Exhibit “2” are 19 separate examples of letters to
Computershare from Mazzuto or Margulies, in varying capacities, directing the issuance of
millions of shares of IEAM stock purportedly under the IEAM Stock Plan. In point of fact,
these letters direct the false issuance of shares, are obviously contrary to the Plan and its terms,
and violate the guidelines for transfer agent conduct as regards transfers of securities at the
direction of a company as promulgated by the Securities Transfer Association – of which
Computershare is a member.
36. The shares that Computershare issued in accordance with these bogus instructions
were free trading. The Plan dictates that the shares issued under it were to be restricted.
37. The letters themselves are wholly inadequate to justify the issuance of the shares.
There is no reliable medallion signature guarantee, there is no secretary’s certificate or bylaw
reference or board resolution, and there is no certificate of incumbency evidencing that the
signor of any of theses letters holds the office they purport to hold. See Securities Transfer
Association Guidelines §3.01 (December 2008).
38. Any single departure from the rules and processes of its industry would be
egregious misconduct on the part of Computershare. As Exhibit “2” demonstrates, however, this
fundamental departure from any standard of reasonable care occurred over and over again and
resulted in the improper issuance of millions of illegal securities.
Cuzalina’s, WFG’s, and NFS’s Participation
39. The participation of Cuzalina, WFG, and NFS in the illegal issuance of IEAM
securities was even more egregious than Computershare’s and, as such, more clearly indicative
of a conscious decision to join the conspiracy to defraud.
40. In the first instance, the facts known to date clearly suggest impropriety in
connection with the opening of the securities brokerage account in the name of the Margulies
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Law Group IOLTA. An IOLTA account represents funds that belong to a lawyer’s clients, that
are held in trust, and that the lawyer so holding must exercise extraordinary care as to any
disposition.
41. Upon information and belief, in order for this account to have been opened at all,
an account opening form reflecting certain crucial information must have been completed and
approved. In the first instance, Cuzalina would complete and sign the form as the registered
representative on the account; then it would be reviewed and executed by his WFG supervisor;
then an Anti-Money Laundering officer for WFG would review and sign off; then the account
opening form would be provided to NFS for its review and approval. This review process, if it
took place at all, violated some of the most basic rules governing the securities industry.
42. First, the opening of an account in the name of the Margulies Law Group IOLTA
violates the maxim of “Know Your Customer” that governs all firms registered in the industry
(WFG, NFS) and the persons associated with them (Cuzalina). There is, quite obviously, no way
that Cuzalina, WFG or NFS could have observed this maxim in the opening of this account – for
the nature of the account is that it represents funds and assets held on behalf of undisclosed law
firm customers. Moreover, none of the required due diligence that the industry rules require
were, on information and belief, exercised. See FINRA Regulatory Notice 09-25 (May 2009).
43. Second, the existence of this account represents a clear departure by Cuzalina,
WFG, and NFS from the industry maxim relating to “Suitability” – there can be no basis for the
belief that an account representing assets of undisclosed clients held in trust and requiring extra
care could possibly be suitable for transactions involving a thinly-traded security of a minimally
capitalized company.
44. Moreover, among the clear “red flags” that all the Defendants ignored was the
fact – as reflected in Exhibit “2” – that the brokerage account in the name of the Margulies Law
WFG COMPLAINT 12
Group IOLTA account was used by Mazzuto to distribute millions of shares in the span of
approximately 8 months!
45. And, as if this were not enough indicia of participation in the Scheme to defraud,
the securities were immediately sold out of the brokerage account in the name of the Margulies
Law Group IOLTA by Cuzalina, WFG and NFS – and the proceeds immediately transferred to
the Margulies Law Group IOLTA account at National City Bank in Cleveland, Ohio. Again, no
responsible due diligence whatsoever in the face of no indicia of to whom these monies were
actually being transferred or why.
46. In a deposition from April 20, 2010, Margulies was asked, in sum and substance,
if he was aware of any restrictions on an IOLTA account. Margulies responded, “[t]he attorney
should not take from the IOLTA account without client permission.” In addition, in the same
deposition, Margulies was asked, in sum and substance, whether he was aware if it was improper
for his client to sell shares and for the proceeds to go into his IOLTA account. Margulies
responded, “I would say under many circumstances it could be proper. And under some
circumstances it might be improper.” When prompted to describe under what circumstances it
would be improper, Margulies responded, “[i]f the company were selling illegal shares.” (April
20, 2010, Margulies Deposition, Pgs. 25-26, Pgs. 29-30).
47. This immediate sale and transfer of proceeds of millions of shares of stocks that
should not have been issued, to an account that should not have been opened, constitutes such
egregious misconduct on the part of the Defendants that the only reasonable conclusion is that
they were purposefully derelict in their clear obligations and participants in the Scheme to
defraud IEAM.
WFG COMPLAINT 13
The Collapse of IEAM
48. On May 1, 2009, IEAM declared bankruptcy, at about which time Robert L.
Renck, Jr. was appointed as President and Chief Executive Officer. During Mazzuto’s tenure as
CEO, some 133 million shares of IEAM were traded with a market value—based on the last
sale—of $450 million. By April 30, 2009, the market value of those shares was $0, representing
a cumulative loss to public shareholders of $450 million.
49. At all relevant times, IEAM’s full Board of Directors was not apprised of the
unlawful activities of the Mazzuto Scheme.
50. In particular, Jerome Davis, IEAM’s sole, wholly independent Board Member,
was appointed in July 2005. He was unaware of the unlawful issuances of stock under the Stock
Option Plan. Moreover, Mr. Davis is a victim of records fraud himself. As reflected in false
record charges from the District Attorney of New York, records reflecting Mr. Davis’s
participation in Board meetings were falsified. In fact, he never participated in or was aware of
any meeting in which unlawful activity was contemplated or agreed upon.
FIRST CAUSE OF ACTION
(FRAUD)
51. IEAM incorporates allegations 1 through 50 above as if fully set forth herein.
52. As set forth above, Defendants knowingly participated in the illicit issuance and
sale to the public of IEAM securities. Through the active participation of the Defendants, a
Stock Option Plan instituted by IEAM and detailed in an S-8 Filing with the Securities and
Exchange Commission was illegally converted into the means by which unrestricted stock could
be issued to, and sold by, members of the Mazzuto Scheme.
53. As set forth above, IEAM contracted with Defendant Computershare for the
provision of professional transfer agency services. Computershare’s fundamental departure from
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any standard of reasonable care occurred over and over again and resulted in the improper
issuance of millions of illegal securities, obviously against and contrary to the Stock Option
Plan’s terms. Computershare represented to IEAM that the improper issuances were, in fact,
proper – or omitted to identify them as improper. IEAM justifiably relied upon these material
and fraudulent misrepresentations and/or omissions.
54. As set forth above, Defendants NFS, WFG and Cuzalina were purposefully
derelict in their clear obligations to IEAM. Defendants NFS, WFG and Cuzalina represented to
IEAM that the improper receipt and sale of its securities were, in fact, proper – or omitted to
identify them as improper. IEAM justifiably relied upon these material and fraudulent
misrepresentations and/or omissions.
55. As set forth above, Defendants NFS, WFG and Cuzalina opened the securities
brokerage account in the name of Margulies Law Group IOLTA without the prerequisite crucial
information and proper approvals. Defendants knowingly violated basic rules governing
securities in order for the immediate sale and transfer of the proceeds of millions of illegally
issued shares.
56. As a direct and proximate result of Defendants Computershare, NFS, WFG and
Cuzalina’s fraud, IEAM suffered monetary loss and liability including, but not limited to, in
excess of $17 million arising out of the illegal transactions involving the Margulies Law Group
IOLTA alone.
SECOND CAUSE OF ACTION
(CIVIL CONSPIRACY)
57. IEAM incorporates paragraphs 1 through 56 above as if fully set forth herein.
58. As set forth above, Defendants were in agreement with IEAM officers to issue
IEAM stock illegally, record the issuance of the stock illegally and to direct the flow of proceeds
WFG COMPLAINT 15
from the illegally issued stock to the Margulies Law Group IOLTA account at National City
Bank in Cleveland, Ohio, resulting in damage and injury to IEAM and its shareholders.
59. As set forth above, Defendant Computershare had an agreement with IEAM
officers to illegally issue unrestricted shares of stock, contrary to the Stock Option Plan.
Defendant Computershare’s conduct constituted a knowing and intentional departure from
standards of its profession and industry in furtherance of the Mazzuto Scheme.
60. As set forth above, Defendants Computershare, NFS, WFG and Cuzalina were in
agreement with IEAM officers to open the securities brokerage account in the name of Margulies
Law Group IOLTA without the prerequisite crucial information and proper approvals.
Defendants knowingly violated basic rules governing securities in order for the immediate sale
and transfer of the proceeds of millions of illegally issued shares. Defendants Computershare,
NFS, WFG and Cuzalina knowingly agreed to engage in this intentional conduct in furtherance
of the Mazzuto Scheme.
61. As a direct and proximate result of Defendants Computershare, NFS, WFG and
Cuzalina’s participation in the conspiracy to defraud, IEAM suffered monetary loss and liability
including, but not limited to, in excess of $17million.
THIRD CAUSE OF ACTION
(BREACH OF CONTRACT)
62. IEAM incorporates paragraphs 1 through 61 above as if fully set forth herein.
63. As set forth above, Defendant Computershare agreed to provide professional
services as a transfer agent for IEAM securities in exchange for payment.
64. As set forth above, Defendant Computershare breached its contractual duty to
IEAM by knowingly issuing shares contrary to the Stock Plan. Moreover, Computershare’s
WFG COMPLAINT 16
conduct constituted a fundamental departure from any standard of reasonable care owed to
IEAM and to the performance of the services agreed upon.
65. As a direct and proximate result of Defendant Computershare’s breach of
contract, IEAM suffered monetary losses and liability including, but not limited to, in excess of
$80 million.
FOURTH CAUSE OF ACTION
(NEGLIGENCE)
66. IEAM incorporates allegations 1 through 65 above as if fully set forth herein.
67. As set forth above, Defendant Computershare was employed by IEAM to provide
to provide professional services as a transfer agent for its securities.
68. As set forth above, Computershare had a duty to IEAM to provide professional
service as a transfer agent for IEAM securities. Defendant Computershare breached that duty by,
contrary to the Stock Plan, blatantly, knowingly, and repeatedly issuing IEAM shares in a wholly
improper manner. As set forth above, Computershare breached its duty of care to IEAM in such
a fundamental, basic manner constituting a severe departure from the standards of its profession
and industry.
69. As a direct and proximate result of Defendant Computershare’s negligence,
IEAM suffered monetary losses and liability including, but not limited to, in excess of $80
million.
FIFTH CAUSE OF ACTION
(UNJUST ENRICHMENT)
70. IEAM incorporates paragraphs 1 through 69 above as if fully set forth herein.
71. As set forth above, Defendants Computershare, NFS, WFG and Cuzalina
knowingly provided services in furtherance of the illegal activities of the Mazzuto Scheme. As
WFG COMPLAINT 17
such, Defendants charged fees and received payments, by way of commissions, for hundreds of
millions of dollars of illegally issued IEAM stock.
72. By accepting commissions for the illegal services provided, Defendants were
unjustly enriched at the expense of IEAM and its shareholders.
73. It would be inequitable if Defendants were able to retain the proceeds from
illegally issuing shares to the detriment of IEAM, its creditors and its investors. IEAM is entitled
to restitution for the value of the fees charged and commissions received by Defendants for their
illicit activities in furtherance of the Mazzuto Scheme.
SIXTH CAUSE OF ACTION
(CONVERSION)
74. IEAM incorporates paragraphs 1 through 73 above as if fully set forth herein.
75. As set forth above, IEAM was the owner of the equity represented by the shares
that were wrongfully issued by IEAM’s agent, Defendant Computershare, in the furtherance of
the Mazzuto Scheme.
76. As set forth above, Defendants Computershare, NFS, WFG and Cuzalina
wrongfully diminished Plaintiff’s equity by knowingly issuing, accepting, and disposing of these
illicitly issued, freely traded IEAM shares.
77. As set forth above, IEAM suffered a diminution of its equity and, therefore a
detriment from Defendants’ actions.
78. As a direct and proximate result of Defendants NFS, WFG and Cuzalina’s
conversion of IEAM shares and securities, IEAM suffered monetary losses and liability
including, but not limited to, in excess of $17 million.
WFG COMPLAINT 18
RELIEF SOUGHT
WHEREFORE, Plaintiff IEAM requests that this Court award it the following relief:
(a) Judgment on its claims against each Defendant:
(b) Pre- and post-judgment interest;
(c) Compensatory and consequential damages;
(d) Punitive damages as allowed by law;
(e) Restitution for the full value of the improperly issued shares;
(f) Plaintiff’s costs and disbursements in this action including reasonable
attorney’s fees; and
(g) Such other and further relief as the Court deems just and proper.
DATED: April 30, 2011 /s/ Christopher D. Loizides Christopher D. Loizides (No. 3968) LOIZIDES, P.A. 1225 King Street, Suite 800 Wilmington, DE 19801 Telephone: (302) 654-0248 Facsimile: (302) 654-0728 E-mail: [email protected]
- and - Thomas J. Curran PECKAR & ABRAMSON, P.C. 41 Madison Avenue New York, NY 10010 Telephone: (212) 382-0909 Facsimile: (212) 382-3456 E-mail: [email protected] Counsel for Plaintiff IEAM
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK
THE PEOPLE OF THE STATE OF NEW YORK
-against- JOHN D. MAZZUTO and JAMES W. MARGULIES,
Defendants.
Indictment No. 2503/2010
THE GRAND JURY OF THE COUNTY OF NEW YORK, by this indictment, accuses
the defendants of the crime of GRAND LARCENY IN THE FIRST DEGREE, in violation of
Penal Law §155.42, committed as follows:
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2004 to in or about 2008, stole property from Industrial Enterprises of America,
Inc. and the value of the property exceeded one million dollars.
SECOND COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of GRAND LARCENY IN THE FIRST DEGREE, in violation of
Penal Law §155.42, committed as follows:
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2006 to on or about July 1, 2007, stole property from an individual known to the
Grand Jury and the value of the property exceeded one million dollars.
THIRD COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of SCHEME TO DEFRAUD IN THE FIRST DEGREE, in violation
of Penal Law §190.65(1)(b), committed as follows:
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2004 to in or about 2008, acting with others known and unknown to the Grand
Jury, all hereinafter referred to as “the schemers,” engaged in a scheme constituting a systematic
ongoing course of conduct with intent to defraud more than one person, including investors,
shareholders, regulators, securities markets and exchanges, and auditors, and to obtain property
from more than one person by false and fraudulent pretenses, representations and promises, and
so obtained property, to wit, money, with a value in excess of one thousand dollars from one or
more such persons, in that the schemers acquired a public shell company and used it as a vehicle
for larceny and fraud by illegitimately issuing millions of shares of stock and engaging in
fraudulent activity to inflate the value of the stock and deceive investors, as follows:
THE PLAYERS
• Industrial Enterprises of America, Inc. (“IEAM”). During the period of the scheme,
IEAM (formerly known as Advanced Bio/Chem, Inc.) was a public shell company
incorporated in Nevada and headquartered in New York County. IEAM acquired three
principal operating subsidiaries between 2004 and 2006, two of which manufactured and
distributed automotive after-market products (e.g., antifreeze, windshield cleaner and
oil-based lubricants), and one of which manufactured and sold aerosol gas products (e.g.,
computer cleaners). During the period of the scheme, IEAM’s stock variously was listed
on the over-the-counter market (“OTC Market” or “Pink Sheets”), the OTC Bulletin
Board (“OTCBB”) and the NASDAQ Stock Market (“NASDAQ”).
2
• John D. Mazzuto. Defendant John Mazzuto spent approximately 20 years at a
prominent New York bank, where he served as Managing Director of corporate finance.
In the decade prior to the scheme, Mazzuto acted as an entrepreneur, investor and private
investment consultant and advisor based in New York County. During the period of the
scheme, Mazzuto was the Chief Executive Officer (“CEO”), President, Assistant
Secretary, and a member of the board of directors of IEAM. Additionally, for significant
periods he also acted as Chief Financial Officer (“CFO”) of IEAM. Mazzuto filed a
personal bankruptcy petition in the United States Bankruptcy Court for the Southern
District of New York in November 2002 and was discharged from bankruptcy on May
15, 2009 – a period encompassing the entire period of the scheme, from which he
personally obtained in excess of $15 million.
• James W. Margulies. Defendant James Margulies is a Cleveland, Ohio-based attorney
with a background in business and securities who, during the period of the scheme, was
a member of the law firm of Margulies and Levinson, LLP. He also formed and utilized
a business entity called the Margulies Law Group. During the period of the scheme,
Margulies held various positions with IEAM, including outside counsel, CFO, General
Counsel, CEO, and member of the board of directors. Margulies obtained in excess of
$6 million from the scheme.
3
THE SCHEME
Origins
In 2002 John Mazzuto acquired a controlling interest in a private New Jersey-based
company called EMC Packaging, Inc. (“EMC”). He then turned his attention to merging EMC
into a publicly listed shell corporation. In July 2004, Mazzuto, with others, accomplished his
goal by gaining control over a dormant public shell corporation called Advanced Bio/Chem, Inc.
(“AVBC”) – a Texas-based company with no operations. At the time, AVBC’s stock traded on
the Pink Sheets (an over-the-counter market for penny stocks). In October 2004 Mazzuto used
AVBC to acquire EMC.
Shortly after the transaction, AVBC changed its name to Industrial Enterprises of
America, Inc. EMC was IEAM’s sole operating business at that time. Later, in 2005 and 2006,
IEAM acquired other subsidiaries, including Unifide Industries, LLC and Pitt Penn Oil
Company.
Registration of IEAM stock with the U.S. Securities and Exchange Commission
Once in control of a publicly listed corporation with an operational business, the
schemers filed a Form S-8 registration (“S-8”) with the United States Securities and Exchange
Commission (“SEC”) on January 24, 2005, along with an employee stock option plan (the
“Plan”), registering 15 million shares of IEAM stock. An S-8 is a public filing by which
companies register shares with the SEC to be issued exclusively for compensatory or incentive
purposes pursuant to an employee benefits plan. Issuing or selling shares to the public for
capital-raising purposes requires separate filings and registrations.
4
The IEAM Plan authorized the IEAM board of directors to issue securities to: (1)
employees; (2) outside members of the board of directors; and (3) consultants. Further, the Plan
authorized the board to issue three types of securities: (1) stock options; (2) restricted shares;
and (3) stock appreciation rights (SARs). Defendant James Margulies, whom Mazzuto had met
and hired in 2004 in the course of seeking to acquire a public shell, was responsible for filing
the IEAM S-8 registration and Plan.
Stock issuances
Between January 24, 2005 and March 31, 2008, Mazzuto and Margulies invoked the S-8
and Plan, but subverted them, to issue millions of shares of IEAM stock worth tens of millions
of dollars to friends, family members, alma maters, and to shell companies, entities and
accounts the schemers controlled, instead of to employees, outside members of the board of
directors or bona fide consultants. A significant number of the shares were issued illicitly for
capital-raising purposes and as gifts, instead of for compensatory or incentive purposes, as
required by the Plan.
The share recipients sold the stock immediately, converting the shares to cash. The
recipients then either kept the money for their own benefit or wired it directly back to IEAM,
where it was booked fraudulently as, among other things, revenue, or to various entities or
accounts controlled by the schemers.
The single largest recipient of IEAM shares was an attorney trust account opened and
controlled by James Margulies, which received more than 3.5 million shares of stock, which
defendant Margulies sold in the open market for approximately $17.7 million, directing more
than $13 million back to IEAM, and the remainder to accounts in the name of or controlled by
the schemers.
5
Reverse stock split
In June 2006 the schemers implemented a reverse 10-for-1 stock split, whereby every
ten shares of outstanding IEAM stock were converted to one share, and the value of every share
outstanding was increased ten-fold. This had the immediate effect of increasing by a factor of
ten the value of the shares the schemers issued pursuant to the S-8 registration and Plan.
The “pump”
To fraudulently inflate the market value of IEAM stock, and to solicit and encourage
public investment in IEAM, Mazzuto and other schemers also routinely made false or
misleading representations about the company in a series of press releases, investor meetings
and calls, and investor conferences held in New York County and elsewhere, and in various
public filings, including false and misleading information about IEAM’s financial condition,
capital structure, earnings guidance and projections, and about the number of shares
outstanding.
The cover-up
In order to conceal the unauthorized stock issuances, and the flow of proceeds back into
the corporation, the schemers engaged in a variety of fraudulent practices, including:
• Describing share recipients who performed little or no bona fide services for IEAM as
“consultants” to the company’s auditors, and creating false consulting agreements to
convey the pretense that these were legitimate recipients of shares.
6
• Arranging bogus private stock transactions, whereby the schemers solicited professional
investors to purchase stock directly from purported IEAM shareholders, when in fact
there were no actual sellers in these transactions. Rather, while the schemers instructed
the investors to wire money into a Margulies-controlled attorney trust account to be
directed to the ostensible seller, defendant Margulies instead wired the funds directly to
an IEAM account (whereupon, the true origin of the money was concealed). And
instead of delivering to the buyer pre-existing shares, Mazzuto and Margulies instructed
the transfer agent to issue new shares of IEAM stock to buyers pursuant to the S-8
registration and Plan.
• Disguising on the books and records of IEAM the flow of money back into the company
from the sale of S-8-issued shares as: (1) loans from various entities; (2) revenue from
the exercise of stock options; (3) reimbursement of legal and other professional fees;
and (4) revenue from “bulk sales” of inventory.
• Providing falsified books and records to outside auditors that contained false
information about the issuance of IEAM shares under the S-8 registration and Plan, and
false information about the source of money flowing back into the company from the
sale of such shares.
• Making misrepresentations in public filings with the SEC, or omitting material
information from public filings.
FOURTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of a violation of General Business Law §352-c(5) (“MARTIN ACT”),
committed as follows:
7
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2004 to in or about 2008, intentionally engaged in a scheme constituting an
ongoing course of conduct with intent to defraud ten and more persons and to obtain property
from ten and more persons by false and fraudulent pretenses, representations and promises and
so obtained property from one and more of such persons while engaged in, inducing and
promoting the issuance, distribution, exchange, sale, negotiation and purchase of securities of
Industrial Enterprises of America, Inc.
FIFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of a violation of General Business Law §352-c(6) (“MARTIN ACT”),
committed as follows:
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2004 to in or about 2008, intentionally engaged in fraud, deception, concealment,
suppression, false pretense and fictitious and pretended purchase and sale, and with intent to
deceive and defraud, made material false representations and statements, while engaged in
inducing and promoting the issuance, distribution, exchange, sale, negotiation and purchase
within and from New York of a security, and thereby wrongfully obtained property with a value
in excess of $250.00.
SIXTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of CONSPIRACY IN THE FOURTH DEGREE, in violation of
Penal Law §105.10(1), committed as follows:
8
The defendants, in the County of New York and elsewhere, during the period from on or
about July 1, 2004 to in or about 2008, with intent that conduct constituting the felonies of
Grand Larceny in the First and Second Degree and Criminal Possession of Stolen Property in
the First and Second Degree be performed, did agree with one and more persons to engage in
and cause the performance of such conduct in that defendants and others agreed to issue, report
and record the issuance of shares of stock illicitly, direct the flows of proceeds from the sale of
such shares of stock, falsify documents and use nominees and nominee accounts to disguise the
flow of proceeds and avoid detection, and enlist and corrupt others to gain assistance, and
thereby sought to steal and possess millions of dollars in fraudulent stock proceeds.
The goal of the conspiracy was to steal and possess property in the form of shares of
IEAM stock and money generated from the sale thereof.
To effectuate their goal, the conspirators agreed to issue millions of shares of stock to
family members, close associates, and to shell companies and entities they controlled, and to
disguise the distribution of the proceeds back to the company and to themselves by creating
numerous false documents and records and making numerous false and misleading statements to
regulators and to the investing public. In so doing, the conspirators sought to defraud stock
transfer agents, regulators, auditors, investors and IEAM shareholders by fraudulently
conveying shares of stock and disguising the distribution of the proceeds from the sale of stock.
To further their plan, the conspirators agreed to engage in conduct designed to inflate the
value of IEAM stock and to influence investors and shareholders to purchase shares of IEAM
stock. The conspirators agreed to make false and misleading public filings and to issue false
and misleading press releases. They also agreed to make false and misleading presentations to
investors and shareholders at investor conferences, investor meetings, and on investor calls.
9
The ultimate goal of these conspirators’ efforts was to issue, inflate and convert IEAM stock
into as much money as possible, using complicit nominees and nominee accounts for channeling the
stolen proceeds back into the company and into accounts they controlled.
OVERT ACTS
In the course of and in furtherance of the conspiracy, the conspirators committed and
caused to be committed the following overt acts:
1. On or about November 12, 2004, defendant John Mazzuto caused to be created a
consulting agreement between IEAM and Regal Partners, LLC, an entity Mazzuto controlled.
2. On or about January 6, 2005, defendant John Mazzuto caused to be created and
signed a consulting agreement between IEAM and Regal Partners, LLC, an entity Mazzuto
controlled.
3. On or about January 24, 2005, defendants John Mazzuto and James Margulies
filed with the SEC a Form S-8 Registration Statement and Advanced Bio/Chem, Inc. 2004
Stock Option Plan (“Plan”), registering 15 million shares of stock to be issued pursuant to the
terms of the registration and Plan.
4. On or about January 24, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
500,000 shares to Regal Partners, LLC, an entity controlled by John Mazzuto.
5. On or about January 24, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
450,000 shares to Co-Conspirator #1, a friend and cohort of defendant James Margulies.
6. On or about January 24, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
750,000 shares to Co-Conspirator #2, John Mazzuto’s girlfriend.
10
7. On or about January 25, 2005, John Mazzuto signed and caused to be sent three
letters to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
425,000 shares to members of his family.
8. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
500,000 shares to an investment entity located in Ohio and controlled by Co-Conspirator #3, a
business associate of John Mazzuto’s.
9. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
150,000 shares to Co-Conspirator #4, John Mazzuto’s attorney.
10. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
150,000 shares to his university alma mater.
11. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
150,000 shares to his high school alma mater.
12. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
500,000 shares to Co-Conspirator #5, a business associate of John Mazzuto’s.
13. On or about January 25, 2005, John Mazzuto signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
500,000 shares to Co-Conspirator #6, a business associate of John Mazzuto’s.
14. On or about February 16, 2005, defendant John Mazzuto caused to be created
and signed a consulting agreement between IEAM and an investment entity located in Texas
and controlled by Co-Conspirator #7, a business associate of John Mazzuto’s.
11
15. On or about April 13, 2005, John Mazzuto signed and caused to be sent a letter to
the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of 1,000,000
shares to an entity controlled by Co-Conspirator #8, IEAM’s investor relations representative.
16. During the period from November 1, 2005 to October 30, 2007, James Margulies
wired approximately $2.6 million of IEAM stock proceeds from an attorney trust account he
controlled to a checking account he controlled with his wife.
17. On or about January 31, 2006, John Mazzuto and James Margulies caused to be
created falsified minutes of the meeting of the board of directors of IEAM.
18. On or about February 28, 2006, John Mazzuto caused to be created and signed a
consulting agreement between IEAM and Co-Conspirator #9, a stock promoter who arranged
sham private stock sales for IEAM.
19. On or about May 26, 2006, John Mazzuto signed and caused to be sent a letter to
the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of 400,000
shares to M4 Capital, LLC, an entity controlled by John Mazzuto.
20. On or about May 26, 2006, James Margulies signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
600,000 shares to Co-Conspirator #1, a friend and cohort of defendant James Margulies.
21. On or about August 1, 2006, John Mazzuto and James Margulies caused to be
created and signed a consulting agreement between IEAM and Sapphire Associates, LLC, an
entity Mazzuto controlled.
22. On or about August 25, 2006, James Margulies wired $169,800 of IEAM share
proceeds from an attorney trust account he controlled to a title company as part of a down
payment on a condominium for John Mazzuto located in Florida.
12
23. On or about September 7, 2006, John Mazzuto appeared and made a presentation
on behalf of IEAM at an investor conference in New York County, in which he made
representations about the company, including projected earnings guidance for IEAM and the
number of shares of IEAM stock outstanding.
24. On or about September 11, 2006, James Margulies wired $2.7 million of IEAM
share proceeds from an attorney trust account he controlled to an account in the name of Co-
Conspirator #4, John Mazzuto’s attorney, for the purchase of a home in Southampton, New
York for John Mazzuto.
25. During the period from October 1, 2006 to May 30, 2007, James Margulies wired
approximately $1 million of IEAM share proceeds from an attorney trust account he controlled
to an account controlled by John Mazzuto.
26. On or about October 2, 2006, John Mazzuto caused to be created and signed a
consulting agreement between IEAM and an individual who had participated in a private stock
transaction arranged by Mazzuto.
27. On or about October 4, 2006, John Mazzuto and James Margulies caused to be
created a falsified incentive stock option agreement between IEAM and Co-Conspirator #1, a
friend and cohort of defendant James Margulies.
28. On or about October 5, 2006, John Mazzuto and James Margulies caused to be
created a falsified promissory note between IEAM and Margulies and Levinson, LLP.
29. On or about October 20, 2006, John Mazzuto and James Margulies caused to be
created a falsified incentive stock option agreement between IEAM and Co-Conspirator #10, an
accountant located in Ohio.
30. On or about November 3, 2006, John Mazzuto caused to be created and signed a
consulting agreement between IEAM and an entity controlled by Co-Conspirator #3, a business
associate of John Mazzuto’s.
13
31. On or about November 17, 2006, John Mazzuto caused to be created a falsified
promissory note between IEAM and Sapphire Associates, LLC, an entity he controlled.
32. On or about December 27, 2006, John Mazzuto and James Margulies caused to
be created a falsified incentive stock option agreement between IEAM and Co-Conspirator #1, a
friend and cohort of defendant James Margulies.
33. On or about December 27, 2006, John Mazzuto signed and caused to be sent a
letter to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
407,850 shares to an attorney trust account controlled by James Margulies.
34. On or about December 31, 2006, John Mazzuto caused to be created two falsified
purchase orders.
35. During the period from December 29, 2006 to September 30, 2007 James
Margulies wired approximately $17.8 million of IEAM share proceeds from an attorney trust
account he controlled to an account in the name of IEAM.
36. On or about January 1, 2007, John Mazzuto caused to be created a falsified
promissory note between IEAM and an entity controlled by Co-Conspirator #1, a friend and
cohort of defendant James Margulies.
37. On or about January 5, 2007, John Mazzuto and James Margulies caused to be
created falsified minutes of the meeting of the board of directors of IEAM
38. On February 16, 2007, IEAM issued a press release announcing results for the
fiscal quarter ending December 31, 2006, which included false and misleading revenue figures.
39. On or about February 13, 2007, John Mazzuto and James Margulies caused to be
created three falsified sales summaries for IEAM’s subsidiaries.
40. On or about February 28, 2007, John Mazzuto caused to be created two falsified
purchase orders.
14
41. On or about March 21, 2007, James Margulies signed and caused to be sent a
letter to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
99,100 shares to an attorney trust account he controlled.
42. On or about March 27, 2007, James Margulies wired approximately $900,000 of
IEAM share proceeds from an attorney trust account he controlled to a title company for the
purchase of a house for John Mazzuto located in Texas.
43. On or about March 29, 2007, James Margulies signed and caused to be sent a
letter to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
100,000 shares to an attorney trust account he controlled.
44. On or about March 31, 2007, John Mazzuto caused to be created a falsified
purchase order.
45. On or about April 9, 2007, James Margulies signed and caused to be sent a letter
to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of 40,000
shares to Co-Conspirator #9, a stock promoter who arranged sham private stock sales for IEAM.
46. On or about April 23, 2007, John Mazzuto signed and caused to be sent a letter to
the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of 100,000
shares to the wife of James Margulies.
47. On or about April 24, 2007, John Mazzuto and James Margulies caused to be
created a falsified spreadsheet detailing bank account activity of IEAM.
48. On or about April 26, 2007, James Margulies signed and caused to be sent a
letter to the IEAM stock transfer agent invoking the S-8 and Plan and directing the issuance of
800,000 shares to an entity controlled by Co-Conspirator #1, a friend and cohort of defendant
James Margulies.
49. On or about May 14, 2007, John Mazzuto and James Margulies caused to be
created falsified consolidating workbooks for IEAM.
15
50. On or about May 22, 2007, IEAM issued a press release announcing results for
the fiscal quarter ending March 31, 2006, which included false and misleading revenue figures.
51. On or about July 9, 2007, John Mazzuto and James Margulies caused to be
created falsified minutes of the meeting of the board of directors of IEAM
52. On or about July 12, 2007, IEAM issued a press release which included false and
misleading information about earnings projections and the number of shares of IEAM stock
outstanding.
53. On or about July 24, 2007, John Mazzuto and James Margulies caused to be
created falsified minutes of the meeting of the board of directors of IEAM.
54. On or about August 6, 2007, John Mazzuto caused to be created falsified minutes
of the meeting of the board of directors of IEAM.
55. On or about August 20, 2007, John Mazzuto caused to be created falsified
minutes of the meeting of the board of directors of IEAM.
56. On or about August 29, 2007, James Margulies wired approximately $1.85
million in S-8 share proceeds from an attorney trust account he controlled to a title company for
the purchase of a home for John Mazzuto located in Florida.
57. On or about September 6, 2007, John Mazzuto led an investor call in which he
made false and misleading representations about the number of IEAM shares outstanding and
earnings guidance for the company.
58. On or about September 7, 2007, John Mazzuto caused to be created falsified
minutes of the meeting of the board of directors of IEAM.
59. On or about September 27, 2007, IEAM issued a press release which included
false and misleading information about annualized savings figures for the company.
16
FALSIFIED BOARD OF DIRECTORS MEETING MINUTES
SEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant, in the County of New York and elsewhere, on or about January 31, 2006,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
EIGHTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about January 5, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
NINTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
17
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about February 5, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, minutes of the meeting of the board of directors of
IEAM.
TENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 21,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
ELEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about March 15, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
18
TWELFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about June 28, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
THIRTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about June 29, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
FOURTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
19
The defendants, in the County of New York and elsewhere, on or about July 9, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
FIFTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about July 17, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
SIXTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about July 24, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, minutes of the meeting of the board of directors of IEAM.
20
SEVENTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about August 6, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, minutes of the meeting of the board of directors of
IEAM.
EIGHTEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about August 20, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, minutes of the meeting of the board of directors of
IEAM.
NINETEENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
21
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about September 7, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, minutes of the meeting of the board of directors of
IEAM.
FALSIFIED CONSULTING AGREEMENTS
TWENTIETH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about November 11, 2005, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and an
investment advisor located in Texas.
TWENTY-FIRST COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
22
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about February 28, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and a stock
promoter who arranged sham private stock sales for IEAM.
TWENTY-SECOND COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about August 1, 2006,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a consulting agreement between IEAM and Sapphire Associates, LLC.
TWENTY-THIRD COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about October 2, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and Sapphire
Associates, LLC.
23
TWENTY-FOURTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about October 2, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and an individual
who participated in a private stock transaction arranged by Mazzuto.
TWENTY-FIFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about November 3, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and an
investment entity located in Ohio.
TWENTY-SIXTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
24
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about December 18, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a consulting agreement between IEAM and an
accountant located in Texas.
FALSIFIED IEAM BOOKS AND RECORDS
TWENTY-SEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 13,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a sales summary.
TWENTY-EIGHTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 13,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a sales summary.
25
TWENTY-NINTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 13,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a sales summary.
THIRTIETH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 15,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, cash flow and balance sheet worksheets.
THIRTY-FIRST COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
26
The defendants, in the County of New York and elsewhere, on or about February 15,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, schedules of options and warrants.
THIRTY-SECOND COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about April 24, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a spreadsheet detailing bank account activity of IEAM.
THIRTY-THIRD COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about May 14, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, consolidating workbooks.
27
THIRTY-FOURTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about May 14, 2007,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, consolidating workbooks.
THIRTY-FIFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about June 11, 2008,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a quarterly report.
THIRTY-SIXTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
28
The defendants, in the County of New York and elsewhere, on or about June 18, 2008,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a quarterly cash report.
THIRTY-SEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about June 18, 2008,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a quarterly cash report.
FALSIFIED DEBT INSTRUMENTS
THIRTY-EIGHTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about October 5, 2006,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a promissory note between IEAM and Margulies and Levinson, LLP.
29
THIRTY-NINTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about October 26, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a promissory note between IEAM and Sapphire
Associates, LLC.
FORTIETH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about November 17, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a promissory note between IEAM and Sapphire
Associates, LLC.
FORTY-FIRST COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
30
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about January 1, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a revolving credit grid note between IEAM and an entity
located in Ohio controlled by a friend and cohort of James Margulies.
FALSIFIED INCENTIVE STOCK OPTION AGREEMENTS AND LETTERS
FORTY-SECOND COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about October 4, 2006,
with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an incentive stock option agreement between IEAM and a friend and cohort of
James Margulies.
FORTY-THIRD COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
31
The defendants, in the County of New York and elsewhere, on or about November 1,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an option exercise letter.
FORTY-FOURTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about October 20,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an incentive stock option agreement between IEAM and an account located in
Ohio.
FORTY-FIFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants, of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 4,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an option exercise letter.
32
FORTY-SIXTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about December 27,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an incentive stock option agreement between IEAM and an account located in
Ohio.
FORTY-SEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about February 4,
2007, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an option exercise letter.
FORTY-EIGHTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
33
The defendants, in the County of New York and elsewhere, on or about December 27,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an incentive stock option agreement between IEAM and an attorney located in
Ohio.
FORTY-NINTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about December 29,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an option exercise letter.
FIFTIETH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about December 27,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an incentive stock option agreement between IEAM and a friend and cohort of
James Margulies.
34
FIFTY-FIRST COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about December 29,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, an option exercise letter.
FALSIFIED PURCHASE ORDERS
FIFTY-SECOND COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about December 31, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a purchase order.
FIFTY-THIRD COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
35
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about December 31, 2006, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a purchase order.
FIFTY-FOURTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about February 28, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a purchase order.
FIFTY-FIFTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about February 28, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a purchase order.
36
37
FIFTY-SIXTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendant JOHN MAZZUTO of the crime of FALSIFYING BUSINESS RECORDS IN THE
FIRST DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendant JOHN MAZZUTO, in the County of New York and elsewhere, on or
about March 31, 2007, with intent to defraud and to commit another crime and to aid and
conceal the commission thereof, made and caused to be made a false entry into the business
records of an enterprise, IEAM, to wit, a purchase order.
FALSIFIED STOCK PURCHASE AGREEMENT
FIFTY-SEVENTH COUNT:
AND THE GRAND JURY AFORESAID, by this indictment, further accuses the
defendants of the crime of FALSIFYING BUSINESS RECORDS IN THE FIRST
DEGREE, in violation of Penal Law §175.10, committed as follows:
The defendants, in the County of New York and elsewhere, on or about September 1,
2006, with intent to defraud and to commit another crime and to aid and conceal the commission
thereof, made and caused to be made a false entry into the business records of an enterprise,
IEAM, to wit, a stock purchase agreement.
CYRUS R. VANCE, JR. District Attorney
GJ # 8 Filed: NA
38
No.
No.
THE PEOPLE OF THE STATE OF NEW YORK
-against-
JOHN D. MAZZUTO and JAMES W. MARGULIES,
Defendants.
INDICTMENT
GRAND LARCENY IN THE FIRST DEGREE, P.L. §155.42, 2 Cts. (both defendants) VIOLATION OF G.B.L. §352-c(5) (both defendants) VIOLATION OF G.B.L. §352-c(6) (both defendants) SCHEME TO DEFRAUD IN THE FIRST DEGREE, P.L. §190.65(1)(b) (both defendants) CONSPIRACY IN THE FOURTH DEGREE, P.L. §105.10(1) (both defendants) FALSIFYING BUSINESS RECORDS IN THE FIRST DEGREE, P.L. §175.10 (defendant John Mazzuto, 51 cts.; defendant Margulies, 33 counts)
CYRUS R. VANCE, JR. District Attorney
ADA Garrett Lynch Foreperson ADA Harold Wilson Major Economic Crimes Bureau
A True Bill