A:SV: IJ F.# 9705057 cosmo. ind

UNITED STATES DISTRICT COURT ~JJI. ~.--:. EASTERN DISTRICT OF NEW YORK A.M~-0".. 't~1lME

l:'- - - - - - - - - - - - - - - X

UNITED STATES OF AMERICA' I N D ! C T MEN T

- against ­ '~a;~089 NICHOLAS COSMO, §§ 1341 and 3551

et ~.). SP'F\TT,1.Defendant.

- - X lINDSAY~",. THE GRAND JURY CHARGES:

COUNTS ONE AND TWO

1. In or about and between January 1994 and April

1997, both dates being approximate and inclusive, the defendant

NICHOLAS COSMO was employed as.a stockbr.oker at continental

Br.oker Dealers, where he traded securities for retail brokerage

cui:l'torners.

2. In or about and between March 1997 and August

1997, both dates being approximate an~ inclusive, within the

Eastern District6f New York and elsewhere, the defendant

NICHOLAS COSMO did knowingly and intentionally devise a scheme

and artifice to defraud his brokerage customers and to obtain

money and property by means of false and fraudulent pretenses and

representations.

2

3. It was a part of this scheme and aT-tifice that the

defendant NICHOLAS COSMO made and caused to be made false and

fra,udulent representations to his brokerage customers that he was

a stockbroker employed by the firm. of Charles Schwab & Co., Inc..

("Schwab"), when in fact, as he then and there well knew, he was

not and ne"'\Ter had been. employed in any capacity by Schwab.

4. It was a further part o:c this scheme and artifice

that the defenda.nt NICHOLAS COSMO liquidated the securities

positions of his brokerage customers, spent proceeds to repay

personal debts, and executed unauthorized trades of securities,

options, and warrants.

5. For the purpose of executinq the aforementioned

scheme and artifice and attemptj.ng to do 50, the defendant

NICHOLAS COSMO did knowinqly deposit and caUse to be deposited.

the following mail matter, to be sent and delivered by a private,

commercial i.nterstate carrier, to wit, Federal Express, according

to the directions thereon:

3

2

APPROX. DESCRIPTION DA.TE OF OF MAIL

COUNT MAILING MATTER SENDER ADDRESSEE

J. 7/97 . 5/97 & 6/97 Nichola.s Cosmo John Doe monthly 3178 Cherrywood

.account Drive sta.tetnents Carle PJ.ace, NY Schulenburg, TX

11793 78956

7/97 Trade con- Nicholas Cosmo Jane Doe firmations Charles Schwab on Schwab 3178 Cherrywood East Meadow, NY letterhead, Drive 11554 net worth Wantagh, NY

. statement 11793

(Title 18, United States Code, Sections 1341 and 3551

COUNT 'l'HREE

6. In or about September 1997, within the Eastern

District·of New York and elsewhere, the defendant NICHOLAS COSMO

did knowingly and intentionally devise a scheme and artifice to

defraUd a securities trading firm, to wit,· Corporate Securities

Group, and to obtain money and property by means of false and

fraudulent pretenses and representations.

7. It was a part of this scheme and artifice that the

defendant NICHOLAS COSMO opened a trading account with Corporate

Securities Group, using a check for $50,000.00 payable to a

5ecuriti~s clearing firm~ to wit, J.W. Charles, which check he

then and there well knew would be returned for insufficient

.funds.

4

8. It was a further part of this scheme and artj.fice

that the defendant NICHOLAS COSMO immediately traded securities

in his account with Corporate Securities Group, before the

$50,000.00 check could be returned for insufficient funds.

9. For the purpOse of executing the aforementioned

scheme and artifice an.d attempting to do so, the defendant

NICHOLAS COSMO did knowingly deposit and cause to be deposited

the 'following mail matter, to be sent and delivered by a priva.te,

commercial interstate carrier, to wit, Federal Express, according

to the directions thereon:

APl?ROX. DESCRIPTION DATE OF OF MAIL

COUNT MAILING MATTER SENDER ADDRESSEE

3 9/J.7/97 $50,000.00 J.W. Charles .check Nicholas Cosmo 980 N. Federal

3178·Cherrywood Highway Drive Boca Raton, FL

Carle Place, NY 11793 33432

(Title 18/ United states Code, Sections 1341 and 3551

ZACHARY W. CARTER UNIIED STATES ATTORNEY EASTERN DISTRICT OF NEW YORK

BY: ~fb.~~'\ .~. u/L·4..-L-.- ~ ... O:'J.C,.lNG UJ\HTED ST!\TFS ~.TTOPN'EY

[··'UnSU/H~T1'0:28 C.ER. 0.131

4

ABV:IJ', F.# 9705057 mailfrd.com

UNITED STATES DISTRICT COURT EASTERN DISTRICt OF NEW YORK

'97 .. 0 8M. 1~13 .... -----------------~-------~----X

UN11ED STATES OF AMERICA. COMPLAINT

- against­ (T. 18, U.S.C., § 1341)

NICHOLAS COSMO,

Defendant.

------------------------------x

EASTERN DISTRICT OF NEW yoitK, SS:

Wfi..LIAM McGROGAN, being duly sworn, deposes and say~ that he is a Special

Agent ofthe Federal Bureau of Investigation ("FBI"), duly appointoo according to la.w and acting . {;'" .

as such.

Upon infonnation and belief;. in or about and between March 1997 and September

1997, both dates being approximate and inclusive, within the Eastern District ofNew York and

elsewhere, the defendant NICHOLAS COSMO, having devised a scheme and artifice to defraud

and obtain money by means offatse and fraudulent pretenses and representations, did knowingly

deposit and cause to be deposited VariOllS documents to be sent and delivered by a commercial

interstate carrier, namely, Federal ExpreSs, for the purpose ofexccuti.ng such scheme and artifice.

(Title 18, United States Code, Section 1341).

The source ofyour deponeot1s infonnation and the grounds for his belief are as

fonows:

I

2

1. I am the case agent conducting the mail fraud investigation ofNlCHOLAS

COSMO. In the course ofmy i.nvestigation, I have reviewed pertinent financial documents and

interviewed individual and institutional Victims.. In addition, on October 30, 1997, I interviewed

NICHOLAS COSMO, who provided me with a signed three..page confession regarding this fraud.

The information cOlJt~ined herein is only a summary ofthe extensive information derived from

these sources.

2. According to the records ofthe National Association of Securities Dealers

(NASD), NICHOLAS COSMO was employed as a stockbroker at Continental Broker Dealers

from January 1994 through April 1997. According to his customers, they principally owned

equities and generally did not trade in options or warrants.

3. In or about March 1997, according to NICHOLAS COSMO, as well as his

customers, COSMO began to represent himself as a broker for Charles Schwab & Co., Inc.

(IfS~hwab") to· his old customers from Continental Broker Dealers and to new customers as well.

Officials of Schwab have informed me that COSMO has never been employed there.

4. NICHOLAS COSMO told his old customers that he wanted them to

transfer their assets from Continental Broker Dealers to Schwab. He also told them that each

customer would have his own separate .account, or his own subaccount of "Cosmo & Associates,"

at Schwab.

5. On or about March 28. 1997, NICHOLAS COSMO opened a single

account at Schw~ in the name of "Cosmo &Associates," into which he deposited and

intermingled the funds and securities ofhis customers, totaling approximately $118,000.00. This

"Cosmo & Associatesll account had no associated subaccounts.

3

6. NICHOLAS COSMO admitted liquidating the securities and using most of

these funds to execute unauthorized trades in options and warrants. Based on my review of the

trade documentation, trading Josses were approximately $72,000.00.

7. COSMO's customers informed me that they were unaware ofthese trades

a.nd believed that they continued to own ~heir securities. To lull his customers, NICHOLAS

COSMO sent them by Federal Express false and fictitious account statements reflecting continued

ownership ofvarious securities that COSMO had already liquidated. In additio.n, when a

customer asked COSMO to execute the purchase or sale of stock, COSMO sent via Federal

Express a "trade confirmation" headed with the Schwab logo. Officials of Schwab have

confirmed to me that such confinnations were entirely false and fictitious.

8. For example, in or about July 1997, NICHOLAS COSMO sent his

custome.,--.two monthlyaecount statements for May 1997 and June 1997. I

reviewed these account statements. 9 t told me that these statements were representative of

the portfolio that COSMO led him to believe that he had at Schwab. Schwab iDfonned me~

however, that this account statement is entirely false and fictitious -- and COSMO admitted as

much to me.. COSMO an~old me th~t the statements were sent and received via

Federal Express. I reviewed the Federal Express airbill corresponding to the delivery of the

a.ccount statements. The "sender" area of the bill bears the name ofNICHOLAS COSMO and

.lists his address as 3178 Cherrywood Drive, Carle Place, New York 11793. The "recipient" is

listed a

9. I have reviewed similar bogus acco\lnt statements and apparent Schwab

documents that NICHOLAS COSMO sent to his customers. I have reviewed the corresponding

4

Federal Express airbills as well, which indicate that COSMO sent these materials from his Carle

Place. New York address.

10. Any funds remaining from customers' liquidated'securities were spent by

NICHOLAS COSMO to repay personal debts, including gambling debts. Based on my review of

documents, and based on COSMO's admissions, Jestimate that these personal disbursements

totaled approximated $40,000.00.

11. Numerous checks drawn on the uCosmo & Associates" account 'at Schwab

payable to customers were returned due to insufficient funds. COSMO admitted. knowing that

these checks would bounce when he issued the checks.

12. One check COSMO issued was payable to a securities clearing fum, JW

Charles, in order for COSMO to open a trading account with Corporate Securities Group. On or

about September 17~ 1997, COSMO issued'this check to JW Charles'in the amount of

$50~OOO.OO. COSMO told me that he sent this check to JW Charles via Federal Express. I have'

reviewed a copy of the check and the corresponding Federal Express airbill. It indicates the

sender as NICHOLAS COSMO of3178 Cherrywood Drive, Carle Place, New York 11793 and

the recipient as JW Charles, 980 N. Federal Highway, Boca. Raton, Florida 33432.

13. Corporate Securities Group permitted COSMO to trade on the account

before this check cleared. The check did not clear; it was returned for insufficient funds.

COSMO's account with Corporate Securities Group was immediately closed and all trading

positions liquidated. Corporate Securities Group incurred a loss'ofappromately $57;000.00.

13. Schwab froze the Cosmo & Associates account on or about July 31] 1997

Approximately $6,000.00 remains in the account.

5

14. When I infonned NICHOLAS COSMO that we were in a position to seek:

an arrest warrant, he agreed to surrender voluntarily this morning, which he has done.

WHEREFORE, your deponent respectfully requests that the defendant

NICHOLAS COSMO be dealt with according to law.

~~IJ1~~ WILLIAM McGROGAN, Sp~' tAgent Federal Bureau ofInvestigation

Sworn to before me thi.s 30th day of December, 1997

_./:I~//

H'.NI ./ IS;ATES MAGISTRATE RIDGE ~ EA~ DISTRICT OF NEW YORK

UN~~~D STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

(»iENDED).----------------~-----------------~ nNITED STATES OF AMERICA JtJDGMENT INCLtJl)~G S~CE

-v- UNOER THE SENTENCXN~ RE~ORM ACT

~ICHOLAS COSMO CASE NUMBER: CR-98-0089-01 (ADS) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -'-'x Traoey Eadie Gaffey, Esq. (LAS) Daniel R. A1onso, AUSA THE LEGAL A~D SOCIETY-EDNY

I '.. ,', . lA'"I • ' '", '.'!II . , oJ;: '135 Pinelawn. Road, Suite 245 North

Melville, NY 11747 Defendant's Attorney & Address

THE DEPBNDAm: --L pleaded guiltYi~to oount(s) 1 (3 COUNT INDICTMENT)

was found gui,y on oount (s) ~ after a, plea of not guilty.

Accordingly, the defenclant is ADJUDGED guilty of .=~J,1.~~Fit'{sll, which involve the following offenses: , :~;, (,0 ffi U \ll (:, '\

• I

~TLE &. SECTION NA'l'URE &: OFFENSE i.<.. :~ ~, ;';, ',..',. \, ::cbtINT NUMBElHS)

18 :1341 MAIL FRAUD, a Class D Felony 1 The defendant is sentenoed as provided in pages 2 throu~~~5' of~~is Judgment. The sentence is imposed pu~suant to the Sentencing Reform' Act of 1984.

The de£Qndant has been found not guilty on count (8) and. is disoharged as to such count(s). , Count (a) 2 and 3 (ax-e) dismissed on the motion of the l1n~d ~~s.

It is ordered that the defendant shall pay to the unitec!t~tat!J~ special assesmment of $ 100.00 whioh shall be due -I- immediately ,_'__ as follows:

It is further ORDERED that the defendant shall. notify the United States Attorney for tb.is di'strict within 30 days of any change of residence or mailing address ~til all fines, restitution, costs r and special assessments imposed by this Judgment are fully paid.,

Defendant's Soc. Sec

Defendant's Date of Birth 5/19/71

Defendant's Mailing Address:

t8K LaBonnevie Drive Rast Patchogue, NY 11.772

Defendant's Residence Address:

SAME...AS ABOYB

AT~U: c,:py ATTEST Date: , ~-1+------

.fI5:~~;:r: DY.~y CL;-rr­

(AMEm)ED)

Defendant: N~CHOLAS COSMO JUdgment - Page 2 of 5 case Number: CR-98-00B9-01 (ADS)

The defendant is hereby oommi~ted to the custody of the United States Bureau of Prisons to be imprisoned for a term of TWENTY ONE (21.) MONTHS ......

*~THE DEFENDANT IS TO RECEXVE XNTENSlVE G~LING THERAPY.

~ The Court ~kes the following recommendations to the Bureau of p~ison~:

THAT THE DEFENDANT SERVE HXS ENTXaS SENTENCE IN A FACILITY THAT OFFERS AN J:NTENSIVE GAMBLING 'l'RERAPY PROGRAM.

The defen.dant is remanded to the custody of the United States Marshal. ~ The defendant shal1 surrender to the United States Marshal for this

distriQt,22S CADMAN PLAZA EAST, BROOKLYN, NY lL201, OR TO THE INSTITUTION, IF DES:rGNATBD.

~ at 12:00 p.m. on FebruarY 16, 199~.

as notified by the Marshal.

The defendant shall surrender for se~iee of sentence at the institution designated by the Bureau of Pri/lorls

before 2:p.m. on _-_---'-FEB -5.~ _ as notified by the united States Marshal. as notified by. the Probation Office.

RETURN

I have executed this Judgment as follows:

}

United States Marshal

By ~.~-.

(AMENDED)

Defendant: N~CROLAS COSMO Judgment - Page 3 of 5 Case Number: CR-98-0089-01 (ADS)

SUPERVIS~D RELEASE

Upon release from imprisonment, the defendant shall be on supervised release for a term of THREE (3) YEARS.**

**SPECIAL CONDITIONS: 1. THE DEFENDANT IS TO PARTICIPATE IN INTENSIVE OUT­PATIJilN'l' GAMBLING THERAPY AT THE DI.R.ECTION OF THE PROBATION DEPAA'rMENT.

2 • THE DEFENDANT IS TO SUBM:IT FULL FINANCIAL DISCLOSURE AS DIRECTED BY THE PROBA~ION DEPARTMENT.

3.· THE DEFENDANT SHALL PAY RESTITUTION !l' THE SUM OF ONE HUNDRED SEVENTY SEVEN THOUSAND DOLLARS ($177,000.00). PAYMENTS ARE AT .A. RATE OF 10% OF THE DEFENDANT'S GROSS MONTHLY INCOME TO COMMENCE AT THE START OF HJ:S TERM OF SUPERVXV!SED RELEASE TO 'l'HE U. S. ATTORNEY'· S OFFICE, ONE P~ERRBPONT PLAZA, BROOKLYN, NY 11201 TO DISTRXEUTE TO TBE VICTIMS PRO RATA. ANY MONI:ES PAID BY MONEY FROM THE CHARLES SCHWAB ACCOUNT SHOULD BE PAID TO THE CLERK OF THE COURT,. 225 CADMAN PLAZA EAST, BROOKLYN, NY 11201.

While on supervised release, the defendant sha11 not oommit another Federal, state, or looal orime and shall. comply with the standard conditions tbat have been adopted by this oou:rt (set forth on the following page). If this jUdgxnent imposes a restitution obligation, it ahall be a condition of supervised release that the defendant pay an.y auc:!h restitution that reJDains unpaid at the commencement of the term of supervised release. The defendant shall comply with the fo~lowing

additional oonditions:

The defendant shall pay any fines that remain unpaid at the c:!ommencement of the te~ of supervised release.

(AMEWEIl) Defendant: NICHOLAS COSMO Judgment - Page 4 of 5 Case Number: CR-89-00S9-01 (ADS)

STANDARD CONDITIONS OF SUPERVISION

While the defendant is on probation or supervised release pursuant to this Judgment~

1} The defendant shall not oommdt another Federal, state or local crime; 2} the defendant shall not leave the judicial district without the per.mission

of the court or probation officer; 3) the defendant shall report to the probation officer as directed by the court

or probation office:r: and shall submit a truthful and camp.lete writ.ten report within the first five days of each month;

4) the de:eendant ahall answer tJ:"Uthfully all inquiries by the probation officer and follow tbe instructions of the probation officer,

5) the defendant shall support his or her dependents and meet other family responsibil~ties,

6) the defendant shall work regularly at a lawful occupation unless excused by

the p:r:obation officer for schooling, training, or other acceptable reasons;

7) the defendant shall notify the probation offioer within seventy-two hours of any change in resid@nce or employment;

8) the defendant shall refrain from excessive use of a1cohol and shall not purchase. possess, use .. distribute, or administer any narcotic or other aontro11ed substance, or any paraphernalia related to such substances, except as prescribed by a physician;

9) the defendant shall not frequent places where controlled substances are illegally sold, used, distributed, or a~inistered;

10) the defendant ahall not associate with any persons engaged in crim.inal activity, and shall not associate witb any person convicted of a felony unless granted per.mission to do so by the probation officer;

11) the defendant shall permit a probation.officer to visit him or her at any t~e at home or elsewhere and shall permit oonfiscation of any contraband observed in plain view by the probation officer;

12) the defendant shall. notify the probation office:r: within seventy-two hours of being a~rested or questioned by a law enforcement officer;

13) the defendant shall not enter into any agreement to aot as an infor.mer or a special agent of a 1aw enfor~ement agenoy without the perBdssion of the oourt;

14) as. directed by the probation officer, the defendant shall notify third parties of risks that may be occasioned by the defendant's cri~nal reoord or pe:rsona~ history or characteristics.. and shall permit the probation officer to make such notifications and to confirm the defendant1s oompliance with such not1fication requir@ment.

These conditions are in addition to any other oonditions imposed by this Judg.ro.ent.