BOSTON - A Marblehead man was convicted today in federal court of conspiring to commit securities fraud and other offenses, based on his management of Locateplus Holdings Corporation, Inc., a company based in Beverly that provides access to public data.
Jon Latorella, 48, initially appeared in court today for a jury trial before U.S. District Judge Douglas P. Woodlock; however, elected instead to plead guilty to a conspiracy wherein he committed securities fraud, made false statements in filings with the U.S. Securities & Exchange Commission (SEC) and company auditors, executed wrongful certifications on SEC filings, and committed aggravated identity theft. Sentencing is scheduled for May 29, 2012, at 2:30 pm. Latorella faces up to five years in prison to be followed by three years of supervised release and a $250,000 fine.
Had the case proceeded to trial the Government’s evidence would have proven that, starting in 2001, Latorella, the former President and CEO of Locateplus, and another man who worked at Locateplus, engaged in several fraudulent schemes intended to artificially inflate the revenues of Locateplus. The schemes included:
- Falsifying loan documents to make it appear that a fictional entity, Andover Secure Resources, owed Locateplus approximately $1 million; opening a P.O. Box as the “office” for Andover; using the identity of a man who died in 1985 as the head of Andover; and manipulating the flow of money to create the appearance that Andover was paying down its fictitious debt to Locateplus;
- Falsifying revenue streams to make it appear that another entity, Omni Data Services, was paying Locateplus under the terms of a contract, when in fact Omni Data had no independent existence, the contract was fake, and the money came from personal loans from Latorella, from Locateplus itself, and from other sources;
- Deceiving the SEC and other regulatory authorities to avoid having to register securities being sold by a company called Paradigm Tactical Products, which Latorella set up with the help of two other men. Latorella again used the identities of his acquaintances and two dead men as Paradigm investors; and
- Routinely deceiving company auditors, and the SEC, about the nature of Locateplus’s revenues and assets in order to keep these fraudulent schemes going and to attract investment in Locateplus.
U.S. Attorney Carmen M. Ortiz said, “Those who choose to run publicly-traded companies have a special responsibility to the investing public. This conviction is a reminder that we will not allow corporate executives to defraud shareholders and potential investors with impunity, and that we continue to prioritize investigating and prosecuting financial crime.”
“Securities fraud, like all financial crimes, threatens the financial health of our communities”, said Special Agent in Charge William P. Offord. “Jon Latorella has pleaded guilty to fraudulent conduct intended to deceive the regulatory authorities and to using stolen identities in the course of his scheme. IRS has made the investigation of identity theft in conjunction with financial fraud a priority. We are proud to bring our specialized skills to securities fraud investigations such as this one and to work with our law enforcement partners at the FBI to combat these serious crimes.”
“As former CEO Latorella’s guilty plea shows, the illegal manipulation of stock prices by corporate insiders is a poor business plan,” said Richard DesLauriers, Special Agent In Charge of Boston’s FBI office. “This investigation is another example of the FBI’s efforts to protect the integrity and transparency of the financial markets. Repeatedly, FBI and IRS investigations in New England have made clear that no one who is engaged in illegal activity while participating in the markets is exempt from the law, including CEO’s, traders, fund managers, equities analysts, lawyers and publicists.”
U.S. Attorney Ortiz; SAC Offord, Internal Revenue Criminal Investigation, Boston Field Division; and SAC DesLauriers, Federal Bureau of Investigation, Boston Field Division, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Andrew E. Lelling and Paul G. Levenson of Ortiz’s Economic Crimes Unit.