Homeless Man and Federal Prisoner Arrested in Separate Schemes to Defraud Class Action Victims of Millions of Dollars
ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and PASQUALE J. D'AMURO, Assistant Director-in-Charge, Federal Bureau of Investigation, New York, today announced the indictment of RICHARD LAGERVELD, also known as "Joseph N. Mollica," on mail and wire fraud charges, and the filing of a complaint charging mail fraud against ALAN N. SCOTT. LAGERVELD has been in federal custody since his arrest on December 16, 2004 in La Jolla, California, and arraignment that same day in U.S. District Court for the Southern District of California, San Diego. He has been transported to the Eastern District of New York, where he was scheduled to be arraigned at 11:00 a.m. this morning before United States District Judge Arthur D. Spatt at the U.S. Courthouse in Central Islip, New York. SCOTT, a federal inmate at the Federal Correctional Institution (FCI) Schuylkill in Minersville, Pennsylvania, is scheduled to have his initial appearance at 12:00 noon today before United States Magistrate Judge James Orenstein at the U.S. Courthouse in Central Islip.
As alleged in the pleadings, LAGERVELD and SCOTT separately masterminded complicated schemes to defraud entities that administered claims in civil class action securities cases pending in United States District Courts throughout the country. Typically, when judgments are entered or settlements are reached in such cases, they are publicized in the print media, and members of the plaintiff classes are advised to submit claims to their shares of these judgments or settlements. Claims administrators receive these claims, assess their merit, and, if appropriate, approve inclusion of the claimant into the plaintiff class, which ultimately results in payment to the claimants.
THE LAGERVELD SCHEME
According to a previously filed complaint and the indictment unsealed today, since October 2002 and continuing through December 2004, LAGERVELD, using various aliases, including "David Corning" and "Joseph N. Mollica," defrauded several class action claims administrators, including the Garden City Group, located in Melville, New York, and David Berdon L.L.P., located in Jericho, New York, and collected approximately $9.2 million in payments.
LAGERVELD allegedly submitted fraudulent claims in connection with class action settlements involving securities fraud cases brought against Oxford Health Plans and Nationsbank, among others. These claims included forged brokerage statements alleged to have come from LAGERVELD's broker L.F. Rothschild & Co., a company which had in fact gone out of business fourteen years ago, and documents identifying his broker at L.F. Rothschild & Co., who had in fact left the company years earlier and is currently incarcerated on securities fraud charges. In two unrelated class action cases, as a result of the fraudulent submissions, claims administrators issued LAGERVELD checks for $6,510,737.20 and $2,260,726.98 and mailed them to him at a homeless center in San Diego, California where LAGERVELD was registered. The investigation revealed that LAGERVELD, who used the homeless center as his mailing address and listed residence, deposited these and other checks he received into brokerage accounts and used some of the monies to invest in the stock market.
Shortly before LAGERVELD's arrest, government agents seized approximately $8.5 million from his brokerage and bank accounts.
THE SCOTT SCHEME
According to the complaint unsealed today, from November 2001 and continuing until February 2004, SCOTT and his co-conspirators schemed to defraud claims administrators in federal class action securities cases of approximately $8 million and allegedly received approximately $200,000. The victim administrators included the Garden City Group, David Berdon L.L.P. and Gilardi & Company L.L.C., located in Larkspur, California; Heffler, Radetich & Saitta L.L.P., in Philadelphia, Pennsylvania; Strategic Claims Services, in Ashton, Pennsylvania; Complete Claims Solutions, Inc., in West Palm Beach, Florida; and Rosenthal & Co., in Novato, California.
Operating out of his prison cell at FCI Schuylkill in Minersville, Pennsylvania, where he was incarcerated on prior fraud convictions, SCOTT submitted fraudulent claims in approximately 90 federal class action securities fraud cases. SCOTT corresponded with the claims administrators through his co-conspirators, and routinely sent directions and correspondence to his co-conspirators by falsely labeling the correspondence "legal mail." SCOTT established ownership of the securities in issue by submitting to administrators false copies of IRS Form 1040, Schedule D.
"These defendants picked the pockets of legitimate claimants who themselves were victims of corporate fraud," stated United States Attorney MAUSKOPF. "As a result, honest shareholders were actually victimized twice. These prosecutions should serve as a wake up call -- whether you concoct your scheme in the boardroom, a homeless center, or a jail cell -- you will be investigated and prosecuted to the full extent of the law." Ms. MAUSKOPF thanked the Securities and Exchange Commission for its assistance in the investigation.
FBI Assistant Director-in-Charge D'AMURO stated, "The class action lawsuit, devised to provide a legal and monetary remedy for aggrieved consumers or shareholders, was mined like the mother lode by these defendants for their undeserved windfall. Their schemes peg them as the legal and ethical equivalent of Gold Rush claim-jumpers."
LAGERVELD and SCOTT face a maximum sentence of 20 years imprisonment and a fine of $250,000 on each count of conviction.
The government's case against LAGERVELD is being prosecuted by Assistant United States Attorneys Bonnie S. Klapper and Richard D. Lunger. The government's case against SCOTT is being prosecuted by Assistant United States Attorney Mark J. Lesko.
Name: RICHARD LAGERVELD
Residence: Homeless Center at 299 17th Street, San Diego, California
Name: ALAN N. SCOTT
Residence: FCI Schuylkill, Minersville, Pennsylvania
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