Two Officers and a Registered Representative of a Retail Brokerage Firm Indicted for Securities Fraud
Defendants Allegedly Defrauded Customers in a "Pump and Dump" Fraud Scheme
Benton J. Campbell, United States Attorney for the Eastern District of New York, and Mark J. Mershon, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Division, announced the indictment and arrests today of PHILIP ANTHONY ORLANDO, ANTHONY JOHN ORLANDO, JR., and ANTHONY JOHN JOHNSON on charges of securities fraud and conspiracy to commit securities fraud. Specifically, the indictment alleges that the defendants defrauded customers of their retail securities brokerage firm, Park Capital Securities, LLC (“Park Capital”), a broker-dealer that was located in Manhattan until it ceased operations in 2004. The defendants were, respectively, the Chief Executive Officer, Chief Operating Officer, and a Registered Representative of Park Capital.
The defendants are scheduled to be arraigned later today before United States Magistrate Judge Joan M. Azrack at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn New York.
According to the indictment, between approximately March 2002 and March 2003, the defendants defrauded dozens of their retail brokerage customers by engaging in a “pump and dump” scheme involving the penny stock Cordia Corporation, which traded on the OTC Bulletin Board. The defendants and others allegedly disseminated false and fraudulent representations about Cordia to induce retail customers to buy and hold its shares. Among other things, the defendants failed to disclose Cordia’s poor financial condition, the speculative nature of the company, and the risks inherent in investing in penny stocks.
The indictment further alleges that to maximize profits to themselves, the defendants manipulated the share price of Cordia, whose stock was thinly traded, by (1) arranging several market purchases of Cordia shares, which rapidly increased the share price, (2) making a series of cross-trades, in which the defendants matched the purchases by their retail customers with “sell orders” by favored Park Capital account holders, and (3) purchasing Cordia shares for the accounts of retail customers without the knowledge or consent of the retail customers and then attempting to sell those shares to the customers after the fact – if a customer did not agree to purchase the Cordia shares already in the customer’s account, the defendants sold the shares at a loss to the customer. The indictment alleges that the defendants profited by receiving kickbacks from the favored account holders in the cross-trades and by charging inflated commissions to the retail customers.
According to the indictment, when the defendants were no longer able to support the price of Cordia shares through their fraudulent scheme, the share price plummeted and the retail customers of Park Capital sustained substantial financial losses.
“The defendants abused the trust of their customers to rig sure-win trades for themselves,” stated United States Attorney Campbell. “Fair capital markets depend on the protection of the small investor, and we will vigorously investigate and prosecute predatory securities brokers who erode investor confidence.” Mr. Campbell thanked the Financial Industry Regulatory Authority, Inc. for its assistance in the case.
If convicted, the defendants each face a maximum sentence of twenty-five years’ imprisonment.
The government’s case is being prosecuted by Assistant United States Attorney Ilene Jaroslaw.
PHILIP ANTHONY ORLANDO
ANTHONY JOHN ORLANDO, JR.
ANTHONY JOHN JOHNSON
The Department of Justice believes that it is important to keep victims/witnesses of federal crime informed of court proceedings and what services may be available to assist you.