News and Press Releases

Three Executives, a Corporate Lawyer, and Two Investors Indicted for Securities Fraud and Related Charges

FOR IMMEDIATE RELEASE
October 19, 2007

Two Publicly Traded Companies And Their Shareholders Victimized

An indictment was unsealed this morning in federal court in Brooklyn charging EDWARD NEWMAN, former CEO and Chairman of Xybernaut Corporation; STEVEN NEWMAN, former President and COO of Xybernaut; ANDREW BROWN, former President and COO of Ramp Corporation; MARTIN WEISBERG, a partner at a Manhattan law firm who served as a member of Xybernaut’s Board; and ZEV SALTSMAN and MENACHEM EITAN, investors residing in Israel, with securities fraud and money laundering. 1

The indictment alleges that EDWARD and STEVEN NEWMAN, BROWN, and WEISBERG caused Xybernaut and Ramp, two publicly traded companies, to issue hundreds of millions of heavily discounted shares through private investments in public equity, or “PIPE” transactions, to dozens of offshore nominee entities created and secretly controlled by SALTSMAN and EITAN. In order to lock in profits, SALTSMAN and EITAN sold the shares “short” in advance of the PIPE transactions and later “covered” the short positions with the discounted stock. 2 The scheme allegedly generated approximately $55 million in illegal profits.

Ramp and Xybernaut filed for bankruptcy protection in June 2005 and July 2005, respectively.

The indictment further alleges that SALTSMAN and EITAN kicked back a portion of the illegal profits to their co-defendants as compensation for their participation in the conspiracy, including (1) approximately $3.1 million to WEISBERG, who kept approximately $1.7 million for himself and transferred approximately $1.4 million to STEVEN NEWMAN, (2) a $1 million kickback to STEVEN NEWMAN made directly from a Swiss bank account controlled by SALTSMAN, and (3) $50,000 in cash delivered to BROWN in a paper bag. In addition, the indictment alleges that WEISBERG arranged for the transmission of $100,000 from the proceeds of one of Xybernaut’s PIPE transactions to EDWARD NEWMAN. None of these payments was disclosed to the SEC or the investing public, as was required by SEC regulations.

In order to conceal their ownership and control of Ramp and Xybernaut, the indictment alleges that SALTSMAN and EITAN routinely failed to file Schedule 13Ds, as is required of an investor who owns more than five percent of the outstanding shares of an issuer, despite the fact that through their nominee entities they acquired as much as 37% of Ramp’s and 18% of Xybernaut’s outstanding shares. In addition, in response to SEC queries about Ramp’s financing, WEISBERG falsely denied that certain PIPE transactions had occurred and misled Ramp’s auditors as to the true nature of those transactions, in part by creating backdated documents.

BROWN is scheduled to be arraigned today before United States Magistrate Judge Steven M. Gold at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. STEVEN NEWMAN was arrested earlier today in Virginia, and the government will seek his removal to the Eastern District of New York. SALTSMAN was arrested in London yesterday, and the United States has requested the assistance of authorities in the United Kingdom to extradite him to New York for prosecution. The United States also intends to seek the extradition of EITAN from Israel to the United States. Warrants have been issued for the arrests of WEISBERG and EDWARD NEWMAN.

The defendants face up to 20 years in prison on each count of conviction for money laundering and money laundering conspiracy, up to 20 years in prison for each count of securities fraud, up to five years for the securities fraud conspiracy count, and fines up to $500,000 on the money laundering and money laundering conspiracy charges, $5,000,000 on the securities fraud charges, and $250,000 on the securities fraud conspiracy charge.

The criminal case has been assigned to United States District Judge Nicholas G. Garaufis. The United States Securities and Exchange Commission today filed civil charges against the defendants in a separate proceeding.

The government’s criminal case is being prosecuted by Assistant United States Attorneys Suzanne McDermott and John Nathanson.

The Defendants:

STEVEN NEWMAN
Age: 61

EDWARD NEWMAN
Age: 64

ANDREW BROWN
Age: 38

MARTIN WEISBERG
Age: 57

ZEV SALTSMAN
Age: 45

MENACHEM EITAN
Age: 51


 

 

_____________________________

1 The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

2 In a short sale, the short-seller borrows a security and sells it at the prevailing market price, promising to return the borrowed shares to the lender at a later date. The short-seller hopes to profit by buying the shares after the price has fallen, earning the difference between the price at which he sold, and the lower price at which he repurchased the shares to cover the short position.


USAO 			Homepage
USAO Briefing Room
victims Witnesses Assistance

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.

Community Outreach

Giving Back to the Community through a variety of venues & initatives.

stopfraud.gov

Report Fraud

Stay Connected: Visit us on Twitter
What Makes Schools Safer? Using science to discover what works. Federal funding available. Visit NIJ.gov, keywords: 'comprehensive school safety intiative'