Manhattan U.S. Attorney And FBI Acting Assistant Director-In-Charge Announce Arrests Of Two Sales Brokers In Broker-Dealer Mark-Up Scheme
A Third Co-conspirator Pleads Guilty in Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, and Mary Galligan, the Acting Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), today announced the arrests of MAREK LESZCZYNSKI and BENJAMIN CHOUCHANE, who previously worked as sales brokers in the same brokerage firm, on charges of securities fraud and conspiracy to commit securities fraud and wire fraud. LESZCZYNSKI, CHOUCHANE, and others are alleged to have defrauded clients out of millions of dollars by misrepresenting the prices at which securities were bought and sold. In so doing, their former employer earned illegitimate and illegal trading profits and they themselves were awarded lucrative bonuses. CHOUCHANE was arrested last night in Manhattan, and LESZCZYNSKI surrendered this morning. Both defendants will be presented in Manhattan federal court before United States Magistrate Judge Frank Maas this afternoon.
The guilty plea of HENRY CONDRON was also unsealed in Manhattan federal court today. CONDRON, who previously worked with LESZCZYNSKI and CHOUCHANE in the same brokerage firm, pled guilty earlier this week to securities fraud charges arising from the same scheme.
Manhattan U.S. Attorney Preet Bharara stated: “Broker dealers are entrusted by their clients to execute trades honestly on their behalf, and they are paid handsomely for doing so. As alleged, that was not good enough for Marek Leszczynski and Benjamin Chouchane, who blatantly lied to their clients in order to inflate their firm’s profits and their performance bonuses. We will not allow corruption, as alleged here, to infect our markets.”
FBI Acting Assistant Director-in-Charge Mary Galligan said: “As alleged, these defendants devised and carried out an audacious scheme that was not especially complex. They overstated to clients the price of securities they bought on their behalf, and understated the price of securities they sold for them. Their firm reaped the difference. Having been handsomely rewarded for these extra ‘trading profits,’ the defendants now stand to be punished for them.”
According to the Complaints unsealed today in Manhattan federal court, as well as the criminal Information to which CONDRON pled guilty, and statements made during his plea proceeding:
From 2005 through November 2010, LESZCZYNSKI, CHOUCHANE, and CONDRON worked at a broker-dealer that was headquartered in London, England, with offices in major cities in Europe, Asia, and the U.S. (“Broker-Dealer 1”). Among other services offered, Broker-Dealer 1 bought and sold securities on behalf of institutional clients, such as commercial banks and investment firms located throughout the United States and in various major European cities.
LESZCZYNSKI and CHOUCHANE worked as sales brokers for Broker-Dealer 1's Cash Equity Desk in New York, New York. In that capacity, they were responsible for receiving orders to buy or sell securities from Broker-Dealer 1's clients, relaying those orders to traders who executed the trades, communicating with clients as their orders were being filled, and sending trading confirmations to the clients that showed the prices at which securities were bought or sold – including any commissions – that Broker-Dealer 1 charged. CONDRON worked as an execution trader and a middle office manager. In that capacity, CONDRON was responsible for executing buy and sell orders at the instructions of sales brokers, such as LESZCZYNSKI and CHOUCHANE, and inputting trading data into Broker-Dealer 1's bookkeeping system.
From 2005 until December 2008, LESZCZYNSKI, CHOUCHANE, and CONDRON misrepresented the execution prices at which securities were bought and sold. For example, when Broker-Dealer 1 received a buy order from a client, the defendants and their co-conspirators caused the purchase price of the security that would be reported back to the client to be “marked up” from its actual purchase price. Conversely, when Broker-Dealer 1 received a sell order from a client, the defendants and their co-conspirators caused the sale price of the security that would be reported back to the client to be “marked down” from its actual sale price. The difference between the actual execution prices and the false prices reported to clients was hidden from Broker-Dealer 1's clients, enabling Broker-Dealer 1 to earn millions in trading profits to which it was not entitled. As a result of the fraudulent scheme, LESZCZYNSKI, CHOUCHANE, and CONDRON were paid inflated bonuses.
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LESZCZYNSKI, 43, of Miami, Florida, and CHOUCHANE, 38, of New York, New York, are both charged with one count of securities fraud and one count of conspiracy to commit securities fraud and wire fraud. Both defendants face a maximum penalty of 20 years in prison on the securities fraud charge and a maximum penalty of five years in prison on the conspiracy charge. LESZCZYNSKI and CHOUCHANE also face a maximum fine of $5 million or twice the gross gain or loss derived from the crime for the securities fraud charge, and a maximum fine of $250,000 or twice the gross gain or loss derived the crime for the conspiracy charge.
CONDRON, 33, of New York, New York, pled guilty to one count of securities fraud and two counts of conspiracy to commit securities fraud. CONDRON faces a maximum penalty of 20 years in prison on the securities fraud charge and a maximum penalty of five years in prison on each of the two conspiracy charges. He also faces a maximum fine of $5 million or twice the gross gain or loss derived from the crime for the securities fraud charge, and a maximum fine of $250,000 or twice the gross gain or loss derived the crime for the conspiracy charge. In addition, CONDRON agreed to forfeit all proceeds traceable to the commission of the offenses.
Mr. Bharara praised the investigative work of the FBI. He also thanked the SEC for its assistance.
The case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Christopher LaVigne and Chi T. Steve Kwok are in charge of the prosecution.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive
branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The charges contained in the Complaints are merely accusations, and the defendants are presumed innocent unless and until proven guilty.