FBI agents raided the offices of a New York-based brokerage and arrested several people suspected of running a boiler room operation, with links to the mob, that allegedly defrauded investors out of $12 million.
Thirteen people, including one allegedly involved in the Bonanno organized crime family, were charged in an indictment accusing them of operating an illegal “boiler room” in a $12 million fraud scheme.
Steven Kimmel, who claimed to be a former employee of the U.S. Securities and Exchange Commission, was among the defendants charged in a decades-long scheme, prosecutors in the office of U.S. Attorney Preet Bharara in Manhattan said today in an indictment.
From 2000 to this year, the 13 defendants operated a boiler room, located on West 36th Street in Midtown Manhattan, that was alternately called Powercom Energy Services Corp. and Empire Energy Services Corp., the U.S. charged in the indictment. The defendants include Anthony Guarino, who is a “soldier” in the Bonanno crime family, said James Margolin, a spokesman for the Federal Bureau of Investigation.
“My client has been involved in a legitimate company for a long time and there is no reason to think there is anything wrong with them.” Matthew Mari, a lawyer for Guarino, said in a telephone interview after court.
“The allegation that my client is a member of any crime family is absolutely laughable nonsense,” Mari said.
The defendants were charged with inducing customers to buy more than $12 million in stock in Realcast Corp., which described itself on its website as an online live broadcast provider.
Kimmel was the owner and chief executive officer of Miami- based Realcast, prosecutors said. Realcast used Powercom and Empire to solicit investors and sell shares, the U.S. said. The defendants siphoned off almost half of investor’s money to pay commissions to Powercom and Empire, prosecutors said.
The U.S. said many of those investors who were solicited were elderly people not living in New York who weren’t able to check on its operations. Despite false statements made during the past decade, the company has generated “minimal” revenue, most of it paid to Powercom and Empire as commissions, prosecutors said.
The U.S. said that as late as March 2010, Kimmel was paying Powercom and Empire 50 percent of a $700,000 investment for its efforts in “bringing money in,” the U.S. charged in the indictment.
“The defendants specifically targeted the elderly to maximize the chances of getting away with their alleged scam,” Bharara said in a statement. “Kimmel and his cronies will now face justice in a court of law for their alleged crimes.”
The defendants are charged with conspiracy, securities fraud and wire and mail fraud. Lawyers for the defendants couldn’t be immediately be reached for comment. A voicemail message left at Kimmel’s Realcast’s offices after business hours wasn’t immediately returned.
If convicted of securities fraud or conspiracy to commit wire fraud, the defendants face as long as 20 years in prison, the U.S. said.
Guarino was released on $1 million bond secured by $300,000 in cash, Mari said.
All eight men arrested today by FBI agents in New York appeared before U.S. District Judge Thomas Griesa in Manhattan and entered not guilty pleas and were released on bond. Two other men will surrender at a later date, Yusill Scribner, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, said.
Kimmel, who was arrested in Miami, and another defendant arrested in East Stroudsburg, Pennsylvania, will appear in federal courts in those states, Scribner said.
Judge Griesa set the next hearing in the case for Sept. 13.
