Monday, August 27, 2012
The Ohio Supreme Court has permanently disbarred an attorney convicted of criminal offenses described in the New York Times:
A lawyer who helped plot a $100 million securities fraud scheme that sold fundamentally worthless stocks to a series of investors, including Yale University, was convicted of grand larceny...
The lawyer, James W. Margulies, cheated investors while living a lavish life that included traveling on private jets and buying a $350,000 diamond ring for his wife, Manhattan prosecutors said.
Mr. Margulies, 47, will face up to 25 years in prison when he is sentenced next month in State Supreme Court in Manhattan.
“The defendant’s pump-and-dump scheme artificially inflated stock prices before he sold off the shares, leaving honest investors holding worthless stock,” Cyrus R. Vance Jr., the Manhattan district attorney, said in a statement after a jury convicted Mr. Margulies on 30 criminal counts. Mr. Vance noted that the victims included a teachers’ pension fund in Ohio and a Methodist church.
Manhattan prosecutors said the case was significant because securities fraud cases of that size are rare in state court.
Mr. Margulies plotted the fraud with John D. Mazzuto, a 1970 Yale graduate and university benefactor, who pleaded guilty in January. As part of his plea, Mr. Mazzuto agreed to cooperate with the district attorney’s office, which said it would recommend a sentence of one to three years in prison in exchange.
Mr. Mazzuto testified against Mr. Margulies at his trial, but the plea agreement could be in jeopardy because he was charged with drunken driving in January in Florida, which violated the terms of the agreement with prosecutors. Mr. Mazzuto’s sentencing is pending.
Mr. Mazzuto had close ties to the Yale baseball program, which named a practice field for him and his wife.
Prosecutors said that Mr. Margulies and Mr. Mazzuto issued 43 million shares of stock in a company in which they had executive roles, even though they were authorized to issue just 15 million shares. Most of the shares they issued were to close friends and relatives, who sold them off and invested some of the money back into the company, Industrial Enterprises of America. Those investments made the company seem as if it were in better financial health than it actually was, prosecutors said, and allowed them to artificially inflate the value of the stock.
Mr. Mazzuto donated some of the stock to Yale, which sold its shares for about $1.5 million before the value plummeted, prosecutors said.