TRENTON
– Attorney General Peter C. Harvey
announced today that the New Jersey Bureau
of Securities is seizing the assets of
three men and a group of companies, including
Clover Management Group Inc. of Fort Lee,
that the trio allegedly created and controlled
in an elaborate scheme to swindle investors,
primarily in the United Kingdom.
The
defendants – led by Hebert Mario
Figueroa of Old Tappan, the founder of
Clover Management Group, and Carmine Russo
and Thomas Russo, both of Hackensack –
allegedly claimed to offer investments
in the defense industry that not only
would provide strong returns, but would
support the British and U.S. war effort
in Iraq and the worldwide war on terrorism.
The defendants allegedly sold more than
$55 million in fraudulent and unregistered
securities. Attorney General Harvey and
Bureau of Securities Chief Franklin L.
Widmann filed suit against the defendants
on Feb. 26 in Superior Court in Newark.
The
day the complaint was filed, Superior
Court Judge Harriet F. Klein granted the
State’s request for an order freezing
the defendants’ assets. On March
23, Judge Klein granted the State’s
request to appoint a receiver to take
possession of those assets. The State
has already seized a
$2 million yacht (photo), several
bank accounts, two Mercedes-Benz cars
and a painting by renowned artist Eduardo
Arranz-Bravo.
The seizures followed cooperative investigations
by the New Jersey Bureau of Securities;
Federal Bureau of Investigation; U.S.
Attorney’s Office, District of N.J.;
U.S. Securities and Exchange Commission;
U.S. Department of Defense; U.S. Postal
Inspection Service; and London Metropolitan
Police, commonly known as New Scotland
Yard, which conducted an extensive undercover
investigation in the U.K. New Jersey did
not publicly announce its actions until
today, when New Scotland Yard announced
its investigation in London.
“These
defendants preyed on British investors
by appealing to their patriotism and their
fears regarding terrorism,” Attorney
General Harvey said. “The court’s
appointment of a receiver is the first
step in our fight to recover the funds
of the many investors who were deceived.
The fact that we were able to act swiftly
to seize the defendants’ assets
is a tribute to the cooperative international
efforts of our Bureau of Securities, the
FBI, New Scotland Yard and our other U.S.
partners.”
The
corporate defendants named in the State’s
complaint are Clover Management Group
Inc., Clover Merchant Group LTD, Clover
Defense Partners LP, Clover JCM Defense
Partners LLC, Clover Capital Management
LLC, CMG Advisors LLC and Clover International
Advisors, all of Fort Lee (collectively,
“Clover”).
The
complaint charges the defendants with
fraud and with numerous violations of
the New Jersey Uniform Securities Law.
The complaint seeks permanent injunctive
relief, restitution for investors, disgorgement
of illegal profits and civil monetary
penalties.
Investigators
thus far have identified at least 170
investors with investments of more than
$55 million in the defendants’ securities.
The investigation is ongoing and there
may have been more investors.
“Through
this international investigation, we send
a strong message to con men: No matter
how elaborate and far-flung your scheme,
we’ll unravel it and make you pay,”
said Securities Chief Widmann. “Working
closely with our federal counterparts
and our colleagues in the United Kingdom,
we successfully handled a fairly massive
operation in short order.”
Chief
of Enforcement Richard Barry, Supervising
Investigators Michael McElgunn and James
Lane, and Investigator Dean Kuehnen conducted
the investigation for the Bureau of Securities.
Deputy Attorneys General Anna Lascurain,
David Puteska and Isabella Trifilio are
handling the case for the Attorney General.
Lt. Harold Vliet of the State Police Marine
Services Bureau assisted in the seizure
of the yacht in Miami, Fla.
The
complaint charges that the defendants,
who are not registered to sell securities
in New Jersey, solicited funds from British
investors through magazine advertisements
and telephone pitches. They touted Clover
Capital Management as a private equity
firm specializing in financing private
companies and in mergers and acquisitions.
The defendants allegedly claimed to be
selling shares in defense and aerospace
contractors, or in investment companies
that invested in those industries, according
to the complaint.
The
defendants allegedly promised large guaranteed
returns to the investors, claiming the
defense industry investments would take
advantage of the war in Iraq and the worldwide
war on terrorism. Most investors, in fact,
have not received any return on their
investments and have not been able to
recover their principal, the complaint
alleges. The defendants made numerous
misrepresentations to the investors about
the nature of the investments and, in
many instances, sold stock in shell corporations
created for the purpose of defrauding
investors, the complaint alleges. Millions
of dollars were allegedly diverted to
fund the lavish lifestyles of Figueroa
and other participants in the scheme.
After
failing to provide investors with returns
on purported investments in named defense
contractors, the defendants allegedly
advised investors that those companies
were failing and/or had filed for bankruptcy.
They encouraged the investors to roll
their investments over into Clover Defense
Partners, which they said was formed for
the purpose of making strategic investments
in the aerospace and defense industry
sectors.
The defendants represented that Clover
Defense Partners was completing a round
of financing which would be followed by
“the acquisition of up to six income-producing,
profitable companies engaged in the manufacturing
of critical components to weapons armaments,
fighter jets and helicopters utilized
by the armed forces of the Western powers.”
However,
Figueroa sent a letter to investors on
Feb. 20 on behalf of Clover Merchant Group
that indicated that Clover Management
Group would terminate the partnership’s
offering of interests in Clover Defense
Partners and that Clover had closed its
Fort Lee offices. The letter proposed
a new business plan being formulated by
Figueroa and unnamed business partners
that will “seek to locate, contract
with, finance and acquire a number of
individual profitable Target Companies.”
The letter listed a mail drop as the address
for Clover Merchant Group: One Closter
Commons, #210, Closter, N.J.
The
Attorney General moved immediately to
obtain the court-ordered asset freeze
and restrain the flow of assets from any
of the companies and individuals named
in the complaint because of the threat
of imminent financial harm to the investors.
