U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20526 / April 15, 2008
SEC v. Robert Durant, et al., Civil Action No. 08-1539 (EDNY) (JG)
SEC Charges 6 Defendants In $1.2 Million Dollar Stock Loan Scam
On April 15, 2008, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Eastern District of New York charging 6 defendants with engaging in a scheme to defraud a large bank and broker-dealer through the payment of sham "finder" fees in connection with a series of "stock loan" transactions. The defendants include a former stock loan trader employed at JP Morgan Chase Bank ("Chase"), three so-called "finders" with whom he schemed and the two entities through which they perpetrated the fraud. In its complaint, the Commission alleges that the defendants conspired to misappropriate Chase's lending profits on a series of April 2003 stock loans made by Chase to Dresdner Kleinwort Wasserstein Securities LLC ("DKW"), and in doing so pocketed $1.2 million from their unlawful scheme.
The defendants named in the Commission's complaint are:
Robert Durant, age 42, resides in Milford, Connecticut. From 1994 through July 2003, Durant was a stock loan trader at Chase. After leaving Chase, Durant worked briefly for a registered broker-dealer but is no longer employed in the securities industry.
Robert Johnson, age 44, resides in Somers, New York. From March 1999 through October 2004, Johnson purported to perform stock loan finding services through Tyde, Inc. ("Tyde"), which he formed in 1999. Johnson currently holds series 7 and series 63 securities licenses.
Lori Caporicci, age 39, resides in Staten Island, New York. From 2001 through at least July 2003, she purported to perform stock loan finding services through Tyde as an independent contractor. From 1989 through 1999, Caporicci worked as a stock loan trader for several broker-dealers.
James Bennett, age 65, resides in New Port Richey, Florida. From 1993 through April 2004, he purported to perform stock loan finding services through Bearcat Financial Services, Inc. ("Bearcat"), which he formed in 1993.
Tyde, Inc. is a New York corporation with a business address in New York, New York. Tyde is owned and controlled by Johnson.
Bearcat Financial Services, Inc. is a Florida corporation with a business address in New Port Richey, Florida. Bearcat is owned and controlled by Bennett.
The Commission's complaint specifically alleges as follows: Durant, a stock loan trader then employed by Chase, schemed with so-called stock loan finders Johnson, Caporicci, and Bennett to misappropriate the bulk of Chase's profits on a series of stock loan transactions involving Italian securities. As a result of the defendants' scheme, DKW paid Bearcat, a stock loan finder firm owned by Bennett, sham finder fees out of the interest payments that DKW owed to Chase. From May 2003 through June 2003, the defendants caused DKW to pay Bearcat a total of approximately $1.2 million in sham finder fees in connection with the loans. Using off-shore and other nominee accounts, defendants Durant, Bennett, Johnson and Caporicci later split the sham finder fees among themselves. Neither Bearcat nor Tyde, the firm through which Johnson and Caporicci conducted their stock loan finder business and perpetrated the fraud, performed any finding services at all on these loan transactions. Under the terms of the loan transactions as originally recorded, all of the money paid to the defendants was to go to Chase, but Durant, pursuant to the scheme, later altered Chase's stock loan records and caused DKW's records to be altered so as to drastically reduce the amount of interest payable to Chase — from an average of 7.15% down to 0.25% on each of the seven loans — and divert the balance to Bearcat.
All 6 defendants are charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and, in the alternative, with aiding and abetting certain of each other's violations of the above provisions of the federal securities laws. The Commission's complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties. The Commission's investigation is ongoing.
For additional information see: