British investors duped by bogus share deal

BRITISH investors were duped into buying millions of pounds of shares in bogus defence companies set up by three Americans, who spent the money to furnish their lavish lifestyles, United States authorities claimed yesterday.

Investigators have so far identified 170 investors, many of them British, who purchased an average of more than $300,000 (164,000) each in shares from companies they believed were producing key components in weapons systems.

The alleged fraudsters are accused of exploiting the investors’ patriotism by assuring them they were not only making a large profit but that they were helping to fund the US-British war effort in Iraq and the global war on terrorism.

New Jersey is now trying to recover as much money as possible and has been given permission to appoint a receiver to take possession of the defendants’ assets, including a $2 million (1.09 million) yacht named "Private Equity" in Miami, several bank accounts, two Mercedes and a valuable painting.

The defendants have been accused of selling fraudulent and unregistered securities. The lawsuit by New Jersey’s Bureau of Securities was filed in Newark’s superior court on 26 February, but not announced until yesterday because of a continuing investigation in Britain by the Metropolitan Police.

The Metropolitan Police said yesterday it had arrested a 34-year-old man in London in connection with enquiries into the alleged scam. He has been bailed to return on a future date.

"Police believe that the investors have been targeted using consumer mailing lists and ‘cold called’ at their homes or businesses," the police said in a statement. "The investors would then be invited to meet with a senior representative from the bogus company.

"These defendants preyed on British investors by appealing to their patriotism and fears regarding terrorism," said Peter Harvey, New Jersey’s attorney general.

The complaint seeks restitution for investors, forfeiture of illegal profits and unspecified financial penalties.

The defendants include Hebert Mario Figueroa, of Old Tappan, New Jersey, and Carmine Russo and Thomas Russo, both of Hackensack, New Jersey.

Companies named in the suit include Clover Management Group, which Figueroa founded, along with Clover Merchant Group and other related companies, all based in Fort Lee, New Jersey.

Figueroa’s lawyer, Robert Wolf, declined to comment on the case yesterday. It could not be determined if the Russos have yet hired a lawyer.

Prosecutors said the defendants, who are not registered to sell securities in New Jersey, solicited funds from British investors through magazine adverts and telephone pitches, touting Clover Capital Management as a private equity firm specialising in financing private companies, as well as mergers and acquisitions.

They claimed to be selling shares in defence and aerospace contractors or in investment companies that invested in those industries, authorities said. The defendants promised large, guaranteed returns to the investors, claiming the defence contractors would take advantage of the war in Iraq and the worldwide war on terrorism, prosecutors said.

But most investors have not made anything, and have not been able to recover their principal, according to the lawsuit.

Meanwhile, the defendants used millions of dollars of the proceeds to furnish lavish lifestyles, the lawsuit said.

After failing to produce profits, the defendants told investors the companies were either failing or had already filed for bankruptcy. They then encouraged the investors to roll over their shares into Clover Defence Partners.