TERI BUHL’s Blog Update. Republished here.
UPDATE March 6th 2015: AJ Discala’s trading partner at OmniView Capital has thrown in the towel. Marc E. Wexler who was charged on multiple counts of securities fraud plead guilty to two felony charges on October 15th and agreed to pay a forfeiture bond of $1.4 million. Wexler who lives in Colts Neck New Jersey plead to conspiracy to commit securities fraud and securities fraud in the stock CodeSmart ($ITEN). The DOJ’s original complaint said they believed Wexler had made $2.2 million in manipulative trading of CodeSmart. Sentencing appears to be held in Wexler’s case as it is possible he is turned government witness against his partner AJ Discala. Discala switched criminal lawyers a few months ago hiring New York-based Charles A. Ross. AJ and his fellow co-defendants are still slugging through motions for discovery and fighting the DOJ charges. Ex-SEC enforcement attorney Tom Sporkin who ran the microcap fraud unit is also helping Discala on the case. Sporkin is now a white-collar defense lawyer for Buckley Sandler in Washington D.C. The SEC parallel case was stayed in mid-November, which is typical when the DOJ leads on criminal charges. If convicted Discala faces years in prison. AJ told this reporter he will fight the case to trial.
Original Article Sep 18,2014
The CEO of a merchant bank that helped fund dozens of micro-cap companies claims he is a target of regulatory overreach after he was indicted in late July on ten counts of criminal misconduct for his alleged role in pump and dump stock schemes. Abraxas J. Discala (known as A.J.), CEO of Connecticut-based OmniView Capital Advisors, was arrested while on business in Las Vegas in July after the Justice Department revealed what appeared to the DOJ to be damaging wiretaps labeling him as a ringleader who tried to manipulate the price of penny stocks and mislead investors about financials in public companies. The DOJ used Discala’s status as the ex-husband of an actress to get their arrest splashed across international headlines in a move to show Obama’s task force on financial fraud is finally arresting Wall Streeters. But a look inside the deal documents show the Justice Department doesn’t know who the bad actors really are in this case. This reporter was given exclusive access to deal contracts, executive’s emails, and conducted interviews with some of the players involved in one of the alleged stock frauds called CodeSmart ($ITEN). The case shows a unique look at the backroom deals made to help small entrepreneurial companies raise capital through alternate public offerings and highlights the questionable tactics microcap advisors use to get discounted free trading stock.
In a stunning decision by Honorable Vitaliano, he granted Ms. Cane’s request to travel to Scotland to help her son unpack. Ms. Cane is allowed to renew her passport and the Court temporary increased her bond’s value to $2,000,000. (20150702 Order Modifying Conditions of Release Cane)
The government made many good arguments regarding Ms. Cane’s financial means, with exception of her off-shore assets. Ms. Cane’s own financial reporting reveals that she is worth $20 million including $6 million in outright property and $12 million in other property including her business.
The defendant stated that she owned the following properties, and provided the following estimated values: (1) her primary residence in Las Vegas, NV, with an estimated value of $3 million and a $750,000 mortgage; (2) a residential rental property in Hidden Hills, CA, with an estimated value of $1.5 million which generates $10,000 month in income; (3) a residential rental property on Quail Hollow Drive in Las Vegas, NV, with an estimated value of $800,000 which generates $3,700 month in income; and (4) a residential rental property on Viking Road in Las Vegas, NV, with an estimated value of $250,000 which generates $1,600 month in income. The Viking Road property is currently the only property securing her bond.
In July 2014, the defendant stated she held approximately $1 million in liquid assets, including stocks ($250,000), a bank account ($120,000) and a TD Ameritrade account ($600,000). The defendant also said she owned three vehicles, including a Tesla, a Mercedes, and a Lexus, worth approximately $150,000 in total.
In addition, through various corporate entities, including GSTB LLC, 200 Western LLC, Western LLC and DKM LLC, the defendant reported owning, with others, six residential rental properties plus a couple commercial properties with a total estimated value of approximately $5.5 million, which generates approximately $25,000 a month in income. The defendant did not provide the addresses of the properties owned through these corporate entities, and it is unknown what percentage of these investments belong to the defendant.
Finally, the defendant reported owning “business assets,” including office furniture and equipment, worth approximately $6.5 million.
The defendant reported earning approximately $25,000 per month income as a lawyer.
The defendant’s main reported liabilities, as of July 2014, included the $750,000 mortgage on her primary residence, and the monthly business expenses for operating her law firm.
Why hasn’t the government seized all this property? $20 million against Ms. Cane’s participation in a $300 million securities fraud scheme? Not even enough to cover the interest. (20150624 Government Response to Cane’s Request to Travel)
Ms. Cane’s attorneys calls the government out flatly that they have no facts to indicate that Ms. Cane is a flight risk. The government never raises Ms. Cane’s connection to Jan Wallace or Chloe Jardine-Cutler. The government never raises Ms. Cane’s and Mr. Cane’s previous off-shore stock schemes with LOM Securities. The government needs to indict Jan Wallace, Chloe Cutler, Mujit Johal, Amin Lakha, Claire Ambrosia, for conspiracy to commit securities fraud and let Johal and Ambrosia spill their beans to cut a deal. It is through this action the government could harvest enough facts to make a clear case that Ms. Cane is a flight risk. Instead, Ms. Cane is going to travel to Scotland, and whether it is this trip or the next, Ms. Cane is going to flee. It’s only a matter of time. (20150626 Cane’s Response to Government’s Reply 20150626 (corrected copy))
Cane’s reply to travel to Scotland is here: 20150601 Cane’s Reply Re Mtn to Travel (123110801776). The idea that Cane “poses no flight risk” is flatly laughable. She is 60 years-old and facing 20-30 years in prison. Moreover, she has spent the majority of her career working with Juanita Jardine “Jan Wallace” and Chloe Rita Jardine-Cutler to hide money at LOM Securities in nominee bank accounts. She has plenty of money to leave any U.S. assets behind without blinking an eye. Moreover, ask yourself this simple question: “would you give up $5 million for a chance to live 5 years if you were faced with 30 years?”
Cane’s attorney argues that because he has “personally represented” other clients who haven’t fled the country, then the Court should trust THIS client, Ms. Cane. “Indeed, I can represent to the Court that I have personally represented at least ten defendants in this District accused of committing “financial crimes” – often very serious ones – and none of those defendants have ever fled prosecution despite the very serious allegations lodged against them. Therefore, to the extent history is any guide, it favors the defendant here.”
This is stupidest argument I’ve ever heard for modification of bond; I wonder how much Cane paid for this. He further writes, “The government has cited no facts to suggest that Ms. Cane will act any differently than the thousands of other defendants accused of financial crimes in this district and others who have not fled prosecution.” This blog contains many facts which suggest that Ms. Cane will flee.
Ms. Cane’s attorney writes, “An opportunity to flee indeed exists. But the government offers no evidence that Ms. Cane is likely to flee this prosecution. Indeed, if she wanted to abscond, Ms. Cane does not need to travel to Scotland to do so. She could simply drive across the border into Mexico. Or she could fly her plane across the border. She has not done so, and that should give the Court confidence that she will not attempt to flee from Scotland if she is permitted to go there for a few days.” When Ms. Cane does abscond, it will be a sophisticated disappearance involving smoke and mirrors and deflection.
I have to admit that I threw up in my mouth reading the pleadings in Cane’s Motion to Modify Conditions of Release to Permit Travel to Edinburgh, SCOTLAND! (20150526 Mtn to Modify Conditions of Release to Permit Travel to Edinburgh, Scotland) (Exhibit A: 20150526 Exhibit A Cane Appearance Bond, Exhibit B: 20150526 Exhibit B Cane’s Passport Surrender Receipt, Exhibit C: 20150526 Exhibit C Recording Cover Page Confession of Judgment $1m Bond) In it, she argues that her son needs help moving his furniture into the dorm rooms. Since Cane has a plane and has been flying around the U.S. without incident and that since she posted $1m in property for her bond – she should be able to renew her passport and travel to Scotland to move furniture. Jesus.
The motion states that Cane has enrolled in microbiology courses for a new career “when the case is over”. Sixty-year-old Cane, who has ruined the financial livelihood of so many people can be so callous to think about her “next career”. Her next career should be serving her sentence of 20-30 years, is that even enough?
To be clear Cane partners with Jan Wallace (Juanita Jardine) and her daughter Chloe Jardine-Cutler to cache money in Bermuda and Cayman Islands at LOM Securities. (20120216 MP IRS Form 211 (all)) Chloe, of Chloe Group of Companies has even been staying with Cane. Cane has been planning on escaping the U.S. when she is caught for securities fraud and has lined the pockets of Wallace-Jardine’s offshore shell companies for when that day comes. That day is here.
How Cane is able to be released on pre-trial is beyond me: she has/flies a plane, she has tens of millions of dollars at her disposal, she has aided dozens of individuals commit wire fraud, money laundering, securities fraud, and tax evasion. There are many people invested in helping Cane disappear than gambling with her turning evidence and negotiating a plea in exchange for a 5K1.1 (http://www.ussc.gov/guidelines-manual/2011/2011-5k11). The government’s opposition states, “As described in the Indictment, Cane is charged with participating in a stock market manipulation scheme, and the evidence against her consists of, among other things, her own statements regarding coordinated purchasing of the manipulated stock captured over a court-authorized wiretap. If convicted, the government estimates that the applicable range of imprisonment under the current version of the United States Sentencing Guidelines for Cane would be 262 to 327 months, assuming Cane falls within Criminal History Category One.” (20150528 Opposition to Cane’s Mtn to Modify Conditions of Pre-Trial) Footnote, This sentencing range assumes a total offense level of 39, based on a base offense level of 7 (U.S.S.G. § 2B1.1(a)(1)), plus 28 levels for an intended loss of over $200,000,000, (U.S.S.G § 2B1.1(b)(1)(M)), plus 2 levels for the use of sophisticated means (U.S.S.G. § 2B1.1(b)(10)(C)), plus 2 levels for abuse of a special skill. The intended loss is based on the market capitalization of the manipulated stock at its peak of approximately $200 million.
262 to 327 months, 262 months is 21.83 years and 327 is 27.25 years. Cane’s birthday is October 22nd, 1954, she is 60 years old. Does anyone think that Cane will return to the U.S. facing 20-30 years? What is the consequence for Cane to try to run and at least live out 5 years or 10 years on the lam? She is going to die in prison, the time for her to run is now.
The government argues, “At the detention hearing held in this district on July 29, 2014, the transcript of which is attached as Exhibit A, Magistrate Judge Reyes previously determined there are conditions of release that will reasonably assure the appearance Cane as required: those conditions included surrendering her passport, signing a $1,000,000 personal recognizance bond, co-signed by two others, and posting real property as collateral. Over the government’s objection, Cane has been permitted to travel freely in the United States, provided she provides advance notice to Pretrial Services in Nevada, and she is permitted to fly her own plane within the United States. Ex. A at 8-9.” (20150528 Exhibit A Transcript of July 29th, 2014 Arraignment of Kyleen Cane) If anyone thinks that an attorney under indictment has business to conduct in the U.S. that requires flying around, I’m disappointed in you. Cane has certainly been planning movements of money, preparing where to flee to, and setting up who is to handle her affairs in the U.S..
What I found ridiculous and somewhat unbelievable is the following from the government’s opposition, “Also, when she was arraigned in New York, it appeared, based on her statements to Pretrial Services, that Cane had personal assets in excess of $5 million plus part ownership of business assets estimated to be worth more than $13 million. Ex. A at 7-8. The one piece of real property that she posted to secure the $1 million bond appears to be worth less than $400,000. ” If anyone believes that Cane does not have a significant stockpile of cash which she has secreted away with Wallace, they are clearly unprepared for a rude awakening. For Cane to have worked in dozens of publicly traded companies (penny stocks and otherwise), a decade long partnership with Wallace, and had a career amounting to $5million is simply not credible. The Davi Skin securities fraud alone was a $5m boon to LOM Securities nominee accounts. Cane architected a stockpile of funds, and the government has done nothing to prosecute money laundering co-conspirators Juanita Jardine and Chloe Jardine-Cutler and others that will help Cane when she is on the run.
Kyleen Cane released with pre-trial services conditions: $1,000,000, 20140729 Order Setting Conditions of Release and Bond 20140729 Magistrate’s Proceedings 5544 Hoback Glen Rd. Hidden Hills, CA 91302, (702) 595-8005