Pump and dump stock scheme entangles Rockland investors
A “pump and dump” securities fraud lawsuit filed five years ago against three Rockland County companies is inching ever so slowly toward a final settlement.
Investors sued Solucorp Industries Ltd., of West Nyack, and two sister companies in 2011 when they discovered that company officials had a history of securities fraud. The lead plaintiff, Michael Goldstein of Monsey, invested nearly $1.2 million.
Settlement talks began in earnest 15 months ago. By January a deal seemed to be in place. Then negotiations collapsed.
“There”™s a lot of bad blood with everybody involved in the case,” said a lawyer familiar with the negotiations who asked not to be named. “And that”™s been a big hurdle in trying to get a settlement.”
He said many of the players know one another from their involvement in the Jewish community around Monsey. “It”™s been a long road because a lot of egos are involved and the bad blood and no love lost with any of these parties.”
It all began with Solucorp, an environmental remediation and waste management company, which claimed to have developed a chemical separation technology that recovers metals from liquid wastes. It was led by Joseph S. Kemprowski of Upper Nyack.
In 1995, the Vancouver Stock Exchange ordered Solucorp to sever all ties with Kemprowski after learning he had pleaded guilty to defrauding customers, according to Goldstein”™s lawsuit in U.S. District Court in White Plains.
Kemprowski resigned but remained as a paid consultant, with the biggest paycheck and the biggest office and while maintaining direct involvement over virtually all significant facets of the business.
When the Vancouver Stock Exchange suspended trading, Solucorp switched to the U.S. over-the-counter market. In 1999, the U.S. Securities and Exchange Commission charged Solucorp with falsifying financial statements and issuing misleading press releases.
In 2003, Kemprowski, a “purported consultant,” and Peter R. Mantia, Solucorp president, were found in violation of antitrust regulations in a six-day trial in White Plains. They were ordered to never again serve as officers or directors of a publicly traded company.
A year and half later, in 2005, according to Goldstein”™s lawsuit, Kemprowski and Mantia were serving as de facto officers of Solucorp.
Kemprowski registered London Ventures Capital Corp. in the Bahamas and borrowed $400,000 to acquire a shell corporation, East Morgan Holdings Inc.
Kemprowski and Mantia were in “dire need of capital to pay back the loan for EMHI,” the lawsuit says, and sought private investors by using the same type of scams for which they had been sanctioned.
Solucorp had a bad reputation but supposedly had valuable patents. Their plan was to temporarily transfer the patents to EMHI and then artificially inflate the value of Solucorp and EMHI shares.
They would dump their own shares on unsuspecting, unsophisticated investors, according to a court filing. The investments would be paid to Kemprowski”™s London Ventures.
Kemprowski, Mantia and other defendants denied all allegations in their responses to the lawsuit.
The lawsuit describes greed and urgency as the primary lures.
Investors were told that EMHI had a contract that would generate $30 million a year. Big companies, like Eveready Batteries, were ready to sign contracts for services.
Goldman Sachs was about to purchase shares of EMHI and market them at a much higher price, investors were told. Investors would make a quick profit, buying EMHI shares at 30 cents and within a few weeks flipping them for $7.
The timing was crucial. Investors had to act before Goldman Sachs created a market for the shares.
In 2009, Raphael Knepler of Brooklyn invested $400,000 in EMHI. His son also bought shares. Two more Brooklyn men invested in Solucorp.
A year later, Goldstein invested in EMHI. The lawsuit identifies Israel Tyberg of Brooklyn as an agent for Solucorp and a stock promoter for EMHI.
Yet Tyberg claims he never met Goldstein or Kemprowski. He said in a letter to the court that he bought EMHI shares after receiving a “blessing for success” from a rabbi in Israel. Three months later, the rabbi put Goldstein in touch with Tyberg and Tyberg passed along Kemprowski”™s phone number.
Goldstein says he discussed the investment several times with Kemprowski and Mantia. They put him in touch with Richard Greene of Davie, Fla., the lawyer behind EMHI who would handle the transaction. In fact, the lawsuit says, Greene had been disbarred.
Goldstein and his company, Goldstein Group Holdings of New City, sunk nearly $1.2 million into EMHI shares.
The scheme began to unravel as investors lost patience waiting for the value of their investments to soar.
Goldstein confronted Kemprowski, who, he claims, picked up a sledgehammer and threatened him with physical harm if he pursued a fraud claim. Kemprowski put down the sledgehammer only when told that the conversation was being taped.
Goldstein filed the lawsuit in September 2011. A few months later, Greene was notified that he was a target of a federal securities fraud investigation. Eventually, he pleaded guilty. It was his second criminal offense for securities fraud; he was sentenced to a year in prison. Greene was released in March 2015.
In the meantime, Kemprowski died from cancer in 2014. His wife filed for bankruptcy, showing assets of $1.6 million ”” almost all of it a house in foreclosure ”” and $3.6 million in liabilities. She was living on Social Security and “assistance from friends.”
Solucorp closed. The Internal Revenue Service entered $7.3 million in judgments against the company. Solucorp settled with the investors, agreeing to pay $250,000.
A default judgment was entered against Kemprowski”™s London Ventures for failure to communicate with the court.
Tyberg agreed to pay back $25,000 by the end of August.
Mantia”™s attorney told the court in February that his client was essentially insolvent but was looking forward to defending himself at trial.
In January, after eight months of negotiating, EMHI reached an oral settlement agreement. Â But the company, now based in Fort Lauderdale, never put the deal in writing and its board of directors recently rejected it.
The EMHI attorney said he had no idea the board was going to reject the settlement and “it wasn”™t a set-up of any type.” He told U.S. District Court Judge Vincent L. Briccetti that he would probably file a motion to withdraw as counsel, in part because of the way the case had evolved.
“At this stage of the game? Really?” Briccetti responded during a May status conference. “I don”™t think so.”
The investors are asking the court to enforce the oral agreement. EMHI had acted deceitfully, their attorney argued, and made “a mockery of this court.”
Joel Landau of Spring Valley sees the securities scam in a different light. He sued Goldstein in Rockland County Supreme Court, claiming that he gave Goldstein the $1.2 million to buy EMHI shares on his behalf. He says Goldstein surreptitiously altered two EMHI sales agreements to cut Landau out of the transactions.
Goldstein responded that wire transfers show the purpose of the payments from Landau as commissions. He has filed notice that he will move to have the case dismissed for, among other things, Landau filing the case too late.
Meanwhile, the Goldstein case continues to inch along.
Mantia”™s trial date was set for October but then cancelled, pending resolution of the EMHI issues.
“I”™m just trying to figure out how to move this case along,” Briccetti said in January.
“I think it might be my oldest case, or it”™s close to it,” he said. “And you know, it”™s got to be resolved one way or the other.”
He has scheduled a conference for Sept. 29 to see where things stand.