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Famous Investment Scandals

Famous Investment Scandals - Scam artist Robert Sucarato admitted this morning that he ripped off investors to the tune $1.6 million, then used the money for department-store shopping sprees and to pay his EZPass bill.

The Bernard Madoff scandal made investors wary that they could get double-digit returns in a collapsing market, despite Sucarato‘s promises as owner and president of New York Financial Company (“NYFC”), a hedge fund firm that did its business online while he pretended to operate prestigious offices with large staffs.

Investors began asking questions, and soon federal regulators were on his tail.

Federal prosecutors said Sucarato, a former School Board candidate in Old Bridge, pulled what is known as a “Suite Scam,” holding up in a funky flatiron-styled building at the 22nd floor of 67 Wall Street, an historic revival tower, where he rented “virtual space” for $100 a month before shifting his base of operations to to an equally powerful address: 501 Fifth Avenue.

According to U.S. Securities and Exchange Commission (SEC), Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001, after receiving material, nonpublic information from Peter Bacanovic, who was Stewart's broker at Merrill Lynch. The day following her sale, the stock value fell 16%.

In the months that followed, Stewart drew heavy media scrutiny, including a Newsweek cover headlined "Martha's Mess". Notably, on June 25, 2002, CBS anchor Jane Clayson grilled Stewart on the air about ImClone during her regular segment on The Early Show. Stewart tensely continued chopping cabbage and famously quipped, "I just want to focus on my salad".

On October 3, 2002, Martha Stewart resigned her position, held for four months, on the board of directors of the New York Stock Exchange, following a deal prosecutors had made with Douglas Faneuil, an assistant to Bacanovic.

On June 4, 2003, Stewart was indicted by the government on nine counts, including charges of securities fraud and obstruction of justice. Stewart voluntarily stepped down as CEO and Chairwoman of MSLO, but stayed on as chief creative officer. She went on trial in January 2004. Prosecutors showed that Bacanovic had ordered his assistant to tell Stewart that the CEO of ImClone, Samuel D. Waksal, was selling all his shares in advance of an adverse Food and Drug Administration ruling. The FDA action was expected to cause ImClone shares to decline. After a highly publicized five-week jury trial that was the most closely watched of a wave of corporate fraud trials, Stewart was found guilty in March 2004 of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators, and was sentenced in July 2004 to serve a five month term in a federal correctional facility and a two year period of supervised release (to include five months of electronic monitoring).

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