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Smart Online CEO and Two Others Found Guilty of
Manipulation of Company Stock
LEV L. DASSIN, the Acting United States Attorney for
the Southern District of New York, announced that DENNIS MICHAEL
NOURI, the former Chief Executive Officer ("CEO") and President
of Smart Online, REZA ERIC NOURI, a former Smart Online employee
and brother of the CEO, and stock broker ANTHONY MARTIN were
found guilty today, after a three-week jury trial before United
States District Judge DENNY CHIN.
According to the Superseding Indictment and the
evidence at trial:
From May 2005 through July 2007, DENNIS MICHAEL NOURI
and REZA ERIC NOURI engaged in a fraudulent scheme designed to
manipulate the price of the securities of Smart Online, which was
publicly traded on the OTC-Bulletin Board. As part of the
scheme, the NOURIS bribed brokers, including MARTIN, to sell
Smart Online stock to their customers so that the price of the
stock went up.
In recorded conversations that took place after the
Securities and Exchange Commission ("SEC") suspended trading of
Smart Online stock on the NASDAQ, DENNIS MICHAEL NOURI described
how to lie to investigators to cover up the scheme and how to
conceal the nature of the illegal kickbacks to brokers. In
another meeting, DENNIS MICHAEL NOURI took a cooperating broker's
cell phone to delete a phone number the broker had been using to
contact him, and gave the broker a number to call when speaking
with him in the future.
Each of the defendants was found guilty of one count of
conspiracy to commit securities fraud, wire fraud, and commercial
bribery, and one count of securities fraud. DENNIS MICHAEL NOURI
and REZA ERIC NOURI each were found guilty of three additional
counts of wire fraud and one count of commercial bribery. The
conspiracy and commercial bribery charges each carry a maximum
sentence of 5 years in prison and a maximum fine of the greater
of $250,000, or twice the gross gain or loss from the offenses.
The securities fraud and wire fraud charges each carry a maximum
sentence of 20 years in prison. The securities fraud charge
carries a maximum fine of the greater of $5 million, or twice the
gross gain or loss from the offense. Each of the wire fraud
charges carries a maximum fine of the greatest of $250,000, or
twice the gross gain or loss from the offense.
Following the jury's return of a guilty verdict against
all of the defendants on all nine charges in the Indictment,
Judge CHIN remanded into custody DENNIS MICHAEL NOURI, who had
been out on bail pending trial. REZA ERIC NOURI and MARTIN
remain out on bail. All three defendants are scheduled to be
sentenced on October 6, 2009.
Co-defendants and stock brokers, ALAIN LUSTIG and RUBEN
SERRANO, pleaded guilty on May 22, 2009, to conspiracy to commit
securities fraud, wire fraud, and commercial bribery in addition
to securities fraud.
Mr. DASSIN praised the investigative work of the
Federal Bureau of Investigation and thanked the SEC for its
investigation.
Assistant United States Attorneys REED MICHAEL BRODSKY
and JESSICA A. ROTH are in charge of the prosecution.
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