Prosecutors charged former Smart Online Inc. CEO Dennis Nouri, his brother Reza, and brokers Ruben Serrano and Alain Lustig on charges of conspiracy to commit fraud and securities fraud. The four men allegedly took part in a scam, in which they sold stocks to investors to drive up Smart Online shares.
US Attorney Michael Garcia is also accusing Dennis and Reza, also Smart Online employee, of bribing the brokers to sell the stock aggressively so that the stock’s price would go up. The brothers were also charged with commercial bribery and wire fraud.
The SEC complaint said that Dennis Nouri paid over $170,000 to the brokers, who sold over 267,000 shares to investors. The investors did not know about these payments. The complaint says that Dennis Nouri covered up the bribes by calling them “consulting fees.”
Prosecutors claim the defendants started their scheme in 2005 in an attempt to boost the company’s share price before it was listed on NASDAQ. Prosecutors say that in a recorded conversation, Nouri is overheard explaining how to lie to investigators so they won’t find out about the scam.
Smart Online announced CEO Nouri’s resignation in September. Lustig is a broker at Jesup & Lamont Securities Corp. Serrano worked for Maxim Group LLC.
The four men face from 5 to 20 years in prison for each count and fines.
If you are an investor who has scammed by a broker or any other member of the securities industry, you should speak with an experienced securities fraud attorney right away. Shepherd Smith and Edwards has helped thousands of investors recover their losses.
Related Web Resources:
Smart Online CEO, brokers indicted in fraud case, Reuters, November 8, 2007
SEC Charges Smart Online, Its President and CEO Dennis Michael Nouri, and Five Others in Connection With a Broker-Bribery Scheme, SEC.gov, September 12, 2007