September 27, 2013
This one gets a bit complicated, so let's sort of back into it slowly.
For starters, you got James T Miceli and Douglas McClain, Jr., the operators of several entities under the name of "Argyll."
Then you got Jeffrey Spanier who operated the Amerifund Capital Finance LLC, loan brokerage business often represented as the "retail arm" of Argyll.
Apparently, Messrs. Miceli, McClain, and Spanier represented that Argyll was an institutional lender with significant cash to lend to corporate executives and other individuals.
Okay, so we can all agree that at any given time there are lots of companies and folks out there in desperate need of loans - sometimes to keep a business afloat, sometimes in order to expand. In recent years you sort of needed a crowbar to pry a loan from the banks or other so-called reputable lenders, and if you were a small fry, even that crowbar wasn't going to pry funds away from those with cash to lend.
The No-Sale Promise
If you listened Miceli, McClain, and Spanier beginning sometime around 2004 and all the way through 2011, they told you that they could arrange for a loan to you provided you were willing to pledge publicly traded as collateral. The nice twist here - or so you were assured - was that your stock would never, ever, no way, fuggedaboutit be sold unless you defaulted on repayment. Now that's a fairly clear-cut guarantee . . . or so it seemed.
Except --- ah, now there's the word that make all the difference with these scams - except, once Argyll got your stock, your shares were sold, notwithstanding all the promises that such a liquidation would only occur subject to your default. To add insult to injury, not only were you unaware that your shares were no longer yours, but you were likely further induced into making quarterly interest payments on the loans. Oh, and another bit of non-disclosure, Spanier was getting back-end incentive fees from Argyll for bringing in the pigeons.
On March 15, 2012, Miceli, McClain, and Spanier were charged in a federal Indictment in the Southern District of California with:
in connection with their participation in a $51 million stock loan fraud scheme that targeted victims in the United States, Canada, Mexico, Panama, China, England, and Belgium. The Indictment sought the forfeiture of $51 million, including cash and securities held in brokerage accounts, a Ferrari, an Advantage Party Cat vessel, a Cessna Citation corporate jet, and diamond jewelry.
- 1 count of conspiracy,
- 7 counts of mail fraud,
- 15 counts of wire fraud,
- 1 count of securities fraud, and
- 11 counts of money laundering
NOTE: The charges in an indictment are merely allegations and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Filling in some of the blanks, the Indictment alleges the Miceli was the Chief Executive Officer of Argyll Equities LLC, SW Argyll Investments LLC, The Argyll Group LLC and McClain the organization's President. Additionally, the Indictment sets forth further organizations formed and managed by the three defendants, and explains various relationship among them.
If convicted, the defendants faced the following for each count:
- Conspiracy: up to 5 years imprisonment and $250,000 fine; and
- Mail Fraud / Wire Fraud / Securities Fraud / Money Laundering: each up to 20 years' imprisonment and $250,000 fine
On May 31, 2013, a federal jury returned guilty verdicts on all counts in the indictment against McClain. A September 23, 2013, Press Release: President of Argyll Equities Sentenced to 15 Years in Prison in Connection with $80 Million International Securities Fraud Scheme. informs us that McClain, Jr., 38, President of Argyll Equities, Inc., was sentenced to 15 years in federal prison and ordered to pay $81,731,879.98 in restitution. McClain was also ordered to forfeit several million dollars in assets that were the proceeds of the fraud, including cash and securities held in brokerage accounts, a luxury home in Florida, a houseboat, and diamond jewelry.
Unfortunately, the September 23rd press release raises some questions. The release states that McClain was indicted on 27 counts on April 13, 2012, but the March 15, 2012, press release asserted that the Indictment against McClain had been unsealed on March 15th. Moreover, beyond some confusion about dates, there is no explanation as to what, if anything, happened with the cases against Miceli and Spanier, and I will assume that their presumption of innocence is still active and that they have neither settled or been convicted.
In explaining the strength of the case against McClain, the US Attorney commented that:
The evidence presented at trial showed that McClain's entities had no cash to lend and instead survived for years by immediately selling borrowers stock on the day after the stock was pledged as collateral. The proceeds from the sale of the stock were used to fund the loans creating the appearance that the Argyll entities had plenty of cash to lend.
The evidence also showed that McClain, and others, fraudulently induced the borrowers to make monthly interest payments on their loans by falsely representing that their collateral was safe and would be returned as long as they did not default. At the end of the loan terms, the borrowers paid off their loans. Instead of returning the stock to the borrowers, McClain kept the money and provided false excuses about why he could not return their stock.
The evidence further showed that McClain's unauthorized sales of stock held by insiders of publicly traded companies caused the stock price to plummet which defrauded purchasers of these publicly traded securities who purchased stock through public stock exchanges.