March 31, 2014
If you had met Scot Zarkiewicz from 2009 through 2013, he likely told you that he was co-founder, president, chief executive officer, treasurer, and principal owner of SingleClick Systems Corp., a privately-held Delaware-incorporated software company based in New Jersey. In fact, if Zarkiewicz saw you as a potential investor in SingleClick, he would have offered more detail about his business, whose mission was to "simplify the configuration, management, access, and sharing of all the devices and content in the modern home and small office/home network."
Maybe I'm just a bit too old to fall for all the pseudo-techie crap but, c'mon, what does it really mean when someone starts spouting off about simplifying access and device/content sharing? I was there the first time the kids started spouting a lot of nonsense about Cyberspace, the Information Superhighway, and the Worldwide Web -- references that now seem aged and clunky. I remember those days when a skeptical but younger Bill Singer kept asking about profits and was told that it was about building traffic and clicks. Of course, there came that nasty dose of reality now known in the annals of Wall Street as the Tech Wreck.
Now, they tell me it's Web 2.0 and it's all very different.
Yeah, sure it is.
For example, we now have a cloud that's not really anywhere but everywhere and probably secure but maybe not totally and everyone is crowdfunding and if only I would wear a hoodie and a black t-shirt and never bother to make eye contact with a human being but stay glued to my smartphone or tablet.
I'll tell you what. I'm not apologizing for being older with gray hair and lots of scars on my back from having been through the wars of a lifetime on Wall Street. All the more power to the kids and their cutting-edge tech but I will persist in my efforts to separate the real deal from the hyperbole designed to separate me from my money.
As such, you've been warned. Buzzwords and facile guarantees go hand-in-hand with far too many high-tech, low-tech, and what-the-hell-is-that private placements, IPOs, and secondaries that are the current crop of darlings on Wall Street. The pumpers will tell you it's all very different. Those of us who have been there and done that will simply smile. Yeah, sure it is.
Hard Cash And Big Bucks
All of which brings us back to Mr. Zarkiewicz, who embarked upon a search for investors for SingleClick by asserting that his company had
- several large corporate clients;
- between 20 to 40 employees;
- millions of dollars of annual revenues;
- millions of dollars of cash in bank and brokerage accounts; and
- an early-stage investor looking to sell his shares.
In 2012 alone, you were told, SingleClick had generated $48 million in revenue. Then in April 2013 a major Japanese firm had signed a Letter of Intent to purchase the company for $270 million. Of course, if enough potential investors had bothered to undertake meaningful due diligence, they would have come up with some troubling discrepancies. But then due diligence is such a bore and a chore.
Zarkiewicz provided to some diligent potential investors alleged 2007, 2008, and/or 2009 tax returns. It all looked official and real. It all confirmed his pitch. Of course, not surprisingly, as to the tax preparers who supposedly signed off on the returns, well, ummm, those preparers had not prepared the returns.
One thing that I will give to Zarkiewicz, he sure as hell knew how to bob and weave as investor concerns began to rain down upon him. For some four years, round after round, as his nose got bloodied and his eyes punched close, he managed to make his way to the center of the ring and keep going toe to toe. As federal prosecutors asserted in a 2013 criminal Information:
8. From at least in or about late 2009 through in or about June 2013, investors regularly requested updated SingleClick financial statements from SCOT ZARKIEWICZ, the defendant. In response, ZARKIEWICZ provided excuses for why the financials were unavailable or not updated. On approximately five occasions during this period, however, ZARKIEWICZ provided updated financial statements in spreadsheet format without any of the underlying documents to support the figures represented in the spreadsheet. When several of the investors requested that ZARKIEWICZ provide audited financial statements, ZARKIEWICZ provided excuses for why audited statements were unavailable, but claimed that he would eventually secure them. ZARKIEWICZ never provided audited financials to the investors.
9. In or about early 2012, multiple investors expressed frustration with SCOT ZARKIEWICZ, the defendant, concerning the lack of audited financials and the lack of proof that SingleClick had millions of dollars in revenue and cash on hand in its accounts. In response to repeated investors pressure to provide proof of the business's profitability, in or about early February 2012, ZARKIEWICZ provide two video clips to investors through an electronic document sharing server. The purpose of the video clips was to demonstrate that Single Click had sufficient money on hand. Specifically, one video clip showed ZARKIEWICZ on his computer logging in to view activity in SingleClick's business checking account at TD Bank ("Video Clip-1"). Video Clip-1 showed that on or about January 31, 2013, SingleClick had approximately $9.2 million on hand in SingleClick's account at TD Bank. The second video clip showed ZARKIEWICZ on his computer logging in to view activity in SingleClick's business checking account at Chase ("Video Clip-2"). Video Clip-2 showed that on or about January 31, 2012, SingleClick had approximately $8.5 million on hand in SingleClick's account at Chase.
So . . . let's step back for a second here and recap what the feds alleged. Zarkiewicz offered excuses to his investors about unavailable financials. Y'all know that a credible, reputable firm is likely to have problems providing you with financials, right? I mean, geez, you know how difficult it is to get a copy of an audited financial? Why, you would have to figure out a way to make a copy of something that you had and then, even more technologically daunting, figure out how to transfer that copy from you to, say, an investor who was asking for that copy. Wow, such technology must be decades in the future.
I dunno about you but for me, Zarkiewicz's inability to get me a bona fide copy of SingleClick's financials would have been one hell of a troubling development.
Then we go to the video. I mean, really? Imagine that you're asking for proof about bank balances in the face of unavailable financials. Then imagine that you're asked to log on to something like YouTube, where you can watch the same guy who is feeding you excuses about the unavailable financials log on to his company's purported bank accounts and display on your video screen the visual proof of millions of dollars in balances.
Instead of certified, audited financials and independently verified account statements, you get a clip. A vid. Streaming content. Incredibly, some investors seem to have actually accepted such crap as proof.
Combining old-school lies with new-school video and computer graphics, Zarkiewicz managed to bring in new pigeons, kept his old sheep in the fold, and deterred some antsy investors from cashing out via redemption. Counted among his investors were both individual and investment funds. In the end, when the jig was up, 35 victims were fleeced out of roughly $6.3 million.
In truth, that $9.2 million TD Bank balance on the video was, in reality, only $3,845.92.
The $8.9 million Chase balance on the video was, in reality, only $66,478.42.
The 20 to 40 employees were less than 10.
Those millions in revenue? More like thousands.
Those ballooning cash reserves? In truth, barely over a half-million in on-hand cash.
The Japanese buy-out? Bogus and wholly fabricated.
By May 2013, an investor in Maryland sued SingleClick and Zarkiewicz and as part of the relief sought, demand was made for access to the company's financial records and payment of a dividend. Around this time, the artifice and false assurances just ran out of steam as other SingleClick investors learned from documents produced during Discovery in the lawsuit that the SingleClick till was nearly empty. Faced with these revelations, Zarkiewicz fessed up to his fraud. In August 2013, Zarkiewicz resigned as CEO of SingleClick.
The High (Tech) Life
Not surprisingly, Zarkiewicz converted about $1.5 million of the investors' funds to such inappropriate uses as paying his personal mortgage, restaurants, clothing, purchases or leases on a Lexus, Mercedes and Audi, maintaining a boat, and travel.
On October 9, 2013, Zarkiewicz was arrested. On November 26, 2013, Zarkiewicz, 41, Toms River, NJ, pled guilty in the Southern District of New York to to a two-count Information charging him with securities fraud and wire fraud. As part of his plea agreement, Zarkiewicz agreed to forfeit $5.5 million, as well as any remaining proceeds in SingleClick bank accounts, and to pay restitution. He faced a maximum term of 20 years in prison on each count. On March 28, 2014, Zarkiewicz was sentenced to 63 months in prison and three years of supervised release; ordered to forfeit $5.5 million, as well as any remaining proceeds in SingleClick bank accounts, and to pay over $6.3 million in restitution. In the Information, federal prosecutors provided the following additional details as to the nature of assets that they sought forfeited:
a. Any and all funds on deposit in the TD Bank account number 4282135560, held in the name of SingleClick Systems, and any property traceable to such property;
b. Any and all funds on deposit in First Virginia Community Bank account number 1222226, held in the name of SingleClick Systems Corp., and any property traceable to such property; and
c. One 2008 Ocean Billfish yacht named "Never Enough," Hull Number XYU00937A808, and any property traceable to such property.
Bill Singer's Comment
Bill Singer the Cynic Extraordinaire would have personally pooh-poohed all the lovely words from this con artist's mouth and have attempted to independently verified each claim. I would have asked for the names of the banks and securities firms where the corporate accounts were held, and obtained a release from SingleClick that would instruct those banks and securities firms to directly provide me with independent records of the activity and balances in said accounts. Tax returns and financials? Same response -- you want me to invest, I want direct, independent access to your CPAs and I also want to supporting documentation. You give me some runaround and I'm outta there. Go find some other sheep to fleece. And, puhlease, don't even start with showing me a video or handing to me some guaranteed proof of a tax return or Letter of Intent. It's not such a big deal these days to produce your own video or generate an impressive but wholly bogus document.
One final thought on Zarkiewicz and his caper. If you're going to try to make it into the upper echelon of con artist, don't tempt fate by naming your yacht "Never Enough." When one considers the career arc from CEO Zarkiewicz to Defendant Zarkiewicz to Inmate Zarkiewicz, such a plummet into the bowels of the penal system suggests the owner of the good ship "Never Enough" had, in fact, reached the point where enough is enough.
Compliments to United States Attorney for the Southern District of New York Preet Bharara and his team. Great job unearthing and prosecuting this mess!
READ the full-text criminal Information