October 1, 2014
Ah yes, another fraud, another fraud coming out of Florida, another fraud involving inflated promises about a start-up company, and, for extra oomph, the alleged fraudsters drop the name of none other than NBA legend Michael Jordan. What was marketed as a slam dunk of an investment turned out to be little more than a foul.
On September 29, 2018, the Securities and Exchange Commission ("SEC") charged Erick Laszlo Mathe (former Chief Executive Officer of Vision Broadcast Network and its largest shareholder), 42, North Miami Beach, FL, and Ashif Jiwa, 55, Miami Beach, FL, with violating Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Separately, Mathe was charged with aiding and abetting violations of Section 10(b) of the Exchange Act and Rule 10b-5(b). The SEC seeks financial penalties, disgorgement with prejudgment interest, penny stock bars, officer-and-director bars, and permanent injunctions. Securities and Exchange Commission v. Erick Laszlo Mathe and Ashif Jiwa (SDFL, 14-CIV-23573; Lit. Rel. #23094, September 29, 2014)
SIDE BAR: The Complaint characterizes Vision Broadcast Network as a company formed by Mathe in 2006 and previously known as Wal-Con Media. Vision was purportedly dissolved in September 2010 for failure to file its annual report with the Florida Department of State.
Bluemark Asset Management LLC was named as a relief defendant for the purposes of recovering investor funds. The Complaint alleges that Bluemark entered into a consulting agreement with Vision Broadcast Network in 2009 but, in fact, was operated by Defendant Jiwa as his alter ego. Allegedly, Bluemark received about $361,000 in fees from Vision for services that are deemed as bogus.
NOTE: The SEC's Complaint merely contains allegations and the defendants are presumed innocent unless and until proven guilty in a court of law by a preponderance of the evidence.
The Low Power Low Down
The SEC's Complaint alleges that from August 2007 to February 2010, Mathe and Jiwa solicited at least $5.7 million in start-up capital from some 100 investors based upon the pitch that Vision Broadcast was worth about $400 million because of the company's ownership of low-power television stations and its ownership of 70 broadcast licenses to operate additional low power television stations. The thing standing in the way of realizing that hidden value was the need to make the stations operational. As more fully set forth in the SEC's Complaint:
16. In connection with the sale of securities of Vision Broadcast, Mathe created and gave to investors at least three Vision Broadcast offering documents: (i) a Five-Year Business Plan; (ii) an Executive Summary which contained substantially the same information as the Five Year Business Plan; and (iii) a document called "Public Merger Investment Opportunity" offering convertible debentures. These materials described Vision Broadcast as an early-stage, operation "start-up" television network and production company, focused on the development, management and operation of internally owned and operated low-power community broadcast television ("LPTV") stations. These materials also represented among other things, that Vision Broadcast had formulated two programming content solutions titled Ask the Specialist ("ATS"), an educations medical video program, and Naked Music TV ("NMTV"), a provider of on demand music videos. Moreover, the materials claimed Vision Broadcast owned or controlled federal licenses to build and operate nearly 70 additional broadcast television stations across the United States, and the corresponding television markets represented a potential broadcast coverage of more than 10 million households. As discussed in greater detail below, these representations were false and misleading.
$25 Million Big Boy
As part of their pitch, the defendants purportedly claimed that some unnamed institutional investor was committed to the tune of $25 million. Oh my, another "unnamed" institutional investor. Why, gee, there are soooo many of these shy big boys out there. And, odd, isn't it, how many of the nameless and faceless in that crowd are so often committed, as in guaranteed, as in a sure shot, as in don't say a word of this to anyone.
Air Jordan Or Just Air?
NBA legend Michael Jordan was also spoken of by the defendants as a prospective investor. The thing about "prospective" investors, as I have learned from over three decades on Wall Street, is that, hey, you know, virtually everyone and anyone can be a "prospective" investor - it sort of depends upon how that word is defined and, of course, who is doing the defining. According to the Complaint, Jordan apparently had no such plans to invest in Vision Broadcast.
Out Of Bounds Passes
Investors wound up with $4.7 million in common stock and about $1.03 in convertible debentures; except the offering was unregistered (as the Complaint asserts was required under federal securities laws) and the investors' funds didn't quite make it into that whole going-operational thing. As alleged in the Complaint, a sizable amount of the investments wound up in companies controlled by Mathe or Jiwa - companies that purportedly were providing professional and consulting services. Depending upon whom you will eventually believe, those services either were or were not legitimately provided. Also, the Complaint alleges that additional funds were used to improperly pay the defendants' personal and travel expense.
The Complaint alleges that Defendant's realized $459,000 in undisclosed commissions on the raise for Vision Broadcast, and that's on top of over $1.3 million in purportedly not-provided professional and consulting services.
Additionally, a close relative of Jiwa was paid $425,000 in personal expenses by Vision; and the company also paid some $84,000 in Jiwa's travel expenses. A particularly nice and thoughtful touch was Vision Broadcast's alleged payment of over three thousand dollars on golf equipment for Mathe and Jiwa; $47,529 in luxury-car lease payments for them, and about $2,500 in costs for Mathe's boat.
Taking It To The Big House?
Going from bad to worse, an Indictment was brought in the Eastern District of Pennsylvania, charging Mathe and Jiwa with wire fraud and aiding and abetting same. If convicted, each defendant faces a maximum sentence of 20 years imprisonment, 3 years of supervised release, a $250,000 fine, and a $100 special assessment. U.S.A. v. Mathe and Jiwa (EDPA, September 25, 2014).
NOTE: An Indictment merely contains allegations and a defendant is presumed innocent unless and until proven guilty in a court of law beyond a reasonable doubt.