Money For Nothing And The Stocks Are Free (Sort of)

October 5, 2015

Pssst . . . c'mere, yeah, you. Just sit down, quietly, don't draw any attention to us. Okay, great, look, I'm working this deal. Gonna make us both a nice chunk of change. You know what I'm saying? What I got goin' here is simple: I buy shares for cash, use those purchased share to collateralize the loan that gets me the cash for those shares, and then we sell the shares and pay off the lender. Everyone makes money. You look like a sharp guy. Can I count you in?

Case In Point

On the morning of August 7, 2013, Steven Staltare, then 48 of Land O' Lakes, FL, was arrested pursuant to a criminal Complaint; thereafter, on September 10, 2013, an Indictment was filed against Staltare charging him with two counts of securities fraud and two counts of wire fraud. On December 2, 2014, Staltare pled guilty.

Let's take a short trip, back in time, to see how Staltare got himself into this legal bind.

A Matter of Restriction

Around 2007, an unfortunate individual (we'll call him Victim 1) had paid Staltare about $14,000 for 365,000 shares of NASDAQ listed Dematco Inc. By 2009, however, Victim 1 learned that those shares were restricted and could not be freely sold. In late 2011, Staltare comes to the rescue with a proposal to have a supposed partner of his buy Victim 1's shares for $70,000 - a tidy profit, or so it seemed.

15 Gets Ya 20 . . . and then some!

Apparently confident of obtaining Victim 1's shares for $70,000, Staltare then approached Victim 2 and asked to borrow about $150,000 for the purpose of buying Dematco shares. Staltare promised to pay Victim 2 $200,000 in three weeks with the kicker of 1/3 of the profits  -- and the whole loan would be collateralized with shares of Dematco.  The simple math is that Staltare borrowed $150,000 to buy shares that he has arranged to purchase of $70,000 - tough to lose on that transaction.


After making the loan, imagine Victim 2's surprise when he subsequently learned that the collateral he held were restricted shares and not freely tradeable. A little oversight in Staltare's pitch.

Quite the Consultant

The Indictment asserts that during the relevant times, Staltare had represented himself as a consultant with contacts at various companies and as President of "Worldwide Marketing Group," of Tampa, FL. In fact, Staltare took the victims' funds and largely used the money to pay his and his family's personal expenses such as mortgage payments, credit cards, car payments, and meals at restaurants.

Unfortunately, Staltare never paid the $70,000 purchase price to Victim 1 and never repaid the $150,000 loan or paid any portion of the promised 1/3 profits to Victim 2.  Victim 2 did get the Dematco shares as collateral; however, they were essentially stolen from Victim 1 because Staltare never tendered the promised purchase price.

New And Improved

Moving on to 2012 through 2013, Staltare runs another version of the earlier scam but expands the shares to include Dematco, Preventia, Inc., First Choice Healthcare Solutions, Inc.(all NASDAQ Stock Market listed companies), and Savtira Corporation (a privately held company). In this second version of the scam, Staltare persuaded Victim 3 to invest $25,000 in Preventia stock with promises of significant returns. We also have Victim 4, who was persuaded to invest $357,000 in Dematco, Preventia, First Choice, and Savtira, again with the same promises of big returns. Once again, Staltare basically took the money and ran.

From Con Artist to Con

On September 29, 2015, Staltare, now 50, was sentenced to 77 months in prison, ,three years of supervised release, ordered to forfeit $846,250, and ordered to pay restitution of $846,250 to victims of his offenses.

Bill Singer's Comment

Ummm . . . lemme explain a little sumthin' here. I've held it back for effect. Dramatic foreshadowing you might say.

If someone - anyone - had checked into Staltare's history, they would have found stories like this one:

"Convicted Four Times, Man Charged Again" (Bloomberg News, by David Glovin, August 11, 2004)

If someone - anyone - had done a little bit more checking into Staltare's history, they would have found this criminal case:
United States v. Herbert Cannon et al. (04-CR-842), a 14-count Indictment in which stock promoter Herbert S. Cannon, retired attorney Mori A. Schweitzer, and Staltare were charged with manipulating prices of four publicly traded stocks during 1997 through 2000.

In the Cannon criminal prosecution, Staltare pled guilty to 2 counts of securities fraud and was sentenced to 32 months in prison for securities fraud and three years of supervised release. Further, Staltare was ordered to pay $9,307,176.10 in restitution. United States of America v. Steven Staltare (Judgment, SDNY, October 4, 2007).

Seems that Staltare sort of left his criminal history and incarceration out of his deal pitches to Victims 1, 2, 3, and 4 -- and it also seems that folks didn't bother to check him out all that carefully. Oh, and then there's Staltare's bankruptcy filing on April 27, 2012!

Ah, yes, money for nothing!