03-17-05 -- Figueroa, Hebert Mario et al. -- Guilty Pleas -- News Release

Three Plead Guilty to Operating Boiler Room and $20 Million Ponzi Scheme

NEWARK - An Old Tappan businessman pleaded guilty today to conspiring with at least 10 others in a boiler room and $20 million Ponzi scheme involving Clover Merchant Group, LTD. (CMG), which purported to be a New Jersey merchant bank, U.S. Attorney Christopher J. Christie announced.

Hebert Mario Figueroa, 31, is charged in a two-count felony Information with conspiracy and securities fraud, in connection with the purchase and sale of securities of Clover JCM Defense Partners, LLC. (JCM Defense Partners), from January 2003 to July 2003. JCM Defense Partners was a limited partnership created by Figueroa and CMG that purported to invest in the aerospace industry. In fact JCM Defense Partners was used to lure mostly overseas investors whose money was used to support the defendants' lavish lifestyles and in the Ponzi scheme to pay investors in earlier bogus offerings.

As part of his plea agreement, Figueroa must forfeit a $2 million estate in Old Tappan, a 62-foot yacht named "Private Equity," as well as artwork, a watch collection and other valuables worth more than $8 million. Other defendants also will be required to forfeit large sums of cash.

The Information to which Figueroa pleaded guilty also identifies, by initials only, seven New Jersey men - TR, CR, and GS, all of Hackensack; ED, of North Bergen, who acted as general counsel to CMG; JC, of Holmdel; EK, of Marlboro Township; and GG, of Jersey City - all of whom allegedly conspired in the boiler room and Ponzi scheme. Three other co-conspirators are identified as TDR of West Harrison, N.Y.; RM of the United Kingdom; and MP of New York, N.Y.

Figueroa admitted today before Senior U.S. District Judge John C. Lifland that from January 2003 to at least July 2003 he and his co-conspirators hired and retained as many as 30 salesmen, also referred to as cold callers, to identify and solicit mostly foreign investors for investment in private companies promoted by CMG, including JCM Engineering Corp., a privately controlled manufacturer of computerized precision machine components and assemblies for the defense and aerospace industries, based in Ontario, California. Figueroa and his co-conspirators trained and supervised cold callers, which included providing them with so-called "sales scripts," that contained false and misleading information.

According to the Information, Figueroa and his co-conspirators fraudulently told investors, among other things, that JCM Engineering Corp. manufactured 70 percent of all tactical Tomahawk cruise missiles manufactured in the defense industry. In truth, as Figueora admitted at the plea hearing, JCM actually manufactured approximately only 2 percent of the component parts - the outer skin - of the cruise missiles.

As part of the fraudulent scheme, Figueroa admitted that Clover planned to raise $40 million (and actually did raise $20 million) from the JCM Defense Partners offering. Figueroa admitted that Clover planned to use $10 million - in the Ponzi aspect of the scheme - to pay off complaining investors of two other fraudulent Clover offerings involving AeroPrecision Corp., and Invatech Corporation.

Although Clover did acquire an interest in JCM Engineering Corp., Figueroa and his co-conspirators concealed the payments to AeroPrecision and Invatech investors from investors in the JCM Defense Partners, according to the Information. Figueroa and his co-conspirators agreed to label these payments to the Invatech and AeroPrecision investors as "profits," derived from non-existent Invatech and AeroPrecision deals. Figueroa and his co-conspirators agreed to take out specifically targeted CMG investors for two reasons, among others: 1) to appease complaining investors of Invatech and AeroPrecision by providing them with a "profit" on their investments; and 2) to induce these same investors to invest even greater amounts in JCM Defense Partners, according to the Information.

According to the Information, of the $20 million raised from the JCM Defense Partners offering, Figueroa and his co-conspirators used approximately $4.5 million to purchase a 43-percent interest in JCM; used approximately $4 million to pay the CMG investors of Invatech and AeroPrecision; and spent the remaining money to finance the CMG boiler room operations and on themselves, through, among other things, extraordinary commissions and lavish business trips that, at times, included the use of private jets. Figueroa used his share of the illicit proceeds to furnish a lavish lifestyle, including vacations, cars, jewelry, and a yacht.

Also pleading guilty today before Senior U.S. District Judge John C. Lifland to criminal conspiracy to commit securities fraud were the following individuals:

• Thomas D. Roskin, of West Harrison, N.Y., who acted as a co-founder of CMG.

• Thomas Russo, of Hackensack, who acted as a vice president and co-founder of CMG.

The investigation surrounding CMG and others associated with it continues.

On the one count of securities fraud, Figueroa faces a maximum penalty of 20 years in prison and a $250,000 fine or twice the gross proceeds of the fraud or twice the loss to any victims, approximately $40 million.

On the one count of conspiracy to commit securities fraud, Roskin and Russo each face a maximum penalty of five years in prison and a $250,000 fine or twice the gross proceeds of the fraud or twice the loss to any victims.

Judge Lifland scheduled sentencing for June 23.

In determining an actual sentence, Judge Lifland will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the offense, the defendant's criminal history, if any, and other factors. The judge, however, is not bound by those guidelines in determining a sentence.

Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all that time.

Christie credited Special Agents of the FBI, under the direction of Special Agent in Charge Joseph Billy, Jr., in Newark; Special Agents of the Defense Criminal Investigative Service, under the direction of Resident Agent in Charge James Murawski; Postal Inspectors with the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Martin D. Phanco; and the Attorney General of the State of New Jersey, Peter C. Harvey, and the New Jersey Bureau of Securities, under the direction of Chief Franklin L. Widmann; The Metropolitan Police Department/New Scotland Yard; and the United States Securities and Exchange Commission.

-end-

Defense Counsel:

Robert Wolf, Esq., New York (Figueroa)

Christopher Brennan, Esq., New York (Roskin)

Bruce Cassidy, Esq., Philadelphia, (Russo)