Six Men Charged in Five-Year High-Yield Investment Fraud Scheme
Six men were charged in an indictment unsealed today for their alleged participation in a five-year high-yield investment fraud scheme according a press release issued by the Department of Justice.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas and Inspector in Charge Delany DeLeon-Colón of the U.S. Postal Inspection Service’s Criminal Investigations Group in Washington, D.C., made the announcement.
Cengiz Jan “CJ” Comu, 58, of Dallas, Texas; John Mervyn Price, 63, also of Dallas; Harley E. “Buddy” Barnes, III, 60, of Plano, Texas; Richard Laurence Kadish, 57, of Miami, Florida; Richard Lawrence Green, 69, also of Miami; and Daniel Thomas Broyles Sr., 61, formerly of Malibu, California, were charged in an indictment returned in the Northern District of Texas with one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud and 10 counts of wire fraud. Price and Barnes were arrested and appeared Monday before U.S. Magistrate Judge Renee H. Toliver of the Northern District of Texas. Comu was arrested and appeared on Wednesday, also before Judge Toliver. Kadish was arrested and appeared Wednesday in Miami before U.S. Magistrate Judge Jacqueline Becerra of the Southern District of Florida. Kadish was arrested and appeared Wednesday in Fort Lauderdale before U.S. Magistrate Judge Lurana S. Snow of the Southern District of Florida. A trial date has not yet been set.
“These individuals are charged with making multiple false and fraudulent representations as part of a five-year fraud scheme that ripped off investors, many of whom were elderly,” said Assistant Attorney General Benczkowski. “The indictment unsealed today underscores the Criminal Division’s commitment to combating high-yield investment fraud, which often targets and victimizes some of the most vulnerable members of our community.”
“The defendants peddled an absurd get-rich-quick scheme, deceiving hundreds of hardworking Americans,” said U.S. Attorney Erin Nealy Cox. “We will not stand for this type of blatant fraud.”
“Anyone who engages in deceptive securities practices needs to know they will not go undetected and will be held accountable,” said Inspector in Charge DeLeon-Colón. “The Postal Inspection Service has been investigating crimes like the ones alleged here for many years. Our duty is to protect investors and defend the integrity of the marketplace and the U.S. Mail.”
The indictment alleges that, beginning in 2013, Comu, Price, Barnes, Kadish, Green and Broyles conspired to sell stock in EarthWater, a United Kingdom company headquartered in Dallas County, Texas. EarthWater manufactured and sold bottled water that it claimed was infused with special minerals mined from an 80-million-year-old deposit hidden in a secret location.
According to the indictment, Comu, who is EarthWater’s founder, chairman and chief executive officer, falsely represented to victim investors that he was a successful Wall Street veteran with decades of experience and did not disclose to investors that, among other things, he was permanently barred from selling unregistered securities as a result of actions filed by state and federal securities regulators.
The indictment further alleges that, to induce victims to purchase EarthWater stock, Comu, Price, Barnes, Kadish, Green, Broyles, and others made numerous false and misleading representations, including that victim investors only had a brief opportunity to purchase EarthWater stock for anywhere from $.10 to $.50 per share in an unregistered offering before EarthWater launched an initial public offering (IPO) or was acquired by a large well-known company and EarthWater’s stock price would increase anywhere from 10- to 50- times the purchase price. In reality, EarthWater allegedly never initiated an IPO, or a merger or acquisition.
The indictment also alleges that defendants falsely represented to victim investors that EarthWater would use 90 percent of invested funds to grow its business and expand operations, and that any fees paid to broker-dealers with respect to the sale of EarthWater stock would not exceed 10 percent of the purchase price of the shares. In reality, Comu, Price and Barnes allegedly agreed to split victim investors’ funds 50-50 with Kadish, Green, Broyles and other individuals who sold EarthWater stock. As a result, nearly half of all of the money victims invested in EarthWater allegedly went directly into the pockets of the individuals who sold them the stock.
In addition, according to the indictment, the defendants also falsely represented to victim investors that Comu, Price and Barnes did not receive salary from EarthWater in 2014, 2015 or 2016. In reality, Comu, Price and Barnes allegedly used EarthWater’s investment account as a personal piggybank, using victim investor funds for their own personal benefit and transferring victim investor funds to bank accounts controlled by them for their own personal use.
An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
This case was investigated by the U.S. Postal Inspection Service. Trial Attorneys Christopher Fenton and William Bowne of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mary F. Walters of the Northern District of Texas are prosecuting the case.
The Criminal Division’s Fraud Section plays a pivotal role in the Department of Justice’s fight against white collar crime around the country.
Individuals who believe that they may be a victim in this case should visit the Fraud Section’s Victim Witness website for more information.