Tuesday, August 21, 2012

Former President of Children’s Social Networking Company and Stockbroker Found Guilty of Securities Fraud and Commercial Bribery Charges

A federal jury in Brooklyn returned guilty verdicts against Pino Baldassarre, the former president of Dolphin Digital Media, Inc. (“Dolphin”) and Robert Mouallem, a stockbroker, on conspiracy, securities fraud, and commercial bribery charges. These charges arose from the defendants’ scheme to sell their shares of Dolphin at inflated prices by bribing stockbrokers. When sentenced by United States District Judge Jack B. Weinstein, the defendants face a maximum sentence of 25 years’ imprisonment on the most serious charge.
The verdicts were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and Janice K. Fedarcyck, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office.
According to the evidence at trial, Dolphin created secure social networking websites for children. Its stock was publicly traded on the Over The Counter Bulletin Board. In addition to serving as Dolphin’s President, Baldassarre was a substantial shareholder of the company. Baldassarre was fired from Dolphin in March 2009. Shortly thereafter, Baldassarre and another Dolphin shareholder met with an individual, identified as “John Doe,” who claimed to have access to a network of stockbrokers who managed client brokerage accounts and to have authority to trade in those accounts on behalf of their clients. John Doe agreed to have these stockbrokers purchase, through their clients’ accounts, Dolphin shares owned by Baldassarre and the other shareholder in exchange for a kickback of 30 percent of the sale proceeds. Baldassarre and the other shareholder arranged for Mouallem to act as their stockbroker to sell their Dolphin shares. Mouallem, who knew of the kickback arrangement, placed orders to sell the stock in such a way as to ensure that John Doe’s network of stockbrokers bought the conspirators’ Dolphin stock instead of other Dolphin stock that may have been available for sale. Unbeknownst to Baldassarre, Mouallem, or the other Dolphin shareholder, John Doe was a special agent of the Federal Bureau of Investigation acting in an undercover capacity. In March and April 2010, Baldassarre, Mouallem, and the other shareholder orchestrated five test sales of their Dolphin stock, supposedly to John Doe’s network of stockbrokers. In each case, Baldassarre paid the 30 percent kickback to John Doe.
“Rather than let the market set the true value of Dolphin stock, these defendants engaged in a bribery scheme to manipulate the market for Dolphin stock for corrupt personal gain,” stated United States Attorney Lynch. “It is essential for the securities markets to be free of such corruption in order to preserve investor confidence. Those who would engage in such manipulation schemes should consider whether their ‘partners’ in crime are actually working for the FBI.”
FBI Assistant Director in Charge Fedarcyk stated, “Schemes like this one not only stack the deck unfairly for the schemers and undermine investor faith in the integrity of the marketplace. If not for the presence of the FBI undercover agent, this scheme would have resulted in real shareholders unknowingly paying inflated prices for stock.”
The government’s case is being prosecuted by Assistant United States Attorney Patrick Sinclair.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The Defendants:
Age: 53
Residence: Indialantic, Florida
Age: 57
Residence: Boca Raton, Florida

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