Archive for month: December, 2020

By David J. Neal
December 28, 2020

Victims of the 1 Global Capital fraud received another $12 million this week and the Securities and Exchange Commission charged three more unregistered brokers allegedly involved in selling the Hallandale Beach company’s securities this month.

But that $12 million and the $317,690 from one of the men charged by the SEC still might be scant solace to the 3,600 investors scammed out of hundreds of millions by 1 Global Capital’s white collar gang.

THE MONEY

Cassel Salpeter’s James Cassel, liquidating trustee of the 1 GC Collections Creditors’ Liquidating Trust, said the $12 million brings the total returned to investors to $124 million, about 44 cents on the dollar.

“I got a phone call from a retired teacher in California who put $10,000, everything she had other than Social Security, into the the company. That is who I’m working for,’” Cassel said he told another attorney connected to the case. “We want to feel we’ve maximized recovery for over 3,500 investors, who are, unfortunately, going to lose money.”

At 44 cents on the dollar, that puts the amount ripped off at $281.8 million. Various court documents place the amount at $322 million.

THE SCHEME

As stated in various court documents of those already convicted of their role, 1 Global Capital was sold to investors as a short-term, high-interest cash lender for small businesses. Investors would get their principal and some interest when the businesses repaid 1 Global.

Lies fooled those investors concerning the high commissions paid to middlemen and unlicensed brokers; the securities laws being broken, concealed by fraudulent legal opinions; the money sucked out of 1 Global for personal use by CEO Carl Ruderman; and the $50 million in arrears the group attempted to cover up, Ponzi-scheme style.

Over the last 15 months, the Justice Department and SEC pulled a parade of 1 Global cronies through the federal courts on their way to federal prison.

• Chief financial officer Alan Heide​ already is sitting in federal prison in Jesup, Georgia until December 2024 after pleading guilty to securities fraud.
• Attorney Jan Atlas’ sentencing has been set for Jan. 21 on securities fraud.
• Former 1 Global director Steven Schwartz is set for sentencing April 9 on
  securities fraud and conspiracy to commit wire fraud.
• ​Attorney Andrew Ledbetter has entered a plea agreement​ on those same charges and even was allowed to travel to Washington D.C. to spend Thanksgiving with his adult son.

Ruderman still hasn’t been criminally charged. ​The SEC gained a judgment against him​ in 2019 that included a $32 million disgorgement, a $15 million civil penalty, another $750,000 in cash; and half the equity in his five-bedroom, seven-bathroom, 9,600-square-foot tower suite condominium at Aventura’s Bella Vista North, 20165 NE 39th Pl.

THE NEWLY CHARGED

The SEC charged Roger E. Dobrovodsky, a 66-year-old from Indianapolis, with being an unregistered broker during the 16 months in 2017 and 2018 that he sold 1 Global Capital securities while using fraudulent materials. The SEC says Dobrovodsky has consented, without legally admitting any wrong, to giving up the $317,690 he made in commission, $32,038 in prejudgment interest and $50,000 civil penalty.

The amounts of those punitive payments from Robert Seth of Georgetown, Texas, the SEC says, still have to be determined although Seth’s consented to them. He made almost $282,000 in commissions, the SEC charges, from his two years of selling 1 Global securities as an unregistered broker.

Matthew Walker, 40, from Olathe, Kansas, is the managing partner and chief compliance officer of Pinnacle Plus Wealth Management. The SEC says Walker, also, was an unregistered broker who kept selling 1 Global securities until June 2018, “despite being confronted with numerous red flags that the 1 Global investments were not what he had been told and that 1 Global officers had not been honest with him.”

The SEC says Walker earned $393,306 in commissions and his companies earned another $300,000. Most of his customers, numbered at over 140, were from the Kansas City area.

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By James Cassel

2020 highlighted how critical agility is for middle market businesses, with many rapidly reinventing themselves to secure their future. While many technology and ancillary companies thrived, if your business did not fulfill a need created, or required by the pandemic, you likely had to be especially creative to stay afloat. While we are not through with 2020’s pandemic challenges, a gradual comeback is on the horizon, even as many traditional business norms may never be the same.

Here are four areas that companies need to watch in 2021:

Technology: Software and artificial intelligence will continue to revolutionize labor. Advances in virtual reality now promise equal or increased productivity from the comfort of your home office. Meanwhile, telemedicine, video conferencing, and a slew of apps with expanding capabilities exploded in usage with much faster adaptation than anticipated, but also with some obvious limits. Technology will continue to define 2021, but how much so and what will stick remains a question.

Work-from-home (WFH): Call me contrarian, but as an investment banker, I find it hard to achieve the same productivity working from home, especially when it comes to new client origination. In my view, you also lose corporate culture, camaraderie and collaboration.

However, some studies disagree, positing that productivity increases when employees work from home. For those working from home with families, the intangible benefits of spending more time with them is now evident, and they will likely lobby for WFH to continue.

For companies that can provide the option, a hybrid model seems likely, with some days spent at the business location or traveling, and others spent working from home. But keep in mind this is simply not an option for many industries.

How will the COVID vaccine rollout go? Will the vaccines be like a flu shot? Will enough people take them? Will vaccines be required yearly, and will each be as effective? Once taken, what comes next? Is it back to the office immediately, or will we ease back into reentry? How long will your immunity last?

Given our interconnectivity, these answers will have huge implications for the 2021 marketplace, but without knowing them, businesses will find it difficult to plan next moves. Flexibility will be key. In any case, the rollout’s impact likely won’t be felt until the second part of the year.

Will we even go out when it’s safe? This newly guarded approach to life has many wary of shaking hands or venturing to business functions. But your company can’t grow unless you’re hunting and securing fresh opportunities, while also developing new relationships. At some point, people will certainly break out of their silos in 2021, but how often, and what must be done to make us be and feel truly safe? Finding the right pace will prove a balancing act.

So much remains uncertain. Most of us survived 2020, albeit not unscathed, and we saw the acceleration of innovations like virtual meetings, telemedicine and WFH. Many of these changes are here to stay, and yet, even with an ambitious vaccine rollout, much business activity may look like it did in 2020, especially for the first half of 2021. There are, however, promising bright spots ahead, but much we have to watch carefully to make the best adjustments and come out on top in 2021.

James S. Cassel is co-founder and chairman of Cassel Salpeter & Co., LLC, an investment- banking firm with headquarters in Miami that works with middle-market companies. jcassel@casselsalpeter.com or via LinkedIn at  https://www.linkedin.com/in/jamesscassel.

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