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John R. Najarian, 36, and his wife, Jessica Najarian, 31, are required to join Osiris Fund Chairman Peter Zuck of Middletown in paying $160,000 in civil penalties through consent orders negotiated on behalf of the state Bureau of Securities by the Division of Law.
Zuck, a three-time convict kicked out of the securities industries in the 80s, led the elaborate fraud, which bilked 76 investors by claiming it worked for the “little guys” and “moms and pops,” state Acting Attorney General John J. Hoffman said.
Undisclosed trading losses drained much of the $12 million entrusted to the fund, Hoffman said. These were followed by bogus statements that inflated numbers so that the investors wouldn’t catch on, he said.
The Division of Law, in turn, filed suit in Superior Court in Jersey City.
“Our focus is on taking appropriate action against those responsible,” Hoffman said today. “This includes barring the most culpable of these scammers from the securities industry to prevent them from preying upon investors in the future.”
Zuck, 63, of Middletown joined with other defendants in creating Osiris, named for the Egyptian god of death, in June 2009.
They then used unregistered agents to solicit investors to buy unregistered interests in the fund, in violation of state securities codes, Hoffman said.
Offering documents also omitted Zuck’s criminal background, which included a five-year prison sentence for securities fraud and corporate misconduct after he “bilked unsuspecting people out of a substantial amount of money [with] no remorse,” according to the sentencing judge.
Besides making bad trades, the lawsuit says, Osiris management also funneled investor money into “loans” and transfers to affiliate Osiris Partners. One of the loands was for a $300,000 fishing boat named “Fintastic,” the suit says.
Zuck also used up to $700,000 of investor money to renovate the Jersey City office, as well as to pay his wife up to $7,500 in monthly rent — even though his daughter owned the property, it says.
All told, state officials say, the crew pocketed $4 million in investor cash.
They “sold unregistered securities and defrauded investors by making false investor account statements, failing to disclose their use of investors’ funds for the benefit of certain individual defendants and their family members, overstating the hedge fund’s net asset value to produce higher management fees and conceal losses, and improperly using unregistered agents to sell limited partnership interests in a hedge fund,” Hoffman said in a release.
In granting the Division of Law’s motion for summary judgment and final judgment by default, a judge ordered that:
Osiris Fund Limited Partnership; Osiris Partners, LLC; Michael J. Spak; Joseph C. Spak; and Brian J. Spak, 38, of Hamilton Square, are jointly and individually liable for $7.6 million in disgorgement and investor restitution, plus $47 million in civil penalties.
Wayne G. Player, 52, of Tequesta, Florida, was ordered to pay $350,000 in restitution, $750,000 in civil penalties, and $69,229 jointly and individually with his company, Wayne Player Productions, LLC. Wayne Player Productions, LLC was not found to have committed fraud.
Loretta Spak, 48, of Chesterfield; ANS Enterprises, LLC; and Bryan J. Zuck, 31, of Jersey City, while not found to have committed fraud, are ordered to disgorge approximately $453,138 in ill-gotten gains.
In addition to the final judgments, various settlements were reached between the Bureau of Securities and several defendants, requiring them to pay restitution, civil penalties, and/or the disgorgement of ill-gotten gains:
Peter Zuck; John R. Najarian; Jessica Najarian, 31, of Hillsdale; and IGF Consulting, LLC, through consent orders, requiring these defendants to pay disgorgement and/or restitution, plus $160,000 in civil penalties. Jessica Najarian and IGF Consulting, LLC were not found to have committed fraud.
Laurie Mazza, 54, of Middletown; Peter L. Zuck, 23, of Middletown; Nicole Zuck, 25, of College Station, Texas, Victoria Brialmont, 64, of Palm Beach Gardens, Florida; Jay John Soojian, 56, of Wayne; Dexter Group, LLC; and John Scheirer, 48, of Glenn Mills, Pennsylvania; through consent orders which require these defendants to pay disgorgement and/or restitution, plus $65,000 in civil penalties. Laurie Mazza, Peter L. Zuck, Nicole Zuck, Victoria Brialmont, and Dexter Group, LLC, were not found to have committed fraud.
Deputy Attorneys General Emanuel S. Asmar and Paul E. Minnefor of the Division of Law represented the Bureau of Securities.
Rudolph Bassman, Chief of Enforcement, and Investigators Peter C. Cole and Richard Stewart of the Bureau of Securities conducted the investigation.
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