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Long Beach resident Alan Seidel, 73, the former CEO of Seidel & Co. LLC, and New Jersey resident Benjamin Mekaway, 37, were arrested on Monday, Dec. 23, U.S. Attorney Geoffrey Berman announced. They were charged with falsifying the books of the company and submitting false reports to the SEC regarding the company’s net capital and staff.
Berman said that the two falsified the financial records of the company to obscure the fact that Seidel & Co.’s net capital fell below the threshold mandated by SEC regulations, submitted reports to the SEC containing false representations regarding Seidel & Co.’s financial condition, and lied to SEC staff members who made inquiries about Seidel & Co.’s net capital.
According to the SEC, regulations required Seidel’s & Co. to maintain net capital reserves of at least $100,000 or six and two-thirds percent of its aggregate indebtedness. If the company’s net capital fell below the required threshold, Seidel was required to notify the SEC on the same day.
Once a broker-dealer falls out of its net capital requirement, it becomes subject to the suspension or revocation of its registration, Berman noted.
In late 2016, Seidel and Mekaway allegedly caused Seidel & Co. to maintain inaccurate books and records regarding its net capital position and to submit false reports to the SEC regarding the company’s net capital position.
It is alleged that in monthly reports filed with the SEC reflecting Seidel & Co.’s financial position for the months of October 2016 and November 2016, Seidel and Mekaway caused Seidel & Co. to falsely represent that it had the requisite net capital to meet its regulatory requirements for those months.
When they made the false representations, it is alleged that Seidel and Mekaway knew that the company had fallen below the SEC requirements in each month, ignoring debt they owed a landlord and falsely inflating the balance of the company’s accounts.
According to Berman, when the SEC began investigating Seidel & Co.’s net capital position, Seidel made false statements regarding a $1 million loan. When the SEC sought verification of this assertion, Seidel acknowledged that the money was in fact a loan but falsely claimed that he believed it might be converted to a capital investment.
In August last year, Mekaway also allegedly sought to obstruct an investigation by the SEC’s Division of Enforcement into the misconduct at the company by failing to produce relevant documents and emails in response to a subpoena for records and falsely denying that he was in possession of Seidel & Co. records.
“In order to protect investors and our markets, the SEC must be able to rely on the accuracy of the books and records and regulatory filings of the firms it oversees,” Berman said. “By allegedly lying to the SEC about Seidel & Co.’s financial condition, and then attempting to cover it up, Alan Seidel and Benjamin Mekaway threatened to undermine the SEC’s vital mission.”
Seidel and Mekaway were arrested this week and charged with one count of conspiracy, one count of falsifying required books and records of a broker-dealer, one count of making false statements to the SEC, and one count of falsifying records in a federal investigation. They face up to 20 years in prison if they are convicted.
USPIS Inspector-in-Charge Philip R. Bartlett added, “As alleged, these individuals, being fully aware of the financial status of their firm, chose to lie to the SEC by cooking their books to reflect a healthier financial condition.
“The investing public relies on the information provided by firms to make sound financial decisions. Shame on these two for allegedly falsifying their records and then trying to hide it from regulators. Criminal acts of the sort alleged here will always be uncovered by law enforcement, ensuring that individuals who break the law will be brought to justice.”
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