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Two FTC Capital Executives Are Charged With Fraud
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(May 26, 2009 - Tuesday) - http://online.wsj.com/article/SB124284632690240113.html?mod=googlenews_wsj
By CHAD BRAY
NEW YORK -- Two executives at FTC Capital Markets Inc. in New York have been charged in an alleged scheme to defraud institutional investors by misrepresenting the types of securities in which they were investing.
Guillermo A. Clamens, FTC Capital's chairman, and Nazly Cucunuba Lopez, also known as Lina Lopez, have been criminally charged with conspiracy, securities fraud and wire fraud. Mr. Clamens also was the company's chief executive prior to March 2009.
Ms. Lopez, the company's operations manager, was arrested in Miami on Tuesday. A lawyer for Ms. Lopez didn't immediately return a phone call seeking comment Wednesday.
U.S. postal inspectors searched FTC Capital's midtown Manhattan offices on Wednesday, a person familiar with the investigation said. The company also has a branch office in Miami.
According to a charging document unsealed Wednesday, Mr. Clamens, Ms. Lopez and others solicited funds from institutional investors between April 2008 and November 2008, promising to invest their money in safe, low-risk securities -- namely short-term certificates of deposit and money market portfolios -- but instead used the money to make "unauthorized purchases of high-risk securities."
The case is being investigated by the U.S. Attorney's Office in Manhattan and the U.S. Postal Inspection Service.
Prosecutors alleged they repeatedly misrepresented how the funds had been invested and sent out fictitious account statements. At least two institutional investors entrusted hundreds of millions of dollars to the firm, according to the charging document. One investor lost at least $21.6 million in the alleged fraud, the government said.
The scheme allegedly unraveled beginning in October when one investor requested a withdrawal of $41.5 million, which represented about 70% of the cash the investor understood to be in the account, prosecutors said.
Ms. Lopez allegedly told the investor falsely via email that a wire transfer of $41.5 million was returned due to invalid wire instructions, the government said.
In reality, Ms. Lopez was attempting to sell about $42.5 million in international notes in the investor's account to satisfy the withdrawal, prosecutors said. The account, unbeknownst to the investor, held more than $60 million in those notes, the government said.
In October, another investor requested a withdrawal of $21.6 million, representing about 80% of the cash purportedly in their account, prosecutors said. Unknown to the investor, the account had a $20 million cash deficit and $42.5 million in international notes, the government said.
On Nov. 3, the investor requested to withdraw an additional $4.7 million, prosecutors said. After some difficulty in attempting to sell the international notes to cover the investor's withdrawal request, $4.7 million was eventually wired to the investor, but the $21.6 million request was never satisfied, prosecutors said.
A call to FTC Capital Markets in New York was not immediately returned Wednesday.
Write to Chad Bray at chad.bray@dowjones.com
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