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« Enforcement Report For Q2 '10 | Main | Veraz Settles With SEC »
Wednesday
Jun302010

The Morris Weissman Story

On August 6, 2003, Morris Weissman, the former CEO and chairman of American Bank Note Holographics, Inc., was found guilty by a federal jury in Manhattan. After a five week trial and a day and a half of deliberations, Wiessman, who was then 62, was convicted of a massive accounting fraud in the 1998 IPO of his company's stock.

He'd lied about the company's performance, inflating the numbers to pump up the IPO price, and lied to the auditors to hide it. The IPO raised $115 million. When the fraud was discovered, the stock plunged 80% in two days -- from $16 to $1.80 -- wiping out more than $100 million in shareholder valued.

The high flyer from Palm Beach was found guilty on four counts of conspiracy, securities fraud, falsifying corporate books and records (an FCPA accounting offense), and lying to independent auditors. He faced up to 30 years in prison, a fine of $1 million or more, and mandatory restitution.

One of Weissman's co-conspirators, Joshua Cantor, had previously pleaded guilty for his role in the fraud and for bribing foreign officials. We talked about Cantor last week. As we said, the company's business was producing currencies, travelers and other checks, credit cards, and holograms for use on security-sensitive surfaces.

Sentencing for Weissman was set for November 13, 2003. Meanwhile, he was freed on $250,000 bail.

Fast forward to 2010. Weissman, now nearing 70 and living in New York, is still free on personal recognizance bond. He's arguing against a long prison term, citing his service to society, his age and medical problems (vascular and cardio-vascular disease), his relatively small role in the crimes, and the amount of damage caused (his former company was acquired by a bigger company a couple of years ago).

The prosecutors see it differently. They want a long sentence. Weissman had the same medical conditions when he committed the crimes, he was the ringleader, they assert, and based on the number of victims and their losses (1,778 authorized claimants who lost around $79 million), the federal guidelines say he could be locked up for life. So 30 years is still the right number.

In their latest argument filed a year ago, prosecutors said:

The government acknowledges that the defendant's life is not defined by his crimes alone. The government does not contest the defendant's claim that he possesses certain positive attributes, has a loving family and caring circle of friends, and has contributed to society in certain ways. However, the government would also note that, in comparison with many defendants that appear before this Court, the defendant has had significant advantages and opportunities in life. The defendant graduated from college and law school, worked as an attorney for several years, and was employed by a number of real estates finance firms. In addition, the defendant has held high level positions at American Banknote Corporation and its predecessor since 1975. The defendant's business and social circles have included Presidents, Senators, and high level corporate executives.

In addition to a long jail sentence, prosecutors want a restitution order against Weissman of $64 million. (They say shareholders lost $79 million and recovered $14 million through a class action suit.)

Judge Barbara S. Jones last fixed sentencing for July 1, 2009. It didn't happen then and she hasn't set a new date.

Download the government's June 2, 2009 sentencing memorandum in U.S. v. Morris Weissman, in the U.S. District Court for the Southern District of New York (Foley Square), Criminal Case #: 1:01-cr-00529-BSJ-1, part 1 here and part 2 here

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Special thanks to several readers who asked about Morris Weissman, and to a reader who provided some documents used to prepare this post.

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