Mr. Knnucan's experiences set a handy, simple, two-step example for those seeking to tread the same path he's taken:

1. Engage in insider trading. While Mr. Kinnucan has yet to be convicted for the crime he is accused of, this is obviously of great importance if you want to get arrested for insider trading.

2. Dare the government to arrest you. Both figuratively:

"How the f--k can you live?" Kinnucan said to the cooperating witness in a voice mail on Feb. 11, according to the government. "Do you have a family, do you have children, do you have a wife? How can you even walk down the street, why don't you just f--king kill yourself?"

And/or literally:

Federal agents first approached Mr. Kinnucan at his Portland, Ore., home in late 2010...Mr. Kinnucan...fired off an e-mail to warn his clients. "Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information," the e-mail said. "We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web."

In the months after the e-mail surfaced, Mr. Kinnucan granted dozens of interviews to the media, lambasting the government’s efforts while defending himself. Later, as the case dragged on, his communications grew stranger. He fired off rants against the federal prosecutors investigating the case – notes that included expletives and racial epithets. He dared the government to arrest him.

It's practically foolproof. Questions?

Government Snares a Vocal Critic in Latest Insider Trading Charges [Dealbook]
Kinnucan's Phone Threats Should Bar His Release, U.S. Says [Bloomberg]
SEC charges tech analyst with insider trading [CNN Money]

fkamer@observer.com | @weareyourfek

RU-DY! RU-DY! RU-DY!

Well, maybe not that last part. Which just happened.

Sports fans, Fightin' Irish alum, and Touchdown Jesus, pay attention:

Your chosen son just got busted by the feds.

For a pump-and-dump scheme.

Involving a sports drink exploiting Rudy's fame.

In Las Vegas.

Just like the rest of Rudy's story, even Hollywood can't make this kind of thing up. Yes, that's the SEC writing about the movie Rudy in their release:

The Securities and Exchange Commission today charged Daniel Ruettiger and 12 other participants in a scheme to deceive investors into buying stock in his sports drink company. Ruettiger is widely known for having inspired the 1993 motion picture "Rudy." According to the SEC’s complaint filed in federal court in Las Vegas, Ruettiger founded Rudy Nutrition to compete with Gatorade in the sports drink market. Rudy Nutrition produced and sold modest amounts of a sports drink called “Rudy” with the tagline “Dream Big! Never Quit!” However, the company primarily served as a vehicle for a pump-and-dump scheme that occurred in 2008 and generated more than $11 million in illicit profits.

Dream big! Never quit! indeed.

It's worth noting that the odds of Rudy's startup sports drink competing with Gatorade likely make Rudy's chances of ever playing for Notre Dame look like less of a long-shot than a shoo-in in comparison.

It's also worth noting that a pump-and-dump scheme, for those who don't know, is not something that comes out of the shotgun formation. It's when you, a financial criminal, overhype a product, artificially inflating market demand for said product, and then leave when the artificial demand hyper-inflates the value of a given commodity, getting out with the money and leaving the people who were conned into thinking there was value there holding the losses (or as they say in the finance sector, 'holding one's sexual reproductive organs in one's hands'). It's getting other people to buy high and sell low, which is the opposite of what you're supposed to do.

What the SEC is accusing Rudy and his business partner—the not-at-all shady sounding Rocky Brandonisio—of doing is making Rudy Beverage a publicly traded company, and then:

(1) Bringing in an experienced penny stock promoter to help orchestrate the company going public, as well as the inflation of the hype behind the beverage company.
(2) And then finding other sketchy guys to help out with this, or in the SEC's words, "partnering with other penny stock promoters to inflate the price and volume artificially through fraudulent touting and manipulative trading," which involved
(3) "a series of false or misleading statements about RUNU to the public in mailers sent to millions of U.S. investors, messages posted in Internet chat rooms dedicated to penny stocks, and videos placed on the Internet for public viewing" as well as false statements made in press releases and SEC filings.

Guess what! It's illegal to lie to the SEC about your publicly traded company. Flag on the field! And how well did Rudy perform with his short time on the market?

In less than a month, RUNU went from trading 720 shares to more than 3 million shares, and within two weeks the price of RUNU stock climbed from 25 cents to $1.05 per share. After March 12, 2008, RUNU stock began a roller coaster ride as the scheme’s participants sold millions of RUNU shares to the market amid their simultaneous efforts to pump the stock.

Realize, that's over a 300% increase in value over two weeks. Think there might be something wrong there? The SEC did. And guess what happened to Rudy? He got tackled:

Ruettiger agreed to pay $382,866 in settling the charges, and other participants consented to final judgments also ordering disgorgement, prejudgment interest, and financial penalties.

But your hero couldn't even do public disgrace well:

Ruettiger and 10 of the scheme’s other participants have agreed to settle the SEC’s charges without admitting or denying the allegations. The settlements, which are subject to court approval, impose penny stock bars and officer-and-director bars as appropriate.

That said, there were twelve other participants in the scheme, which sounds like just enough people to carry Rudy out of federal court on their shoulders for not having to completely confess to being totally shady stock manipulators. Not that his entire legacy wasn't a totally overblown Notre Dame thing to begin with. 'Knew that Napoleon Complex would catch up with him eventually.

fkamer@observer.com | @weareyourfek

But an NBA player running an entire ponzi scheme? That'd be impressive. And in former New Jersey Nets and Milwaukee Bucks player Tate George's case, it kind of is, especially when you consider the magnitude of the lies he told, and who he targeted: he told his investors he had $498M more than he had in his portfolio.

What kind of investors would believe that?

Per Bloomberg:

Tate George...was charged with running a $2 million Ponzi scheme that targeted ex-professional athletes.

According to the FBI, George had been running the scheme since 2005, and is looking at 20 years in the pen if convicted. He spent the money on initial returns to investors and then in supporting his lifestyle, which included (among other things) child support and mortgages.

So much for that $500M real estate portfolio of The George Group.

Or their website.

Or that October 2008 Portfoilio features entitled "Success, by George!" about what a great guy he is:

Since he left the hardwood, he has gone on to launch the George Group, establishing the stable and substantial real development portfolio of the company that currently exceeds $500 million. His business education began with a degree from the University of Connecticut and continued with a real-world education in Wall Street banking in New York. Since the founding of the George Group, he has built relationships and raised millions of dollars for an extended variety of clients in the fields of commercial development, real estate development, and international finance, as well as the entertainment and sports industries. George's company, which has six employees in New Jersey and Florida, has put $51 million into three public/private redevelopment projects.

To be fair, Tate George isn't entirely a goon. He did make one of the most incredible buzzer-beaters in NCAA history:

Sadly, Conn then lost by one point to Duke in the Final Four, who then went on to lose by thirty points to the legendary 1990 UNLV Runnin' Rebels team that consisted of Larry Johnson, Stacey Augmon, Greg Anthony, George Ackles, and Anderson Hunt, coached by Jerry Tarkanian, who was later forced to resign from coaching UNLV when a picture of three of his players in a hot tub with Richard "The Fixer" Perry—his name was "The Fixer," there's not much else to know there—ended up on the front page of the Las Vegas Review Journal. Maybe this drew itself deep within George; maybe Tate George held onto the idea that criminals come out on top in the end for just a little too long.

Or maybe he thought he could run a Ponzi Scheme and get away with it, and he didn't. Either way, he's pleading not guilty, and is currently out on bail living at his mother's house in Newark.

Ex-NBA Player Charged in $2M Ponzi Scheme [Bloomberg]

fkamer@observer.com | @weareyourfek

Meet James Davis Risher and Daniel Joseph Sebastian of Florida. How they even amassed $22M out of Floridian teachers and retirees is pretty impressive in its own right, but even more so is the return they told investors they'd be getting them, and how they told their investors they were going about doing it: 14 percent to 124 percent, "by investing in public equity securities through a broker-dealer."

This is akin to Peter Dinklage taking 124:1 bets on him dunking over Yao Ming.

With the odds in his favor.

And then going and spending the money made with the bets on "jewelry, gifts, and property in North Carolina and Florida. Risher and Sebastian also paid themselves millions of dollars in phony management and performance fees."

A good sign your Ponzi Scheme Manager is an idiot? They're investing in real estate in Florida and North Carolina. A good way to tell your "Performance Fund Manager" is a Ponzi Scheme Manager? They are a former insurance salesman and a guy with a criminal record of mail fraud, money laundering, and securities fraud, who spent 11 of the last 21 years in jail instead of "growing a thriving retail brokerage business," which one of them said they did.

If you're thinking about pulling any empathy for anybody stupid enough to invest in these guys, remember: the people they frauded are the same people who are too frail to punch holes in their ballots. The clients' age ranges were generally between 65 and 90.

90. Which could explain how anybody could see this scheme without an ounce of skepticism: senility. Via the SEC:

Sebastian verbally told investors during telephone calls and meetings that they would never lose their principal investments in the fund. He even provided some investors with written guarantees from a company he owned that would reimburse any loss. In reality, Sebastian knew that the company had no assets to reimburse investors for losses, making his guarantee meaningless.

The best, of course, is how they named their funds:

• Safe Harbor Private Equity Fund
• Managed Capital Fund
• Preservation of Principal Fund

They never made it to the next logical progression in the naming of their funds, "Your Money Is Awesome And We Will Make It Awesomer Capital Management." And you know when the list of agencies the SEC thanks includes the U.S. Postal Inspector Service, it becomes clear that Barney Fife could've untangled the uncomplicated web of stupidity they wove themselves. For the record, unemployment peaked at 12% over the last 20 years in Florida, where the average teacher salary ranks 22nd in the country by state.

Hopefully they will go to jail for a very long time.

fkamer@observer.com | @weareyourfek

Via the U.S. Attorney for the Southern District of New York's office, basically:

From November 2000 through June 2005, CUTI and WILLIAM TENNANT, the former Chief Financial Officer ("CFO") and Senior Vice President of Duane Reade, engaged in a scheme to misrepresent Duane Reade's financial performance. The scheme involved: 1) the reporting of inflated income from fraudulent real estate transactions; and 2) the artificial reduction of expenses through fictitious credits from vendors who did work for Duane Reade.

Mr. Cuti was also hit with a decent tab, payable to Preet Bharara & Co.:

In addition to the prison term, Judge BATTS sentenced CUTI, 65, of Saddle River, New Jersey, to three years of supervised release. CUTI was also ordered to pay a $5 million fine and a $500 special assessment fee. Restitution will be determined at a later date.

Filed under "Things Your Club Card Won't Help With." Meanwhile, while Duane Reades across the city are shinier than ever, alas, they still have long lines. Though now, with one less person to wait in them.

UPDATE. Mr. Cuti's defense team writes in with their statement:

While at the helm of Duane Reade, Mr. Cuti led the growth of the company from a small drug store chain to a local institution

[...with long lines...]

in less than ten years, dramatically changing the landscape of New York City in the process.  Duane Reade became one of the largest commercial retail tenants in the City in terms of the number of stores and square footage.

Mr. Cuti is deeply disappointed with the sentence imposed by the court.  As the court determined, neither Duane Reade nor any investor could be shown to have lost money as a result of the transactions at issue.   Nor was it demonstrated that Mr. Cuti personally profited from the transactions.   Mr. Cuti plans to vigorously appeal the verdict.

fkamer@observer.com | @weareyourfek

Baseball's having a hell of a (money-oriented crime) related week.

According to the release (which touts the fact that he used to play baseball, because even SEC button-ups need to feel the glory of a successful at-bat), Mr. DeCinces and his co-conspirators made $1.7M off of the sale of the a company called Advanced Medical Optics Inc. to Illinois-based Abbott Laboratories Inc. The former third baseman—active in Major League Baseball from 1973 to 1987 most prominently for Baltimore—agreed to pay $2.5M to the SEC to settle the charges. His insider trading skills sound inversely porportioned to his baseball skills, which earned him a place on the AL All-Star team in 1986. From the SEC:

DeCinces, who lives in Laguna Beach, Calif., received confidential information about the acquisition from a source at Santa Ana, Calif.-based Advanced Medical Optics. DeCinces immediately began to purchase shares of Advanced Medical Optics in several brokerage accounts, buying more throughout the course of the impending transaction as he received updated information from his source. During this time, DeCinces also illegally tipped three associates who traded on the confidential information – physical therapist Joseph J. Donohue, real estate lawyer Fred Scott Jackson, and businessman Roger A. Wittenbach.

Even better? Cliche that jocks are idiots: perpetrated.

Donohue made $75,570 when he sold the stock on the same day as the public announcement. DeCinces later asked Donohue whether he had sold his stock and congratulated him.

Anyone congratulating anybody else on making $75K on insider trading is also, very likely, the kind of person stupid enough to be caught. Mr. DeCinces—worth $1.99 at Sears, mint condition—and his aspirants should take some tips from known goldbug and Mets kinda-owner David Einhorn. Or really, anybody with skin in the (baseball) game who's made money elsewhere legally. Or at least more discreetly. From a 2008 MLB.com piece on his (second) life after third base:

"People don't really understand what it takes to be a professional athlete. It takes a lot of dedication and preparation in order to be successful and I took those traits and went to the business world with that same preparation."

When reached by The Observer, a spokesman for the (43-64) Baltimore Orioles declined to comment on Mr. DeCinces hall-of-fame status with the ball club until "they have gathered all the facts."

SEC Charges Former Professional Baseball Player Doug DeCinces and Three Others with Insider Trading [SEC]

Previously:DeCinces enjoying life as businessman. [MLB.com]

fkamer@observer.com | @weareyourfek