The Securities and Exchange Commission filed complaints Friday against four Israeli residents, an American and an auditing firm alleging their involvement in a scheme to create and sell 15 shell companies at a profit.
From 2010 to 2014, Sharone Perlstein, Aric Swartz and Hadas Yaron ran the “shell factory” from Israel, even conducting initial public offerings on some of the shell companies. Sales of certain shell companies run by the group led to a profit of more than $1.8 million, according to SEC records.
To settle the charges, the five individuals and firm accused of participating in the scheme have agreed to pay remedial fees known as disgorgement and prejudgment interest totaling about $2.2 million, with Perlstein owing a lion’s share of more than $1.6 million.
Perlstein, a dual American-Israeli citizen who owns Israel-based company Chelsea Tech, financed the creation of the shell companies and led the group’s efforts to sell them, according to SEC records. He asked friends and relatives to serve as officers and directors for the shell companies, or paid an associate to find people who could serve in name only.
Swartz, another Israeli-American dual citizen, helped prepare incorporation documents along with Yaron, who served as Perlstein’s assistant.
Outside of that core group, Israeli Alan Weinberg, his Baltimore-based firm Weinberg & Baer LLC and an American attorney, Jonathan Strum, are charged with aiding and abetting the fraudulent scheme.
Weinberg and his firm issued clean but misleading audit reports for at least seven of the shell companies, despite the fact that they had no assets or legitimate business purposes.
For his part, Strum served as outside counsel for at least 14 of the shell companies, court records show, and helped prepare the shell companies to begin issuing shares to the public. According to the commission, he prepared fraudulent documents and opened bank accounts for at least 10 of the shell companies.
Only the complaint against Strum suggested anyone in the group had doubts about their plans. Strum expressed concerns to Swartz, the attorney living in Israel, that the SEC would pick up on the shell companies’ lack of business activities in a form for one shell company.
“[I] appreciate the work and want more, but this won’t pass a smell test,” he said in an email. “I want to keep us in the clear. … (Just trying to CYA).”
In another email regarding a different form, Strum wrote to Swartz, “I hate to be a pain but it is my ass they will come for.”
By 2012, Strum suspected that the group wanted to profit from selling the shell companies, and he confronted Swartz but continued to work with him.
Contact Mollie Bryant at 405-990-0988 or bryant@bigiftrue.org. Follow her on Facebook and Twitter.
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