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February 6, 2014, 6:31 pm
Ex-Brokerage Executives Charged With Fraud
By WILLIAM ALDEN and JAMES C. MCKINLEYJR.
The owner and two executives of the WJB Capital Group were arrested on
Thursday and charged with defrauding at least 15 investors out of more than $11
million during the waning days of their now-defunct brokerage company.
Appearing in State Supreme Court in Manhattan, the three men pleaded not
guilty to charges of grand larceny, securities fraud and tax fraud in a long 71-count
indictment brought by the Manhattan district attorney, Cyrus R. Vance Jr.
They are accused of running a scheme that ran for years in which they used
investor money to pay for personal expenses like luxury cars, home improvements
and private school tuition as their firm headed toward an eventual bankruptcy in
2012. In explaining why WJB had to close up shop and lay off its employees, Craig
A. Rothfeld, the chief executive, said at the time that it was unable to raise capital.
Now, Mr. Rothfeld, along with his former chief financial officer, Gregory S.
Maleski, and the majority owner, Michael N. Romano, are charged with conspiring
to persuade investors to lend the ailing firm millions of dollars starting in 2008.
The men filed false reports to the Financial Industry Regulatory Authority, or
Finra, to conceal the precarious health of the firm, according to court documents.
Their victims included close friends and family members of Mr. Rothfeld and
Mr. Romano, as well as employees of the firm, according to court documents. The
top charge against all three men - first-degree grand larceny - carries a sentence
of eight and half to 25 years.
A lawyer for Mr. Romano, Edward V. Sapone, denied that his client had lied
to investors, who he said knew the company was in trouble. He added that the
expenses that prosecutors have called personal were actually legitimate business
expenses.
"Mr. Romano is innocent of these accusations," Mr. Sapone said outside the
courtroom. "We have assembled a trial team and we intend on fully defending
against these false claims."
Lawyers for Mr. Rothfeld and Mr. Maleski also denied that their clients had
lied to investors. "There are no facts in there. There are allegations in there," Mr.
Rothfeld's lawyer, Harvey L. Greenberg, said in reference to the indictment.
But prosecutors say the men fraudulently convinced investors to extend old
loans and commit more money to WJB, telling them the money would be for
corporate purposes.
Instead, Mr. Romano used it to underwrite an extravagant lifestyle, paying for
expenses at nightclubs, hotels and country clubs, as well as mortgage payments
and luxury cars, prosecutors contend. Mr. Rothfeld withdrew money from WJB's
bank accounts to pay for improvements on his Manhattan co-op and Hamptons
house, in addition to private school tuition, prosecutors said.
Both men used corporate American Express cards for their own purchases,
tapping WJB's accounts to pay them off, according to the indictment. Prosecutors
accuse all three men of stealing at least $7.1 million from the company between
2008 and 2012.
Mr. Rothfeld and Mr. Romano are also charged with underreporting their
income to state tax authorities.
WJB laid off its 100 employees in January 2012 and declared bankruptcy that
May. Three months later, Finra expelled the firm for misstating its financial
records, barring Mr. Rothfeld from the securities industry and Mr. Maleski from
supervising employees of a broker dealer.
On Thursday, State Supreme Court Justice Larry Stephen set bail at a $1
million bond each for Mr. Romano, 41, and Mr. Rothfeld, 43. A $soo million bond
was ordered for Mr. Maleski, who is 39.
"Another investment fraud has come to light - this time forcing more than
employees out of work," Mr. Vance, the district attorney, said in a statement.
"Manhattan is the center of the securities industry and my office will continue to
aggressively prosecute those who steal from innocent investors."
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