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Georgiou Gets 25 Years in Prison for Penny Stock Fraud

Nov. 19 (Bloomberg) -- George Georgiou, a former stockbroker from Canada, was sentenced to 25 years in prison for his role in an international fraud that led to more than $55 million in losses, prosecutors in Philadelphia said.

A federal jury convicted Georgiou, of Ontario, in February of securities fraud, wire fraud and conspiracy for his role in manipulating the shares of four companies trading over-the-counter. In addition to the prison term, U.S. District Judge Robert Kelly today ordered Georgiou to pay more than $55 million in restitution, U.S. Attorney Zane David Memeger said in an e-mailed statement.

“Kelly stated when imposing the sentence that the evidence was overwhelming and that the defendant’s perjury was stunning,” Memeger said in the statement.

Lawyers for the broker argued in court papers that he had lived “an honorable life, full of good works” that was “impacted by lapses in judgment.”

“We believe the sentence was far disproportionate to the offense conduct,” attorney Michael Bachner said in a phone interview noting the sentence was within federal sentencing guidelines. “We think the guideline ranges are now a complete reaction to the political and economic environment and have nothing to do with the realities of the case.”

Banned as Broker

Georgiou, who was banned as a broker in Canada in 1995, worked with others in the U.S., Canada, the Turks and Caicos Islands and the Bahamas. He used e-mail aliases and bought stock through intermediaries whom he reimbursed to create the appearance of a market for the shares of Neutron Enterprises Inc., Avicena Group Inc., Hydrogen Hybrid Technologies Inc. and Northern Ethanol Inc.

Georgiou was arrested in September 2008 after agreeing to pay an undercover U.S. Federal Bureau of Investigation agent a kickback to bribe brokers to purchase $10 million worth of Northern Ethanol.

Kirby Behre, a sentencing expert at law firm Paul Hastings, Janofsky & Walker LLP, said 25-year sentences are usually reserved for the “most outrageous and egregious cases.”

“With a loss of that size typically you wouldn’t see a sentence anywhere near this long. In most of these cases what you see is a sentence less than 10 years,” Behre said today in a phone interview. “This one is an outlier. It’s certainly an extremely harsh sentence usually reserved for world-class swindlers.”

Bail Revoked

Bachner said Georgiou, whose bail was revoked after his conviction, will appeal on several grounds including the government’s alleged failure to disclose to trial attorneys information about informant Kevin Waltzer.

Waltzer, of Newtown, Pennsylvania, became a government informant after he was caught by the Internal Revenue Service evading taxes, the Philadelphia Inquirer reported. Lawyers for Georgiou argued during the trial that Waltzer, an alleged mobster, took advantage of the former stockbroker. Waltzer pleaded guilty to a separate $44 million financial fraud, the Inquirer reported in January.

“After the trial we learned that the prosecution was aware that Waltzer had serious psychiatric problems and was medicated and never disclosed that to the defense,” Bachner said. “He was medicated when the offense occurred and at the time of trial.”

The case is U.S. v. George Georgiou, 09-88, U.S. District Court, Eastern District of Pennsylvania (Philadelphia)

To contact the reporter on this story: Sophia Pearson in Wilmington, Delaware, at spearson3@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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