SEC Charges Individuals with Fraudulent Scheme to Obtain Stock in Newalliance Bankshares IPO
Robert Ross and four co-defendants fraudulently obtained 490,000 shares in the NewAlliance Bancshares IPO by using nominee depositors to bypass depositor allocation rules, generating $1.75 million in illicit profits, leading to SEC civil charges and criminal prosecution, with Kundrat settling for over $594,000 in disgorgement and penalties.
The SEC charged Robert Ross, Chance Vought, George Kundrat, John Lucarelli, and Frederick Raila with orchestrating a fraud scheme to illegally acquire 490,000 shares in the April 2004 NewAlliance Bancshares IPO by using seven nominee depositors to circumvent rules reserving shares for mutual bank depositors. Ross provided funding and recruited others to act as fronts, while submitting false subscription documents falsely certifying the nominees as the true purchasers, resulting in approximately $1.75 million in illicit profits. Kundrat settled without admitting guilt, agreeing to pay $474,279 in disgorgement plus prejudgment interest and a $120,000 civil penalty, while the SEC sought injunctions, full disgorgement, and penalties against all defendants, with related criminal charges filed by the U.S. Attorney’s Office.
Robert Ross orchestrated a fraudulent scheme in early 2004 to illegally obtain 490,000 shares in the NewAlliance Bancshares IPO by exploiting the priority allocation reserved for mutual bank depositors following the conversion of New Haven Savings Bank. He recruited John Lucarelli and Frederick Raila to identify willing depositors, and enlisted Chance Vought and George Kundrat to provide funding, enabling the nominees to purchase shares at the $10 offering price while Ross and his co-conspirators secretly controlled the investments. The nominees submitted falsified subscription documents falsely claiming they were the true buyers with no agreements to transfer shares, thereby violating federal securities laws. The scheme generated approximately $1.75 million in illicit profits, prompting the SEC to file civil fraud charges in the U.S. District Court for the District of Connecticut. Without admitting or denying the allegations, Kundrat agreed to a permanent injunction and paid $474,279 in disgorgement plus prejudgment interest and a $120,000 civil penalty, while the SEC sought similar remedies against all defendants. The U.S. Attorney’s Office for the District of Connecticut filed related criminal charges, and the investigation involved the SEC, FBI, and Connecticut Department of Banking. The case underscored the SEC’s ongoing efforts to deter misconduct in mutual bank conversions and served as a warning to those attempting to exploit IPO allocation rules for personal gain.
Extracted insights
- $1.75M $1.75 million $1M–$10M
- $474K $474,279 $100K–$1M
- $120K $120,000 $100K–$1M
- person fraudulent scheme
- person george kundrat
- person new haven savings bank
- person robert ross
- agency Securities and Exchange Commission
- agency united states attorney's office for district of connecticut
- SEC charged Robert Ross, Chance Vought, George Kundrat, John Lucarelli, Frederick Raila with fraudulent scheme
- Robert Ross orchestrated scheme to illegally purchase 490,000 shares of NewAlliance Bancshares stock
- Robert Ross recruited Chance Vought and George Kundrat to provide funds for nominee depositors
- Robert Ross recruited John Lucarelli and Frederick Raila to locate depositors
- Fraudulent scheme generated $1.75 million in total profits
- Scheme involved seven nominee depositors to illegally obtain stock at $10 per share
- George Kundrat agreed to permanent injunction and payment of $474,279 disgorgement plus prejudgment interest and $120,000 civil penalty
- New Haven Savings Bank converted from mutual form to stock form of organization in April 2004
- SEC filed civil fraud charges in United States District Court for District of Connecticut on June 28, 2005
- United States Attorney's Office for District of Connecticut brought related criminal charges in connection with the scheme
SEC CHARGES INDIVIDUALS WITH FRAUDULENT SCHEME TO OBTAIN STOCK IN NEWALLIANCE BANKSHARES IPO FOR IMMEDIATE RELEASE 2005-93 Washington, D.C., June 28, 2005 - The Securities and Exchange Commission today announced the filing of civil fraud charges against five individuals in connection with the initial public offering of NewAlliance Bancshares, Inc. The fraud arises out of a scheme orchestrated by Defendant Robert Ross, along with Defendants Chance Vought, George Kundrat, John Lucarelli, and Frederick Raila, in which they illegally purchased stock in the NewAlliance IPO in violation of the federal securities laws. The SEC's action was brought in the United States District Court for the District of Connecticut. The United States Attorney's Office for the District of Connecticut also brought related criminal charges in connection with the scheme. Walter Ricciardi, District Administrator of the SEC's Boston District Office, said, "This action is a message to all those who would seek to deprive mutual bank depositors of their rightful opportunity to participate in their bank's IPO. Hopefully, the actions taken today by the SEC and the Justice Department will deter anyone considering this type of misconduct in the future." The actions arise out of the April 2004 conversion of New Haven Savings Bank, which was based in New Haven, Conn., from a mutual form of organization to a stock form of organization. Because mutual banks are owned by its depositors, they are given first priority in receiving the shares arising out of the conversion's initial public offering. The Commission's complaint alleges that, beginning in or about February 2004, Defendant Ross orchestrated a scheme in which he and others used seven nominee depositors to illegally obtain 490,000 shares of NewAlliance Bancshares stock at the initial offering price of $10 per share. According to the complaint, Ross recruited Defendants Lucarelli and Raila to locate depositors who would be willing to enter into arrangements with Ross. In these arrangements, Ross would put up the funds to purchase the stock and the depositor was to receive a small portion of the profits. The Commission's complaint further alleges that, in addition to providing funds himself, Ross recruited Vought and Kundrat to provide funds for the nominee depositors to purchase the stock. Further, according to the complaint, Ross caused the nominee depositors to submit to the bank subscription documents that falsely and misleadingly represented that the depositors were the true purchasers of the stock and had not entered into any agreements relating to the sale or transfer of the stock. As a result of this fraudulent conduct, the scheme generated approximately $1.75 million in total profits. In its complaint, the SEC is seeking to obtain permanent injunctions, full disgorgement plus prejudgment interest, and civil penalties against each of the defendants. Without admitting or denying the allegations in the complaint, Kundrat agreed to a permanent injunction and the payment of disgorgement plus prejudgment interest of $474,279 and a civil penalty of $120,000. Today's civil and criminal actions are the result of ongoing investigations by the SEC, the U.S. Attorney for the District of Connecticut, and the New Haven Division of the Federal Bureau of Investigation. The SEC also acknowledges the assistance and cooperation of the Connecticut Department of Banking, Securities and Business Investment Division in the investigation, which is continuing. The SEC has brought civil enforcement actions relating to IPOs arising out of mutual bank conversions in the past, which are set forth in the Investor Alert the SEC is issuing today. The Investor Alert is available at: www.sec.gov/investor/pubs/mutualconversion.htm. Anyone with information regarding this or similar schemes involving the New Haven Savings Bank conversion is asked to call the SEC's Boston District Office's Investor Services Line at (617) 573-8800. See also: Litigation Releases Contacts: Walter G. Ricciardi District Administrator (617) 573-8934 David P. Bergers Associate District Administrator (617) 573-8927 http://www.sec.gov/news/press/2005-93.htm Home | Previous Page Modified: 06/28/2005
SEC CHARGES INDIVIDUALS WITH FRAUDULENT SCHEME TO OBTAIN STOCK IN NEWALLIANCE BANKSHARES IPO FOR IMMEDIATE RELEASE 2005-93 Washington, D.C., June 28, 2005 - The Securities and Exchange Commission today announced the filing of civil fraud charges against five individuals in connection with the initial public offering of NewAlliance Bancshares, Inc. The fraud arises out of a scheme orchestrated by Defendant Robert Ross, along with Defendants Chance Vought, George Kundrat, John Lucarelli, and Frederick Raila, in which they illegally purchased stock in the NewAlliance IPO in violation of the federal securities laws. The SEC's action was brought in the United States District Court for the District of Connecticut. The United States Attorney's Office for the District of Connecticut also brought related criminal charges in connection with the scheme. Walter Ricciardi, District Administrator of the SEC's Boston District Office, said, "This action is a message to all those who would seek to deprive mutual bank depositors of their rightful opportunity to participate in their bank's IPO. Hopefully, the actions taken today by the SEC and the Justice Department will deter anyone considering this type of misconduct in the future." The actions arise out of the April 2004 conversion of New Haven Savings Bank, which was based in New Haven, Conn., from a mutual form of organization to a stock form of organization. Because mutual banks are owned by its depositors, they are given first priority in receiving the shares arising out of the conversion's initial public offering. The Commission's complaint alleges that, beginning in or about February 2004, Defendant Ross orchestrated a scheme in which he and others used seven nominee depositors to illegally obtain 490,000 shares of NewAlliance Bancshares stock at the initial offering price of $10 per share. According to the complaint, Ross recruited Defendants Lucarelli and Raila to locate depositors who would be willing to enter into arrangements with Ross. In these arrangements, Ross would put up the funds to purchase the stock and the depositor was to receive a small portion of the profits. The Commission's complaint further alleges that, in addition to providing funds himself, Ross recruited Vought and Kundrat to provide funds for the nominee depositors to purchase the stock. Further, according to the complaint, Ross caused the nominee depositors to submit to the bank subscription documents that falsely and misleadingly represented that the depositors were the true purchasers of the stock and had not entered into any agreements relating to the sale or transfer of the stock. As a result of this fraudulent conduct, the scheme generated approximately $1.75 million in total profits. In its complaint, the SEC is seeking to obtain permanent injunctions, full disgorgement plus prejudgment interest, and civil penalties against each of the defendants. Without admitting or denying the allegations in the complaint, Kundrat agreed to a permanent injunction and the payment of disgorgement plus prejudgment interest of $474,279 and a civil penalty of $120,000. Today's civil and criminal actions are the result of ongoing investigations by the SEC, the U.S. Attorney for the District of Connecticut, and the New Haven Division of the Federal Bureau of Investigation. The SEC also acknowledges the assistance and cooperation of the Connecticut Department of Banking, Securities and Business Investment Division in the investigation, which is continuing. The SEC has brought civil enforcement actions relating to IPOs arising out of mutual bank conversions in the past, which are set forth in the Investor Alert the SEC is issuing today. The Investor Alert is available at: www.sec.gov/investor/pubs/mutualconversion.htm. Anyone with information regarding this or similar schemes involving the New Haven Savings Bank conversion is asked to call the SEC's Boston District Office's Investor Services Line at (617) 573-8800. See also: Litigation Releases Contacts: Walter G. Ricciardi District Administrator (617) 573-8934 David P. Bergers Associate District Administrator (617) 573-8927 http://www.sec.gov/news/press/2005-93.htm Home | Previous Page Modified: 06/28/2005