Rabbi Convicted of Fraud In Sales of Penny Stocks

A rabbi accused of using a religious organization as a front for illegal penny stock manipulation has been convicted of 10 felony counts that include perjury, obstruction of justice and conspiracy to commit securities fraud and tax evasion.

Benjamin G. Sprecher, 53, a New York rabbi who is also a lawyer, had been accused of using Kahila Kadeshia Parkofski, a tax-exempt religious organization he established, to evade taxes and siphon profits from penny stock fraud to himself and associates.

Prosecutors said that, as far as they could learn, Sprecher has no congregation but maintains a securities law practice in Manhattan. Kahila is an inactive shell company.

The guilty verdict on all 10 of the counts against him was delivered by U.S. District Judge Miriam Goldman Cedarbaum in New York late Thursday and was made public Friday. It followed a non-jury trial late last year.

Ivan S. Fisher, Sprecher’s lawyer, called the verdict “extremely sad” and said it probably will be appealed.

The conviction capped a seven-year investigation by the Securities and Exchange Commission and federal prosecutors. During the inquiry, Sprecher filed numerous civil suits alleging harassment by government lawyers.

Sprecher was accused of illegally selling stock on the over-the-counter market for small, unregistered shell companies in Utah and Nevada.

In a 76-page opinion, the judge found that Sprecher “engaged in fabrication and forgery” by creating sham corporate records in an effort to throw investigators off his trail. In addition, the judge found, Sprecher lied under oath to an SEC enforcement attorney.

The SEC lawyer, Thomas von Stein, who launched the inquiry in the mid-1980s, said, “We’re pleased by the verdict,” but he declined further comment.

In one instance, the judge found that Sprecher had illegally conspired to sell to the public 39 million unregistered shares of World Wide Medical Technology, a shell corporation with no real assets.

Through a complicated scheme involving a reverse stock split and issuance of new shares, Sprecher arranged for the public holders of the 39 million shares to end up owning only about 3% of the company, while he controlled the rest. Sprecher then arranged to merge World Wide with another company and use the merger as a pretext to illegally sell more unregistered stock to the public at an artificially inflated price.

After the conviction, Sprecher, who had been free on bail, was placed under house arrest. He faces a maximum of 50 years in prison and a fine of up to $2.5 million.

The judge is expected to set a date for sentencing at a bail hearing Tuesday.