GenesisIntermedia Investor to Plead Guilty in Fraud

An investor in GenesisIntermedia Inc., a former telemarketing company in Van Nuys that was 75% owned by Saudi financier Adnan Khashoggi, agreed to plead guilty to helping manipulate the company’s share price in a conspiracy that netted more than $130 million, U.S. prosecutors said Thursday.

Kenneth D’Angelo, 60, agreed to plead guilty to charges that he conspired to commit securities fraud and wire fraud, and a count of wire fraud. He and co-conspirators used several methods to raise GenesisIntermedia’s stock price to as high as $18.77 in 2001, including making secret payments to have the company’s shares touted on financial TV programs, the Justice Department said.

The stock now is virtually worthless.

Ultimate Holdings Ltd., a Bermuda-based company headed by Khashoggi, held 75% of the company’s shares at the time of the alleged conspiracy. Khashoggi is not mentioned by name in the indictment filed Thursday, though it does say that one of D’Angelo’s co-conspirators was “a Saudi Arabian national” and “purportedly a wealthy international arms dealer and financier.”

The investigation is continuing, said U.S. Atty. Debra W. Yang in Los Angeles.

Court papers say that, between April 2001 and September 2001, D’Angelo took part in about 18,000 trades of GenesisIntermedia stock, valued at more than $87 million in all. He used brokerage accounts he controlled, including at a small brokerage operated by relatives.

The stock soared from $7.50 in early April 2001 to $18.77 by June 28, and held above $17 until early September of that year. The company, which operated Internet kiosks in shopping malls, continued to lose money throughout that period.

The stock was touted in May 2001 by Rafi Khan, a Southland stock promoter who had been barred from the securities industry by the Securities and Exchange Commission.

As the stock surged, the conspirators were able to use the equity as collateral for brokerage loans. The scheme ultimately led to the bankruptcy filings of two brokerages, MJK Clearing Inc. of Minneapolis and Native Nations Securities Inc. of New Jersey, when GenesisIntermedia’s stock collapsed in the fall of 2001 and the collateralized loans weren’t repaid.

D’Angelo has agreed to cooperate with the government’s investigation into the conspiracy, the Justice Department said.

He faces up to 10 years in prison and will be required to pay restitution to victims.