Jere Ross and the stock scammers
That's Jere Ross on the left.
He's co-founder of Bush Ross, a prominent law firm in central Florida.
Ross was named one of the top 1,000 lawyers in Florida by being named to the "Legal Elite" list in Florida Trend Magazine in 2005.
Ross was involved in one of the largest penny stock pump and dumps in US history.
There is some evidence to support the contention that Ross was simply negligent about looking at what was going on and that he trusted what his clients told him. In fact, that is their defense.
But there is also evidence that suggests that Ross should have known what was going on and refused to help the evildoers.
You'll have to decide for yourself based on reading the information below as to whether you think he's a co-conspirator (knew the purpose and took action to further the purpose) and thus liable for the torts committed by the conspiracy responsible for the stock fraud.
Basically, the key question as far as liability is this: Does the evidence show that he should have known what was going on, even if he didn't actually know? Secondly, do his acts in furtherance of the conspiracy, which were done even after he found out, make him a co-conspirator?
I think a court could call this either way. Some courts will demand a higher standard of evidence against an attorney while other courts will demand a higher standard of scrutiny by the attorney.
I believe a fair court would have to weigh the evidence (such as 400 pages of wire transfers done to aid the conspiracy) and decide that even if he may not have known, he should have known. Take a look at this document I wrote that summarizes some of the key evidence: RossCourtSummary.pdf.
I've sued Bush Ross to bring the question before the court. I think there is a valuable public interest served by this lawsuit since if Bush Ross loses, it will cause lawyers to be a lot more careful about inadvertently helping evildoers.
The result was that I won my case against Bush Ross PA. They didn't appeal and promptly paid the judgment.
The following laws are relevant to what transpired here:
- Crime Doesn't Pay -- But Counsel May
- US CODE Title 18,1957. Engaging in monetary transactions in property derived from specified unlawful activity
- US CODE Title 18,1343. Fraud by wire, radio, or television
- US CODE Title 18,4. Misprision of felony
In particular, the Crime Doesn't Pay -- But Counsel May is an excellent overview. Here are some high points:
- Well-entrenched, expansive interpretations of these statutes enable the government to charge not only corporations, their officers, and other principal offenders, but sometimes even their attorneys, based on criminal acts by subordinate employees.
- Furthermore, although the offense of conspiracy necessarily involves two or more persons, the agreement may be formal or informal, explicit or tacit, and may be proven by purely circumstantial evidence
- ...the court’s comment that one who acts in furtherance of a conspiracy may be presumed to be a knowing participant. Thus, if nothing else, Tranakos underscores that attorneys must exercise caution to prevent clients from using them, wittingly or unwittingly, to accomplish illegal ends. See also, United States v. Enstam, 622 F.2d 857 (5th Cir. 1980) cert. denied., 450 U.S. 912 (1981).
- "willful blindness" (aka the "Sgt Schultz defense") is not effective as a defense. Butler is important for several reasons. It illustrates how criminal liability can be predicated on the provision of routine legal services, such as forming corporations and negotiating real estate transactions. The defendant in Butler was convicted of thirty six counts of wire fraud affecting a financial institution, each carrying a potential thirty year sentence, in addition to other charges. If the attorney in Butler was not in fact aware of his client's fraudulent intentions, the case also illustrates the danger of failing to scrutinize a client's motives and the risk that an attorney will be convicted on the basis of "willful blindness" (that is, deliberate avoidance of positive knowledge regarding the client's business), even if he or she lacked positive knowledge.
- United States v. DeLucca, 630 F.2d 294, 301 (5th Cir. 1980), cert. denied, 450 U.S. 983 (1981), held that an attorney had a duty to report a cocaine trafficking conspiracy that was formed in his presence
The stuff below is based on evidence I've obtained and contains my personal conclusions and beliefs based upon that evidence. You may reach a different conclusion than I did.
I've summarized what I found in my 272 page small claims case filing against Bush Ross PA.
Here is the subpoena I issued to them: SubpoenaBushRossForService3.pdf
Here is a letter to the judge as to why the subpoenaed documents are relevant: MaddenPacket-5-9-06.PDF
Ross wrote me in an email on August 15, 2004 at 2:50pm (emphasis mine):
- "Generally the SEC staff conducts an informal or, with Commission approval (which won't be difficult to obtain in this case), formal investigation. If they determine the likelihood of criminal activity (which, unfortunately, appears to be present in the current case), they will refer..."
- "As an aside, I give you credit for your efforts and hope that they are successful. There are few worse actions than market manipulation of the sort being practiced by whomever is behind the recent activity. They prey on the small investor who looks for the big hit. Good luck."
The evildoers essentially laundered the money (paying vendors and receiving the illegal profits) through the Bush Ross client trust account. The bad guys probably figured that by laundering the funds through the law firm, they could conceal who's behind it. Anyone trying to find Kos and his pals would get stopped out at Bush Ross's front door via attorney-client privilege. Even if they got the bank records directly from the bank, the transactions of interest would be obfuscated in the huge number of transactions.
But there was a slight problem with their strategy. Unlike bank transactions, all client trust fund transactions require extensive documentation (see Florida Bar Rule 5-1.2(b)(4) and 5-1.2(b)(5)(D) and 5-1.2(b)(6)(D)). So Ross has to know the reasons for the wires that the bad guys ask him to make.
As predicted by the bad guys, when the SEC tried to subpoena their records, Bush Ross claimed attorney-client privilege which is their ethical obligation to their clients (even clients that they might now know to be bad guys). Problem is that they didn't do their homework and client trust funds aren't subject to attorney-client privilege. Uh oh. Big boo-boo. To make matters worse, the SEC figured that out and made a motion to compel production of the Bush Ross client trust fund records citing the US Supreme Court rulings that they can't hide the stuff.
At least three of Bush Ross's clients (Bryan Kos, Donald Oehmke, Hartley Lord) have been charged by the SEC for securities fraud in the connection with illegal "pump and dump" securities fraud. A federal lawsuit has been filed against those clients (see links below). Also, Ross admitted to the SEC that Bush Ross handled transactions involving Jaynes and Kos.
When I did my investigation on the faxes I received, I found that all of the principal "contractors" used in the perpetration of the fraud were being paid by Bush Ross, P.A. including Tom Heysek, Bryan Kos, Fry Hammond Barr, Vault Studios, and Paul Spreadbury. See Anatomy of a stock fraud.
Camelot Promotions was paid $464,795.00 in seven wire transfers (six totaling $355,000 were from Bush Ross PA. The other was from Oehmke/Ventana). The contractors (Fry Hammond Barr, Spreadbury, Heysek, Kos, Camelot) in total were paid almost $1M, maybe more since I don't have all the invoices, but the ones I have total nearly a million bucks.
Not only that, but millions of dollars from the illegal stock trades were wired into the exact same Bush Ross bank account! All from funny sounding names. Now if it were me, I'd get a tad suspicious about what was going on. Jere Ross did the wire authorizations (normally, it's the partner associated with the client) so he presumably knew what was going in and out.
Now I've heard of lawyers paying settlement funds through their bank account for their clients. But frankly, I've never heard of a law firm paying almost a million bucks over just a few months for fraudulent press releases, TV ad campaigns promoting a stock "pump and dump" website, junk faxes to be sent hyping worthless stocks, and more and then accepting millions of dollars in profits from the scam into the same account. That's pretty amazing. Still, it is possible that Bush Ross truly didn't know what was going on.
Ross approved a press release from Paul Spreadbury, coaching him on the content, while at the very same time he wrote a press release on behalf of the company being touted totally disclaiming the fraudulent ones that Spreadbury sent out. One could reasonably conclude he is working both sides of the issue. He even gives the bad guys (both Spreadbury and Kos) an advance copy of the release! However, these actions could be construed as recognition that they are the bad guys and notifying them of what the company is doing to defend itself and telling them not to implicate the company in their press releases.
Check out these emails from my small claims case against Bush Ross PA (which Spreadbury turned over to the SEC):
- NOTE: To read these eml files, you MUST be in Outlook Express. You cannot just click on the hyperlink. Right click the hyperlink and do a Save Target As... to save it to the desktop. Then double-click on it.
- ConcordeProject.eml: Oemke forwards to Bryan Kos revenue and profit projections he admits he got from Mauricio Madero, who is an associate of Hartley at Concorde. This is important since it disputes the statements Ross wrote in his press release that no company official was contacted in connection with the release (PerBKosInstructions2.eml).
- ConcordeReworked Numbers.eml: Kos asks Mauricio to approve Andrew Kline's adjustments to the the projections. Kline refers to the numbers that were "given by Hartley." So these two emails show that Concorde's officers are providing information on a selective basis to Kos and Oehmke. Why are they doing that? It's contrary to their policy articulated by Jere Ross below. And it's also contrary to Jere Ross's press release saying the company hasn't provided any information
- PerBKosInstructions1.eml: this is the retraction release Kos instructed Spreadbury to generate and get Ross's approval before it is sent. Note that there is no contact info.
- PerBKosInstructions2.eml: August 10, 2004. This is the killer e-mail. Ross says Spreadbury's release is fine. So Ross is HELPING the bad guys!! And to make matters even worse, he's including an ADVANCE copy of the press release he's drafting that will be released later that day. In that release, Spreadbury and gang are painted as bad guys. So if they are bad guys and we know Ross now knows it because of the text he drafted, then why is Ross giving both Spreadbury and Kos an advance copy of the release (see To: and Cc: line of the email)? That gives them an unfair chance to short the stock. Clearly, Jere Ross knows Spreadbury is a bad guy since that's what his press release he's writing is all about. No honest attorney would then give the bad guys ANY advice whatsoever to help them and he certainly would NEVER given them an advance copy of any company press release since it violates company policy that he articulated to me a week later (see CNDD questions1 and 2 below ). Also, Ross knows that "John Richey" doesn't exist (which he acknowledges in Ross's press release), yet makes no mention to Paul about correcting that mistake.
- PerBKosInstructions3.eml: Jere Ross sends another email to Spreadbury again giving him advice to cover his tracks, i.e., make sure it isn't coming from the company. Question: why is Jere Ross helping the bad guys yet again? Only possible answer: he's a co-conspirator.
- PerBKosInstructions4.eml: This email is also very telling since it indicates that Kos is orchestrating things in conjunction with Ross. Kos says "we are going to let them do theres [sic]." We can only mean Ross and Kos since only Ross has "control" over what Concorde issues. So Kos and Ross are going to permit Concorde to issue a press release!! Basically, it means Kos and Ross are conspiring with each other and controlling how Ross's other client (Lord / Concorde) should act.
- CNDDquestions1.msg: When I tried asking Hartley some hard questions on what he told me, Jere Ross shoots back an email saying that they can't tell me anything: "it may not provide on a piecemeal basis, to select investors or others having an interest in the company, information concerning the company which the average investor would reasonably wish to have in order to be able to make an informed investment decision concerning those shares." Well, gee, if that's the policy then why did you give Paul Spreadbury and advance copy of the company's press release?
- CNDDquestions2.msg. He again confirms "the Company is not in a position to provide any information about its operations selectively." So he clearly knows it's improper to do so, yet he gave Spreadbury that advance copy. Pretty hard to explain that if you are in cahoots.
- IneedYourHelp.msg: Aug 15, 2004 email from Jere Ross where he admits that what happened in this case "appears to be" criminal and he admits that he represented TWO corporations that Kos was involved in (March to June). That's critical because it proves Kos wasn't a client from July through Aug 15 making emails between Ross and Kos not privileged!
Docs from my small claims case:
- BushRossSmallClaimsCase.pdf: the 272 pages of argument and evidence in my small claims case against them (Case 205SC002909 filed November 3, 2005; heard Jan 9, 2006). Well worth reading.
- BushRossLetterToMadden.PDF: they ask for dismissal and attack my credibility
- Kirsch reply to Bush Ross letter.doc: I point out the holes in their letter
- SubpoenaBushRoss.PDF: the subpoena I served on them for documents. If they fail to produce the docs, they'll lose the case.
- BushRossLetterToMadden-2-23-06.pdf: They try again to argue that the case should dismissed. This letter makes some key admissions, e.g., Jere Ross is the ONLY member connected with this matter which means Ross had to be THE person who authorized the wires for Kos. And they give the dates of representation of Kos's company (though they only mention ONE but we know there are TWO from the Aug 15 email above).
- KirschLetterToMadden-2-27-06.pdf: I respond to their letter. Basically, courts all over the country have held that there is personal jurisdiction over the senders in the place where the illegal fax is received. And, because Bush Ross had a legal duty to know the purpose of each wire transfer, and I was able to trace the payment for sending the faxes back to Bush Ross, they are liable. They lost their motion and trial will be held on March 20, 2006.
I believe Jere Ross may be liable as a co-conspirator based on the following allegations and evidence:
- He approved a press release from the scammers, and then a few days later wrote a press release that disclaims the press releases from the scammers. In short, he wrote the company didn't know who was involved in the illegal press release. As counsel to CNDD, it would have been unlikely for him to have approved the fraudulent press release without getting approval from the company. The company could have lied to him.
- All of the contractors employed by the conspiracy were paid from Bush Ross; how could Ross have approved so many transactions without asking a few questions about where this money was going. Lawyers don't transfer large sums of money like this without knowing what the purpose is. It is simply pretty hard to believe that a lawyer who was integral to the securities transactions going on would approve all this multi-hundred thousand dollar transactions related to the penny stocks without asking questions. It doesn't pass the reasonable man test.
- Millions of dollars of illegal profits came into the law firm from offshore trading accounts. Anyone with half a brain would start asking questions at this point.
- An employee at Bush Ross admitted to me that Ross talked to Bryan Kos all the time. Yet he wouldn't acknowledge whether Bryan Kos is a client. He just said to me in an email that "he knew him." He talking to one of the world's most prolific pump and dump promoters (and email spammers) all the time and doesn't know that what Kos is doing is illegal? Gimme a break.
- Ross admitted in an email to me on August 15, 2004 that he was involved with two companies associated with Bryan Kos
- Ross is a VERY smart guy
- Ross handled all the finances for Kos. How could he do that and be clueless as to what is going on?
- Lawyers, in general, are super precise people. Jere was named one of the 200 best lawyers in Florida. He's a real smart guy and he even admitted it in his affidavit in my case. There is NO possible way that he's going to be "duped" into making LOTS of payments of LOTS of dollars to LOTS of people to do illegal things and not know about it. That is simply HIGHLY unlikely.
In addition, I believe that Bush Ross, the law firm, may be liable as a co-conspirator (and thus liable for any torts committed in furtherance of the conspiracy regardless of who actually committed the tort) based on the following allegations and evidence:
- Ross is an employee of Bush Ross and was at all times acting in the scope of his employment so his firm is liable due to respondeat superior. It is no more complicated than that.
- Ross was an officer of the law firm at the time of the activities.
- Ross was a key player in the conspiracy to commit securities fraud including handling the finances, making the payments, approving fraudulent press releases, etc. (see above)
- Because Ross knew he was facilitating a tort, and Ross is an officer of the law firm, it follows that the firm itself had knowledge of what was going on.
- Bush Ross corporate assets were used in the conspiracy, e.g., the bank account was used, communication was done by calling the law firm, other co-conspirators were clients of the firm, etc.
- Ross was acting as an agent of Bush Ross in the performance of illegal acts in furtherance of the conspiracy
- Ross was, at all times, acting inside his duties in the course and scope of his employment with Bush Ross, e.g., the co-conspirators were clients, they would call him at work, he would use the corporate trust fund to launder their funds, he would use the corporate email and phone system to communicate with them, he was working on the legal matter required to pull off the fraud, he billed his clients through the law firm for services rendered and the clients paid their bills and the company accepted payment
- The law firm can't claim that "illegal activities" were outside the scope of his employment and therefore they aren't liable because they ratified the actions by 1) accepting their money, 2) allowing them to continue after the company (i.e., Ross himself qualifies since he was an officer) was made fully aware of the actions.
- Even after most everyone in the law firm was aware of the evidence against Ross, Ross was not fired. Therefore, his actions were de facto considered by the firm to be within the scope of his employment.
- The faxes were paid for by Bush Ross P.A. Payment is required in advance of the faxes being sent so this caused the event to occur (it was not a bill payment after the fact).
- The firm made some transfers of funds with the knowledge that the funds where derived from illegal activity
Therefore, the law firm, which paid the perpetrators and their consultants to commit the fraud, is liable as well as Ross. A law firm cannot knowingly aid in the commission of a crime and then claim it is legal because they ran it through an account number which is normally used for transferring customer funds for legal purposes. It doesn't matter what account they used. The fact that the law firm KNOWINGLY transferred money (even if it was client money) to facilitate an ILLEGAL PURPOSE makes them liable in the conspiracy and liable for all the torts arising from that conspiracy, including the sending of the junk faxes and also the securities fraud as well.
The point is pretty simple: if you (person or company) are a knowing agent of a principal to commit a tort, you and the principal are jointly and severally liable for the tort. Similarly if you and a principal conspire to commit a tort, you are both liable for all torts committed to achieve the purpose of the conspiracy, regardless of whether you are a direct actor.