As previously discussed on this website, in August 2010 Federal prosecutors unsealed a criminal indictment against a California businessman Samuel “Mouli” Cohen of defrauding at least 55 investors out of more than $30 million in connection with a publicly-traded company called Ecast, which Cohen reportedly misrepresented that the Company was on the verge of being acquired by Microsoft Corp.
On October 6, 2010, Cohen’s Attorney filed a motion to release Cohen on bail. The government has since filed a reply brief opposing the motion to release Cohen stating that he may be a “serious risk of flight.” Following an oral argument held on October 19, 2010, Judge Susan Ilston ultimately denied Cohen’s motion for bail release.
Upon reviewing the case filings, Federal prosecutors have outlined several additional allegations regarding Mr. Mouli’s “criminal enterprise”:
- The government has contended that Cohen sold more than six million shares of Ecast to various investors when in fact, the most shares Cohen has ever allegedly possessed was five or six million. Cohen also received more than $30 million in additional funds (in addition to the original investment) which was to be used for fees and costs associated with finalizing Microsoft’s alleged acquisition of Ecast. The government contends that the both the Microsoft acquisition as well as the “additional funds” received to complete the acquisition were a complete fabrication.
- The government has also alleged that “$20,000,000 of the money stolen by [Cohen]…passed through the defendant’s wife’s bank accounts and she financed the publication of her book…with money the defendant stole from the victims.“ They further argue that more than $3 million of the money has been sent to Swiss bank accounts, which the government contends reflects that Cohen may be hiding assets elsewhere. In his response, Cohen’s attorney stated that Cohen became “concerned” about Wells Fargo during the financial crisis in 2008 and to “protect shareholders and his own family” he transferred approximately $2 million to a Credit Suisse account.
- At the time of his arrest, Cohen had accumulated a mountain of debt including more than $450,000 for private jet rentals and credit card expenses. He also reportedly “several million dollars” in debt with another individual for defrauding him in connection with investments unrelated to Ecast. On top of all this, he also reportedly owes his former counsel, Skadden Arps, several millions in unpaid legal fees. The government’s reply brief further disclosed:
“At the time of his arrest the defendant was living in a mansion in Beverly Hills with a rental payment of approximately $50,000 per month. His wife drove a Jaguar and he was chauffeured around in a Bentley. He employed body guards, a cook, and several other staff at his mansion. Nevertheless, he expects this Court to believe that upon being arrested he instantly and inexplicably became penniless.”
- Commenting on his wealth, Mouli has stated that he has “developed a business development fund” which at the time of his arrest was valued “by accountants at nearly $100 million (based on the prognosis for the companies being developed).”
- Over the past several years, Cohen has offered himself to investors as a highly successful investor but apparently forgot to inform the IRS! The government alleges that they are “unaware of the defendant earning any actual income by a a legitimate means over the last decade” and if any of his “ideas/companies have actually generated any income for him….[Cohen] has failed to pay tax on that income.” In Cohen’s response, he claims that he regularly filed income tax returns and that in the view of his “prominent lawyers and tax experts,” tax was not due because of the “nature of the companies and the companies that generate these funds.”
- Perhaps the most striking revelation offered by the government to date are Cohen’s telephone calls that the government recorded while he was in jail. The government alleges that during these conversations, Cohen made statements suggesting he has “significant” assets available which upon his temporary release, “it will be all over” suggesting he is a serious risk of flight.
- Sadly, there have been numerous reported correspondences between Cohen’s victims and the Justice Department dating back to 2006 requesting the government to take a closer look at Cohen. Additionally, the SEC began looking into Cohen in at least July 2009 when they reportedly sent him a letter requesting a voluntary production of documents. Ironically, on August 3, 2010 Cohen received an exoneration letter from the SEC just days before his arrest. Could this have been the government’s ploy to get Cohen’s guard down before his arrest as court transcripts suggest they were seeking to apprehend him in early July 2010? (We are giving the SEC the benefit of the doubt here!)