On August 8, 2013, securities attorney Martin Weisberg, a former partner at Baker & McKenzie LLP, was sentenced to two years’ imprisonment and three years’ probation on his convictions for money laundering and consiracy to commit securities fraud. In addition, Weisberg was ordered to pay $297,500 in restitution and $250,000 in forfeiture. He was also disbarred as a result of his felony convictions and role in the scheme.
The securities fraud conviction stemmed from Weisberg’s role in a penny stock scheme involving the issuance of publicly traded stock in two companies, Xybernaut Corporation and Ramp Corporation. Both were once high-flyers trading on the Nasdaq, but five years into the new century, they’d fallen on hard times. According to the charges, Weisberg conspired with two Israeli investors, Zev Saltsman and Menachem Eitan.
He did so to conceal their ownership and control of securities issued in a series of private placements.
They did so while acting as outside securities lawyers for the two companies, and as a member of Xybernaut’s board. In return for his help, the Saltsman and Eitan paid him kickbacks that were, obviously, never disclosed in the companies’ SEC filings. The Israelis also failed to file with the SEC the Schedules 13 that were required of them as company affiliates. Weisberg was paid about $3.1 million, of which he retained $1.7 million.
The two companies filed for bankruptcy in 2005; criminal charges against Weisberg, Saltsman, Eitan and company officers were filed in 2007.
In connection with the money laundering conviction, Weisberg was hired by a corporate client to set up a $30 million escrow account. The lawyer did that, but advised the client that such an account could not bear interest. In reality, Weisberg did create an interest-bearing account. Over a 14-month period, it generated about $1.6 million in interest. He wired $1.3 million out of the account to pay his own personal and business expenses.