NEW YORK - John Mazzuto, a corporate executive, and James Margulies, an attorney, for illegally issuing shares of stock to enrich themselves and others, and for engaging in fraudulent activity to inflate the stock’s value and deceive investors.   The defendants were charged with Grand Larceny, Scheme to Defraud, Conspiracy, Falsifying Business Records, and violations of the Martin Act (New York State’s securities fraud law). The crimes charged in the indictment occurred between 2004 and 2008 and relate to Industrial Enterprises of America, Inc. (“IEAM”), a public holding corporation located in Manhattan. The defendants illegally issued millions of shares of stock in IEAM to family, friends, and close associates, and engaged in myriad fraudulent activities in their scheme to steal more than $60 million. The defendants stole from the corporation and legitimate investors, and engaged in a variety of fraudulent accounting and securities practices to disguise the theft and pump up the value of the stock. 

“This was the wholesale looting of a public company for greed and self-enrichment. These defendants defrauded the market, the regulators, and their investors to line their pockets,” said District Attorney Cyrus Vance, Jr. “I congratulate the ADAs in our Major Economic Crimes Bureau for bringing to light this serious matter.”

According to the indictment and documents filed in court, Mazzuto, 61, a 20-year veteran of a prominent New York bank, was the architect of the fraudulent scheme and controlled it.  He acted as Chief Executive Officer (“CEO”), President, Assistant Secretary, and was a member of the Board of Directors of IEAM. For a substantial period of time, he also acted as Chief Financial Officer (“CFO”).  Mazzuto filed a personal bankruptcy petition in federal court in 2002 and was not discharged from bankruptcy until 2009 – a period of time encompassing the defendants’ scheme.  During this time, notwithstanding the bankruptcy, he personally obtained more than $15 million from IEAM, and used the illegally obtained proceeds to fund a lavish lifestyle, using millions of company dollars for homes, travel, and personal expenses.  These included a $3 million home in Southampton, a $2.5 million home in Palm Beach Gardens, and more than $500,000 for travel on private jets.

Margulies, 45, is an Ohio-based attorney who acted as outside counsel, CFO, and General Counsel of IEAM. He also acted as CEO and was a member of the Board of Directors in 2008.  According to documents filed in court, he personally obtained more than $6 million from the scheme.

The investigation is continuing.