Mea Culpa for Daniel Rubin

Daniel Rubin, the “playboy” investment banker who once ran for mayor of Lake Helen, Florida, has joined the ranks of convicted stock manipulators.  Rubin has pleaded guilty to securities fraud and market manipulation.  As part of his plea bargain, Rubin has agreed to forfeit $2 million to federal authorities.  He faces a prison term of up to 25 years. 

Prosecutors had charged Rubin and the Rubin Investment Group with fraudulently acquiring and selling shares of public companies between August 2002 and October 2003.  One of his ventures, 1-800-ATTORNEY, operated an attorney-referral service in Lake Helen, Florida.  As CEO of 1-800-Attorney, Rubin purportedly assembled a group of cold callers who induced tiny public companies to sell large blocks of shares to Rubin Investment Group at discounted prices.  Rubin then dumped his shares, realizing substantial profits while driving down market prices.

At his guilty plea proceeding, Rubin acknowledged that he directed his cold callers to tell small cap companies that he would recommend their shares to investors in the Rubin Investment Group, and would not sell his own shares in the open market.  He now admits that he had no intention of honoring that promise.

On October 2, 2003, Rubin was arrested, and charged with orchestrating a “pump and dump” scheme involving shares of two small, struggling companies - Marx Toys & Entertainment Group and The Classica Group.  Authorities said that Rubin received 1.2 million shares of Classica stock, and 6.8 million shares of Marx Toys’ stock, in consideration for consulting services that he never actually rendered.

That, evidently, was part of a pattern.  At the plea proceeding, Rubin also admitted to wrongdoing with respect to his acquisition of shares of AuGRID Corporation (Pink Sheets: AGHD).  On September 30, 2003, AuGRID announced that Rubin and Rubin Investment Group had paid AuGRID $1.5 million to exercise common stock exercise options for AuGRID shares.  Those options had been awarded in exchange for Rubin’s commitment to provide consulting services.  A Form 13D filed on October 1st revealed that Rubin had acquired 200 million shares of the Company – or 36% of the outstanding shares.  In fact, Rubin had exercised options to acquire 280 million AuGRID shares. 

Rubin now admits that he refused to pay for the options but accepted the shares and subsequently sold them.

Rubin’s involvement with AuGRID was detailed in a series of articles published by StockPatrol.com, beginning in October 2003.  See, Augrid Corporation — Part I, Another Rubin-Esque Venture?

Several other members of the senior management team at Rubin Management Group previously entered guilty pleas on related charges.  Daniel Nourani (the former managing director of the Rubin Investment Group in Los Angeles); Glen Santha (former director of investment banking); and Andrew Sakska (former director of mergers and acquisitions) each face a maximum sentence of 25 years’ imprisonment and a fine of up to $250,000, or twice the gain or loss from the offenses.

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Hartley Bernstein and StockPatrol.com have been featured in The New York Times, The Wall Street Journal, Forbes, Barrons, Crain’s New York Business, Details Magazine, Chief Security Officer Magazine, and Investment Dealers Digest.