Months after serving two years in prison for securities fraud, former Delaware County stockbroker Howard Appel launched a new swindle.
Appel, 57, of Wayne, Pennsylvania, controlled millions of shares of publicly traded companies including Red Mountain Resources, a Texas oil and natural gas company, and Virtual Piggy, Inc, a PayPal-like payment service for children.
Since Appel had been stripped of his broker’s license by financial regulators in the 1990s and had fraud felonies on his record, he needed cover if he wanted to play the market again.
Appel this week admitted in federal court in Philadelphia that for about three years starting in May 2011, he enlisted friends and family to hold shares that he secretly owned. Any time the price of the stocks dropped, his associates would buy shares based on confidential insider information to artificially prop up the share price.
During this same time, Appel was recruiting investors to make large stock buys, touting the success of the companies. But he did not disclose that he was selling those same shares, sometimes to the very investors he had advised to purchase stock.
Appel arranged these deals under the guise of consulting work, when in fact he was secretly a major stock owner. He also did not widely share that he was on supervised release while he was orchestrating the scheme.
“The general public has no idea that when they see all these trades going on, it looks like, ‘Hey people are interested in this company, there’s a lot of volume.’ It’s really a secret deal between Appel and these insiders,” said Assistant U.S. Attorney Michael Lowe, who prosecuted the case.
In 1991, financial regulators banned Appel for life from practicing as a stockbroker over accusations of fraudulent activity. In 2004, Appeal was convicted in New York of corruption, securities fraud and money laundering in a “pump-and-dump” scandal. After serving two years in prison, he was released in 2010.
Appel is currently incarcerated as he awaits his November sentencing in front of U.S. District Judge Paul Diamond in Philadelphia.
Government lawyers during the plea agreement hearing did not request that Appel be jailed before his sentencing hearing. Still, Diamond ordered his detention, a rare move in white-collar cases.
The maximum prison time he faces under that plea deal is five years for one count of conspiracy to commit security fraud.
“He’s a habitual fraudster,” said Lowe. “This is the third time now that he’s admitted to participating in securities fraud.”
In all, prosecutors allege that Appel netted up to $4 million in profits from his schemes. Authorities are asking that Appel forfeit that amount back to investors who were defrauded.
New York-based lawyer Derek Cohen, who is representing Appel, declined to comment on the case.