Tuesday, April 17, 2007

My Days as an Accomplice

I used to work for the guy featured in the Justice Department press release below. I was actually an officer for one of his subsidiary companies that dealt with a specific sort of investments. While I was involved with the company it wasn't making any new transactions, and I handled very little money, but my name was all over it. There was a point when I was losing sleep over the possibility of being dragged into the scandal despite the fact that I knew absolutely nothing of any interest. However, I hadn't thought about it for ages until an ex-coworker forwarded me a link to Mr. Kornman's guilty plea.

The main company - for which I also worked - went bankrupt a few years ago due to an unrelated lawsuit by a former executive, but Kornman continued doing business under the name of a different company. If a cheated ex-employee hadn't brought the company down, both litigious, disgruntled clients and a pissed-off IRS were poised to do so. In the end, it was the SEC that really did him in.

This was my first job right out of college. I started there as an executive assistant. Although I knew the firm did some sort of financial consulting, they didn't give any details about their activities until after I had signed about 100 pages of employment contracts. I wasn't crazy about the idea of working for a company that helped rich people avoid paying taxes, but I believed that they were just in the business of giving legal advice - the operative word there being "legal". Knowing what I do now, that was rather naive of me. I truly do not believe that I directly performed any illegal or unethical acts, but my karma took a major hit being associated with that place as long as I was.

At least it motivated me to give up my life as a corporate cog, and I'm much happier working at a nonprofit now. I certainly hope the good work I do my best to accomplish will outweigh the time I spent aiding and abetting - even in a small way - an admitted liar and cheat.

D O J Seal
U.S. Department of Justice
United States Attorney
Northern District of Texas

1100 Commerce St., 3rd Fl.
Dallas, Texas 75242-1699

Telephone (214) 659-8600
Fax (214) 767-0978


CONTACT: 214/659-8600
APRIL 10, 2007


DALLAS --- Gary M. Kornman, age 62, a licensed attorney, licensed securities professional, and tax advisor, pled guilty yesterday in federal court in Dallas to one count of making false statements to the U.S. Securities and Exchange Commission (SEC), announced U.S. Attorney Richard B. Roper. The maximum statutory penalties the Court can impose are five years in prison, a $250,000 fine, and restitution. He is scheduled to be sentenced by U.S. District Judge Jorge A. Solis on July 11, 2007.

According to the indictment, Gary M. Kornman was an officer of The Heritage Organization, L.L.C. and was a licensed attorney who held Series 6 and Series 63 securities licenses. He operated and controlled Heritage Securities Corporation, a securities broker-dealer registered with the SEC. Kornman sold tax shelters and estate planning services to wealthy individuals and was responsible for the management and operations of Heritage.

According to documents filed in Court, Kornman participated in a voluntary telephone interview with investigators from the SEC on October 29, 2003 regarding its investigation into suspicious trading activity engaged in by Kornman. During that interview, Kornman told the SEC investigators that he did not know who possessed trading authority over the brokerage account for a hedge fund through which he engaged in trading activity in MiniMed, Inc. stock in February 2001. MiniMed was a company that was, until its acquisition by Medtronic, Inc. in August 2001, a publicly traded company whose shares were listed on the National Association of Securities Dealers Automatic Quotation National Market System (NASDAQ).

Kornman’s statement was false. He knew that he personally possessed trading authority over the brokerage account for the fund through which he conducted the trading activity in February 2001 that was under investigation by the SEC. In addition, Kornman admitted that he made the statement intentionally, knowing that it was both false and material to the SEC’s investigation. Kornman also admitted he made the false and material statement for the purpose of misleading the SEC in its investigation into his MiniMed trading activity.

U.S. Attorney Roper praised the investigative work of the Securities and Exchange Commission, Fort Worth Office, and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Jeffrey J. Ansley and Special Assistant U.S. Attorney Toby M. Galloway of the SEC.



Anonymous said...

I also worked for him as "Marketing Director" in the earlier days ('85-'88). Many things obviously did not change over the years. Back then were the early stages of what became somewhat of an empire for him. The shuffling around of the business secretly, contant changes in the names of the business entities, etc. tipped off us naive young business professionals-to-be, right out of college, that something was not above board there. Eventually, almost everyone I knew from there, moved on and a fresh supply of smart college grad talent, as naive as we were and ready to earn their wings, was brought in.

Upon leaving, I and many others thought Gary was operating in such a way as to end up in prison, not "if" but "when". Surprisingly, he's lasted a lot longer than most of us would have thought and his penalties are much less than the trouble we thought he was going to get into.

I'm awfully glad that after 3 years of business "education" there, I learned a lot of what to do and what NOT to do and had the opportunity to move on.

Anonymous said...

Add another to the list - mid 80s. I sometimes think we should have a reunion of Whitehall alumnae. I would make an effort to attend.