Paul Pelosi Jr’s Adventures in Pennyland

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Paul Pelosi Jr’s Adventures in Pennyland

https://www.securitieslawyer101.com/2022/paul-pelosi-jrs-adventures-in-pennyland/

In mid-January 2022, British tabloid the Daily Mail published a https://www.dailymail.co.uk/news/article-9827893/Nanchttps://www.dailymail.co.uk/news/article-9827893/Nancy-Pelosis-son-Paul-involved-FIVE-companies-probed-feds.htmly-Pelosis-son-Paul-involved-FIVE-companies-probed-feds.html]long story[/url] about U.S. House Speaker Nancy Pelosi’s son Paul Jr, in which it was alleged that he’d been involved in a number of shady businesses, some of them targets of Securities and Exchange Commission investigations and enforcement actions. The piece was subsequently picked up by the NY Post and several Republican political organs. We’ll take a look to see if there’s any fire to go along with all the smoke.

Paul Pelosi Jr is the only son of Nancy and Paul Pelosi; their other four children are daughters. (One of them, Alexandra, memorably said of her mother on CNN: “She’ll cut your head off and you won’t even know you’re bleeding.”) Like his siblings, Paul isn’t a kid; he’s 52 and has worked as an attorney and environmentalist since he was in his 20s. He graduated from Georgetown University and has been a member of the California Bar since 1996 and a California real estate broker since 2002. He’s been fairly low-profile in his business and personal life. His sisters Christine and Alexandra are better-known.

At LinkedIn, Paul lists Due Diligence, Corporate Finance, Start-ups, Corporate Development, Venture Capital, New Business Development, Investment Banking, and more as “skills” he possesses, and at which he presumably excels. Early in his career, he worked for Bank of America, but more recently, he’s been associated with smaller enterprises, some of them startups. As everyone who follows the OTC market knows, that choice can present its own dangers.

The Mail says that Paul “was involved in five companies probed by federal agencies—but has never been charged himself,” adding that “[a] shocking paper trail shows Paul Pelosi Jr.’s connections to a host of fraudsters, rule-breakers and convicted criminals.”

InfoUSA

In 2007, Paul had a full-time job working as a home loan officer at Countrywide Home Loans in San Mateo. He was nonetheless hired by data collection company InfoUSA as a senior vice president earning $180,000 annually, presumably in addition to his salary from Countrywide. InfoUSA was the creation of Vin Gupta, an Indian immigrant who’d become an enormous success in the ‘80s and ‘90s. Originally called American Business Information (ABI), by 1994, the company traded on the Nasdaq. In 1997, Gupta stepped down as CEO, saying he believed more experienced management was needed.

Nonetheless, he took over once again the next year and renamed the company InfoUSA. In 2008, the name was changed a third time to InfoGROUP. In 2010, Gupta sold the company for $680 million. By then, Gupta had acquired more than 45 companies to combine with InfoGROUP and had expanded operations worldwide.

But not all was sunny at the company. For years, Gupta had treated it as his own private property, arranging for very large amounts of money to be paid to him personally. On March 15, 2010, the SEC sued Gupta, a board member, and two company employees: Vasant H. Raval, former chairman of the audit committee, and Rajnish K. Das and Stormy L. Dean, each of whom had served as CFO of InfoGROUP at different times. How did the SEC become interested? Some shareholders became aware of Gupta’s “perks” and sued him in Chancery Court in Delaware, where InfoUSA/InfoGROUP was incorporated. The SEC learned of the action and opened its own investigation.

The SEC alleged that between 2003 and 2007, the company gave Gupta approximately $9.5 million in unauthorized and undisclosed perquisites. The cost was either billed directly to InfoGROUP or through Annapurna Corporation or Aspen Leasing Services, two entities controlled by him. According to the relative complaint:

Gupta’s expenses that were reimbursed by Info as business expenses included, among many others, costs related to private jet travel to Italy, the Virgin Islands, Cancun, Miami, and Las Vegas; travel and accommodations in South Africa; computers for his sons; 28 club memberships; over 20 automobiles; certain costs associated with a home in Aspen, Colorado and a winery in Napa Valley, California; and personal life insurance policy premiums.

Gupta agreed to pay disgorgement of $4,045,000, prejudgment interest of $1,145,400, and a penalty of $2,240,700 and consented to an order barring him from serving as an officer or director of a public company. Raval also settled with the SEC. At the time the complaints were filed, the case against Das and Dean was ongoing.

So then. What does all this have to do with Paul Pelosi, Jr? Nothing, really. Gupta’s been supportive of Democratic politicians for decades; he and Bill Clinton used to play golf together. He contributed to both Clintons’ political campaigns and hired Bill as a “consultant” once he’d left office. But the Mail cites an earlier investigation; one opened by Iowa Attorney General Tom Miller in 2005. It examined telemarketers who defrauded the vulnerable elderly. Two of the companies Miller considered of interest were InfoUSA and its subsidiary Walter Karl Inc. In 2007, running for the Democratic nomination for the presidency, Hillary Clinton was evidently aware of the investigation and made a point of warning older voters: “We’ve got to send out the alarm: Seniors should be extremely careful in buying anything that someone tries to sell you over the telephone.”

InfoUSA offered its own explanation:

“In response to the Iowa investigation, Walter Karl exited this business and the one sales representative involved in this area left the company,” the infoUSA statement reads. “While infoUSA can not manage what a client does with the publicly available information infoUSA provides, the company has a strict policy about not selling data to companies who act illegally.”

Ultimately, the company was not charged.

Again, all that has nothing to do with Paul Pelosi. He didn’t work for InfoUSA until after the investigation was closed. Probably Gupta admires Nancy Pelosi and was happy to have Paul come on board. But there’s no indication they were friends. According to the Mail, a Newsmax reporter asked Pelosi in 2007 whether Gupta had hired him to get access to his mother. Pelosi replied:

I don’t think that’s really what happens. I don’t see it that way, but I could see why you’d ask the question… I guess you always wonder why somebody hires you, right?

We wonder why he was talking to someone from Newsmax. And—flash forward—why did he spend New Year’s Eve 2018 at Mar-a-Lago, chatting with Ivanka Trump?

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Natural Blue Resources

In 2009, just two years after Paul went to work for InfoUSA, he was recruited to help set up an environmental investment company called Natural Blue Resources (NTUR). So he entered Pennyland and entered it in the worst possible way. Presumably, Pelosi found the offer he received attractive because, as the SEC said, Natural Blue’s “purported mission was to create, acquire, or otherwise invest in environmentally friendly companies.”

Who recruited him, along with Toney Anaya, a former New Mexico governor?

Since founding Natural Blue together as a private company, and at all relevant times when it was a public company, [James E.] Cohen and [Joseph A.] Corazzi provided direction to the Company’s board and management. Among other things, Cohen and Corazzi recruited Anaya and Pelosi to serve as officers of the public company, recommended various board members, officers, employees, attorneys, and auditors. Cohen negotiated with third parties (including acquisitions and reverse mergers) on behalf of Natural Blue, participated in board meetings, recruited investors, reviewed and commented on public filings, and had formal authority over Natural Blue’s brokerage account. While Corazzi’s role was not as prominent as Cohen’s, Corazzi also helped to select Anaya (and his successor) as the CEO, recruited investors, handled press releases, managed the Natural Blue website, reviewed and commented on public filings, and negotiated a business transaction with a Massachusetts-based company that resulted in new management.

A few short minutes with a good search engine, or at the SEC website, would have shown Pelosi and Anaya they’d fallen in with a bad lot. Cohen had once been a registered representative who’d worked for a number of brokerages but, in the end, was barred from the profession after a 2004 criminal conviction for attempted enterprise corruption and attempted grand larceny. Pelosi himself had been a broker for about 10 years; it would have been easy for him to check Cohen out.

Corazzi was even more colorful. In the 1990s, he’d served as Chairman and CEO of one of the funniest OTC scams of all time, Las Vegas Entertainment Network (LVEN). In its NTUR litigation, the SEC says only that Corazzi’s old company was “sued by the Commission for fraudulently overstating its assets,” but what really happened went far beyond that. The fun began with a $95 million unsolicited bid made by Corazzi/LVEN for Jackpot Enterprises, a Las Vegas entity.

It turned out that part of the $95 million would be supplied by a mysterious but fabulously wealthy man called Dr. Fred Cruz. Cruz had his own company, called Countryland Wellness Resorts, which claimed it had sold a mine it owned for $2.7 billion in treasury bills and certificates of deposit issued by… the Dominion of Melchizedek. The DOM was a fake country that did—and still does—describe itself as an “ecclesiastical sovereignty.” Like the Vatican, except that its only properties are some atolls in the Pacific Ocean. We are not making this up:

The Company sold its mining interests in Plumas County, California to a foreign ecclasiastical [sic] sovereignty in exchange for Treasury Bills (“T-Bills”) having a face value of $2,418,000,000.00, issued by the Dominion of Melchizedek (“DOM”). The T-Bills, payable without interest, mature on May 27, 2005.

The Company has booked the T-Bills at face value. As additional consideration, DOM has credited the account of the Company 300,000,000.00 Dominion Dollars (the official currency of DOM), from which the Company has acquired a 5 year Certificate of Deposit issued by the DOM state owned and licensed bank, Bank of Salem. Bank of Salem is not licensed within the United States of America, nor is it associated with any U.S.A. bank. The exchange rate for Dominion Dollars of the Dominion of Melchizedek is one Dominion Dollar to one U.S. Dollar. Additional information regarding the sale of the mining properties is contained in the Company’s Form 10Q filing with the Securities and Exchange Commission for the period ending March 31, 2000, dated May 15, 2000.

Pelosi and Anaya were, evidently, unable to look that up at Edgar. Nor, apparently, were they capable of finding this article about the scam from the Las Vegas Sun, though in fairness, it doesn’t reference Corazzi. Nor did it reveal that Dr. Fred—he was a podiatrist—Cruz had been jailed four times for fraud, or that he claimed to own $1.1 billion in Indonesian Bank Guarantees that yielded 9 percent interest daily. But the truth is out there, and the new NTUR officers could have found it.

The LVEN story ended when the SEC sued the company, Corazzi, and two other officers for fraud on October 8, 2002. For good measure, the SEC revoked LVEN’s registration at a time when that was an unusual step to take. The agency also sued Cruz and Countryland, though Cruz died not long after. The complaint noted that “dirt stored in a warehouse was reported as gold with a value ranging from $19.5 million to over $27.3 million,” and that “Indonesian bank guarantees were reported to have values ranging from $400 million to $1.1 billion; in fact, the bank guarantees did not exist.” The Sun reported on that news as well, in a piece that clarified a number of issues concerning Cruz.

And yet Pelosi and Anaya, unable to figure all this out and apparently unaware that it would make sense to pay for some background checks, gladly signed on with Corazzi and Cohen. Pelosi would be the president of the company. Corazzi and Cohen’s fraudulent scheme began in 2009 and continued until July 2014, when the SEC brought an administrative action against the company, Cohen, and Corazzi. It’s likely that had Anaya not been a former governor and Pelosi the son of a prominent member of Congress, the Commission would have chosen to sue in federal court instead.

The thrust of the action was clear and simple:

Since founding Natural Blue together as a private company, and at all relevant times when it was a public company, Cohen and Corazzi provided direction to the Company’s board and management. Among other things, Cohen and Corazzi recruited Anaya and Pelosi to serve as officers of the public company, recommended various board members, officers, employees, attorneys, and auditors. Cohen negotiated with third parties (including acquisitions and reverse mergers) on behalf of Natural Blue, participated in board meetings, recruited investors, reviewed and commented on public filings, and had formal authority over Natural Blue’s brokerage account. While Corazzi’s role was not as prominent as Cohen’s, Corazzi also helped to select Anaya (and his successor) as the CEO, recruited investors, handled press releases, managed the Natural Blue website, reviewed and commented on public filings, and negotiated a business transaction with a Massachusetts-based company that resulted in new management.

Pelosi testified against Corazzi and Cohen. As a side note, Toney Anaya is not the only governor of New Mexico to get involved with a scam company in recent years. One of his successors, Bill Richardson, found himself serving on the board of the appalling Miller Energy Resources (MILLQ; registration eventually revoked). Richardson did realize MILL was problematic, but he went ahead and accepted the job. Which did no real good for anyone.

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