Florida Man Admits Boiler Room Scam Run Out of New Jersey; Investors Lost More Than $2.5 Million

NEWARK - A south Florida man pleaded guilty today to operating an investment scheme involving foreign currencies which were sold through a New Jersey boiler room and which defrauded victims of more than $2.5 million, U.S. Attorney Christopher J. Christie announced.

Joseph Valko, 37, pleaded guilty to one count of conspiracy to commit mail fraud, which carries a maximum penalty of five years in federal prison and a $250,000 fine. U.S. District Judge Katharine S. Hayden scheduled sentencing for Nov. 27.

Valko was not previously charged and his guilty plea was his first appearance in court. Judge Hayden set bail at $500,000 unsecured bond pending sentencing.

From July 1997 through December 1998, Valko, purported to own and operate Risk Capital Management International (Risk Capital), which was principally located in Red Bank, with an administrative office in Pompano Beach, Fla., and with affiliate sales offices in Hoboken, N.J., Chicago, and Houston. Risk Capital promoted investments into foreign currency options, primarily Japanese yen, the British pound, German deutschmark and the Swiss franc, according to Robert Kirsch, the Assistant U.S. Attorney who prosecuted the case.

Risk Capital's salesmen solicited customers through telemarketing as well as supplemental written promotional material, touting the company's expertise in managing their highly profitable investment program, according to the criminal Information to which Valko pleaded guilty. At his plea hearing, Valko admitted that the representations of profitability were false and misleading, and that the overwhelming majority of the investors lost money.

Risk Capital advised their customers that the foreign currency options were purchased and sold through Nassau Bay Trading, a supposed trading "clearinghouse" located in Nassau, Bahamas. Nassau Bay Trading was owned and operated by an individual identified in the Information as "C.H.," who lived in Pompano Beach, Florida.

At the plea hearing, Valko admitted that C.H. was Charles "Chip" Hoffecker, who was sentenced on June 26 by Judge Hayden to 210 months in federal prison. The sentence was for Hoffecker's convictions on charges of conspiracy and mail fraud which related to his operation of an international telemarketing commodities scam.

Valko also admitted that Nassau Bay Trading gave kickbacks to the principals at Risk Capital and that those kickbacks were not disclosed to the customers.

In determining an actual sentence, Judge Hayden will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the office, the defendant's criminal history, if any, and other factors. The judge, however, is not bound by those guidelines in determining a sentence.

Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all that time.

Christie credited Postal Inspectors from the U.S. Postal Inspection Service, under the direction Postal Inspector in Charge Thomas C. Van de Merlen, and Special Agents of the FBI, under the direction of Special Agent in Charge Leslie G. Wiser, Jr., with developing the case against Valko.

The government is represented by Assistant U.S. Attorney Kirsch.

Defense Counsel: Michael Giampietro, Philadelphia, Pa.