Hiring a professional private investigator to conduct a comprehensive due diligence investigation on Samuel “Mouli” Cohen would have identified multiple “red flags” that could have saved investors millions of dollars.
On August 9, 2010, federal prosecutors in California unsealed a criminal indictment accusing local businessman Samuel “Mouli” Cohen of defrauding over 55 investors, including actor Danny Glover, out of more than $30 million with claims that his company was about to be acquired by Microsoft Corp. On his website, which is no longer active, the Israel-born Cohen describes himself as an entrepreneur, “one of the few to have success in biotechnology and high technology,” and he claims to have “generated well over $3 billion in shareholder value.”
According to the indictment, Cohen allegedly lied to investors with claims that his company, Ecast, was about to be acquired by Microsoft and that once the deal was completed, Cohen’s Ecast shares would be exchanged on a 1-for-1 basis for Microsoft shares of stock, which would have netted investors significant gains. According to a related civil lawsuit that Glover and his affiliate Vanguard Public Foundation filed against Cohen last year, Vanguard “has been effectively destroyed” by Cohen’s activities. Cohen was a persuasive salesman who had “all the trappings of success,” according to Peter Rehon, a lawyer in the civil suit.
Does this sound familiar?
Now we cannot live in hindsight, but we can learn from our mistakes and shortcomings. By hiring a investigator with both the knowledge and experience to conduct a comprehensive due diligence investigation on Mr. Cohen, certain “red flags” would have immediately stood-out:
- Prior Allegations of Fraud – A review of civil litigation filings where Mr. Cohen either resided or worked identified more than 20 lawsuits against him dating back to the 1990’s. They include two lawsuits from 2003 and 2004 which contained fraud allegations against Cohen that are nearly identical to the recently-filed criminal indictment. A more in-depth review of the those litigation filings would have uncovered allegations that Cohen was not the successful entrepreneur with a self-reported net worth of over $40 million and was Ecast not close to finalizing any merger deals or financing agreements with Microsoft.
- Failed Business Venture – Over the past several years, Cohen has issued numerous press releases and online posts relating to his many ventures claiming that he was “one of few to have success in biotechnology and high technology” which has “generated well over $3 billion in shareholder value.” However, Cohen failed to disclose that just prior to his affiliation with Ecast he was president and CEO of Playnet Technologies which filed for Chapter 11 bankruptcy in June 1998. According to a 1997 SEC filing, Playnet Technologies had $819,894 in revenues for the period of 1990 through July 1997 and a net loss of $170,561 for that same period.
- Conspicuous Consumption – In August 2002, the San Francisco Chronicle reported that Mouli Cohen had 30 guests at his multi-million dollar Belvedere residence “to celebrate the completion of his new house.” However, subsequent investigation disclosed that Cohen never actually owned this property. The residence had been owned by a Lawrence and Karen Drebes, founders of desktop.com, since the late 1990’s. In addition, Cohen often self-promoted himself via videos on YouTube discussing fine art and philanthropy painting the “trappings of success.” Cohen also posted various photographs of himself on one of his many social networking websites taking pleasure on yachts, ski vacations, and beautiful beaches all while giving projecting an image of vast wealth to potential investors who may decide to “Google him.”
- $450,000 Owed in Federal Tax Liens – On October 22, 1998 a $150,627 federal tax lien was filed against Cohen in New York and on February 27, 2001 a $313,592 federal tax lien was filed against Cohen in San Francisco. Additionally, the New York State Tax Commission filed a $40,492 judgment against Cohen on December 2, 1999.
- “Millionaire Residency” Status – Multiple press releases published by Cohen disclosed that he “was awarded the first-ever ‘Millionaire Residency’ with full citizenship status by President George H. Bush.” Unfortunately for Mr. Cohen, as far as we can tell, there is no such thing as a “Millionaire Residency” status. A simple Google search of the term “Millionaire Residency” does identify multiple results, but upon further review, nearly all of them relate to Cohen and his self-promoting.
- Inconsistencies in Cohen’s Professional History – There are multiple inconsistencies with Cohen’s self-reported employment history on his LinkedIn profile, which is no longer active, as compared to his reported work history to the SEC. Specifically, his online profile page indicates that he was Chairman and CEO of “Aristo International” from 1980 and 1982, while SEC filings indicate he was affiliated with Aristo International (which later became Playnet Technologies) from 1990 through 1998. In addition, he self-reports that he was Chairman and CEO of “Lamia Enterprises” from 1982 and 1984, while according to SEC Filings he was affiliated with Lamia from 1989 through 1991. While date inconsistencies with a person’s reported employment history may not necessarily be a clear indication of fraud, numerous and significant inconsistencies do raise a red flag and should be grounds for further inquiry.
- Multiple Aliases – A review of litigation filings and other publicly-available documentation identified multiple aliases for Mr. Cohen over the past 10 years including: Mouli Cohen, Shmuel Cohen, Shmual Cohen, Schmual Cohen, Samuel Cohen and Moli Cohen. Although the multiple name variations are not significant in and of themselves, it raises the possibility of accusations against other aliases, which he could have been looking to hide.
Note that the information reported above was identified exclusively through the examination of publicly-available documentation. Additional facts may have also been disclosed via interviews with Mr. Cohen’s former business partners, known associates, legal counterparts or possibly even his ex-wife.
What Does This All Mean?
Fraudsters are now adapting to a new culture whereby potential investors are becoming more aware and skeptical of large promises and guaranteed returns. Unfortunately, some of these skeptics are putting on their own fedora hats and trying to conduct their own investigation through Google or one of the many “fly by night” background checking websites to conduct their own due diligence investigation. As demonstrated by the case of Mouli Cohen, millions of dollars in losses could have been prevented had investors consulted a due diligence investigator to help them avoid a “persuasive salesman who had ‘all the trappings of success.’”