A former Long Beach resident who fled to South Africa as a fugitive pleaded guilty to orchestrating a scam involving a sports drink named after Notre Dame's most famous football benchwarmer.
Chad Peter Smanjak, 38, copped in U.S. District Court to one count of conspiring to commit securities fraud and, as part of a plea deal, he will pay full restitution to be determined to more than 250 marks. He is also likely to draw five years in prison.
Smanjak and others obtained millions of shares of penny stock in the Rudy Nutrition sports drink company and then pumped up the trading volume by trading it among themselves and issuing misleading press releases. They then dumped the stock on the market until federal regulators halted trading in 2008. The feds call these "pump and dump" scams, and Smanjak enjoyed a $5.2 million profit.
The SEC on Nov. 14, 2008, revoked the registration of each class of registered securities of Rudy Nutrition for failure to make required periodic filings with the commission. David "Rudy" Ruettiger, whose story of becoming a member of the Notre Dame Fighting Irish football team is depicted in the 1993 film Rudy, was the CEO of Rudy Nutrition, which was marketed as a health-conscious alternative to high-sugar soda and sports drinks. Ruettiger was not charged with a crime in the wire fraud case, but he did have to agree to pay $382,866 to settle Securities and Exchange Commission (SEC) charges. The SEC also barred him from serving as an officer or director of a publicly traded company.
Smanjak fled to his native South Africa in 2010 after authorities executed a search warrant. He was arrested in January in Johannesburg by special agents with U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) Attaché office in Pretoria and members of South Africa's Police Services. Smanjak waived extradition and voluntarily returned to the U.S. to face charges.
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By then more than 630 million shares of Rudy Nutrition shares had been issued to several Smanjak-controlled Panamanian companies, which sold them and kept the proceeds in Panamanian banks, which then wired the funds back to U.S. accounts held by Smanjak and his co-conspirators. Smanjak paid his trader with a $400,000 Lamborghini Murcielago, which ICE later seized.
Judge James V. Selna in Santa Ana will unveil the restitution order on Dec. 12, when Smanjak is formally sentenced.
"It's a long-awaited and welcome day for the hundreds of unwitting stockholders who were duped," commented Claude Arnold, special agent in charge for HSI Los Angeles. "Schemes like this not only exact a heavy toll on individual investors, they also undermine public confidence in our nation's financial system, which is why HSI will continue to vigorously pursue and seek justice for those involved."