36 counts include mail, wire charges, money laundering
By Penni Crabtree
December 10, 2005
Vladislav "Steven" Zubkis, a San Diego businessman with a long history of promoting fraudulent investments, was arraigned yesterday in federal court
on 36 counts of mail fraud, wire fraud and money laundering.
Zubkis, a 46-year-old Ukrainian immigrant, defrauded investors of more than $1.8 million in two schemes during 2003 and 2004, one related to the
proposed construction of a storage facility and the other to the renovation of a Las Vegas casino, according to the indictment.
Zubkis, dressed in a white jumpsuit and sporting a mane of curly gray hair, entered a plea of not guilty in federal court yesterday. Assistant U.S.
Attorney Sanjay Bhandari asked that Zubkis be held without bail, citing him as a flight risk and an economic predator who poses a danger to the
community.
The judge agreed and scheduled a hearing on Zubkis' detention for Dec. 20. If convicted on the fraud charges, Zubkis faces up to 20 years imprisonment
on each of 34 counts, and up to 10 years imprisonment on each of two counts of money laundering.
The office of the U.S. attorney declined to comment on Zubkis' latest problematic business venture, a proposed luxury time-share housing development
in Baja California that he has been promoting this year. Sources close to the Zubkis investigation said the Baja project is part of an on-going probe.
Zubkis first gained notoriety in the 1990s when he defrauded investors who bought stock in his now-defunct Stella Bella Corp., a bogus chain of coffee
houses. In 2001, a federal judge imposed a $21.5 million judgment against Zubkis and banned him from being an executive or officer in a public
company.
The indictment this week caps a two-year investigation by the FBI and the Internal Revenue Service, and stems from Zubkis' activities in 2003 and
2004.
Despite the 2001 court-ordered ban barring him from serving as a director or officer of a public company, Zubkis continued to peddle stock and control
the workings of International Brands Inc. (IBI), a successor public company to Stella Bella, as well as affiliated companies. IBI is no longer a
public company.
In 2003 and 2004, Zubkis and a network of salesmen persuaded mostly elderly investors to buy into separate schemes to build a chain of storage
facilities and to acquire a controlling interest in a Las Vegas casino, according to court documents and former investors.
Zubkis made repeated misrepresentations to investors, including "baseless predictions about the future revenues and stock price" of the company he was
promoting, according to the indictment.
In the storage facilities project, Zubkis did not tell investors that he used their money to pay upfront commissions of up to 20 percent to
salespeople who solicited them to invest.
Nor did Zubkis tell investors that San Diego County had rejected his permit application to build a storage facility. Between May 22, 2003, when the
county rejected the permit application, through Nov. 6, 2003, Zubkis took in $936,696 from investors, who never saw a dime of return, according to the
indictment.
From November 2003 until March 2004, Zubkis, through San Diego Properties, again solicited investors, this time with the promise of a casino project.
Investors were told that the project would have a high rate of return ? every penny share would quickly be worth $5 or more upon a projected initial
public offering, according to the indictment.
The investors were not told that by Nov. 14, 2003, Zubkis had defaulted on a contract relating to Castaways Casino, and after that date had no
contract to acquire a controlling interest in that casino or any other.
Zubkis took in $875,665 from investors from Nov. 15, 2003, after his Nov. 14 contract default, to March 30, 2004, according to the indictment. Again,
investors never saw a dime in return.
The often flamboyant Zubkis, who has boasted in court documents about his bad-boy business ways, has since enjoyed a lavish lifestyle while thwarting
attempts by former investors and the U.S. Securities and Exchange Commission to collect on millions of dollars in court judgments and regulatory
fines.
Zubkis has been aided by a complex network of shell companies and offshore accounts that he allegedly devised to hide his assets, according to the SEC
and other court documents.
In October, Zubkis filed for bankruptcy, a move the SEC alleged in a court filing last month was done to "further delay the SEC in the enforcement of
the judgment."
In 2003, the SEC seized a 75-foot luxury yacht and an account containing $46,795 controlled by Zubkis, and has been battling in court with Zubkis and
companies controlled by him to liquidate them. In June, a judge granted the SEC's request to sell the yacht, but the bankruptcy has stalled the sale.
At the time of Zubkis' arrest Thursday, he was paying $6,000 a month to rent a four-bedroom, three-bath home in Coronado, and driving a Rolls-Royce,
according to his landlord, Gil Roesch. Zubkis is behind on his rent.
Zubkis has been working on another problematic venture this year, a project described in sales materials as either the Baja Vacation Club or the Baja
Las Vegas project. Investors were asked to pay $13,000 for a time share in the venture, and promised a profit of $286,000 to $715,000 on that
investment, according to sales material available in May on the Internet site of San Diego Properties, a company in which Zubkis is listed as general
partner.
At the time, state and city officials in Baja California said they had received no applications or issued any permits for such a project. Zubkis
maintains an ornately decorated office in Puerto Nuevo, but a local resident said it was closed yesterday. Zubkis had prepared, but never opened, a
similar office in downtown Rosarito Beach's main strip.
Rosarito Beach developers, real estate agents and business groups have been trying to get Zubkis to stop operating in Baja California, said Gustavo
Torres, head of the Rosarito Beach real estate agents organization, AMPI. But authorities have said they cannot take action until a client comes
forward with a complaint, Torres said.
After listening to a litany of allegedly fraudulent business schemes orchestrated by Vladislav "Steven" Zubkis ? including an ongoing effort to lure
investors into a Baja California real estate project ? a San Diego federal judge yesterday ordered Zubkis to remain jailed until his trial on mail
fraud and money laundering charges.
Citing a past of "bilking" investors, U.S. District Judge Leo Papas said that "no combination of (court-imposed) conditions could assure his (Zubkis')
compliance. He is in fact a danger to the community."
Zubkis was arraigned Dec. 9 on charges that he defrauded investors of more than $1.8 million in two schemes during 2003 and 2004, one related to the
proposed construction of a storage facility, the other to the proposed purchase of an ownership interest in a Las Vegas casino.
Neither project ever materialized, and investors received "zero," according to a federal indictment.
Frederick Carroll, Zubkis' court-appointed attorney, unsuccessfully sought his client's release on bail, portraying him as an "overly optimistic"
entrepreneur whose business projects just never manage to pan out.
"He is by his own admission a good pitchman . . . but a very bad closer," said Carroll, who added that the business world is full of deals that get
pitched but don't "come to fruition."
Assistant U.S. Attorney Sanjay Bhandari called Zubkis a "professional, hard-boiled con man" who has already raised at least $1 million this year in
his latest dubious scheme, a proposed luxury time-share housing development in Baja California.
Though the Baja project is not part of the charges against Zubkis, it is the subject of an ongoing federal investigation. Zubkis was promoting the
venture up to the time of his arrest Dec. 7, Bhandari said.
The Baja project ? which touts the construction of thousands of luxury villas and replicas of the Hearst Castle and the World Trade Center's Twin
Towers ? follows the same pattern of "false claims and baseless promises of ridiculous (investor) returns," Bhandari said.
In promotional materials, Zubkis guaranteed his mostly elderly or low-income investors a return of 500 percent or more, and presented the project as
already under construction.
In reality, nothing has been built but a few showrooms to lure investors, Bhandari said. Meanwhile, Zubkis is behind on payments on some land in
Mexico, which is in danger of going into default, he said.
"This will end up being the same sort of thing ? 100 percent fraud," Bhandari said.
In 2001, a federal judge in New York imposed a $21.5 million judgment against Zubkis for orchestrating a massive fraud to sell millions of shares of
penny stock in a company called Stella Bella Corp.
Zubkis never paid the fine, and refused to acknowledge the authority of the U.S. Securities and Exchange Commission to regulate him or his public
company, which is now defunct.
No trial date has been set in the storage unit and casino case. If Zubkis is convicted, the government will seek a minimum 20-year prison sentence,
followed by deportation, Bhandari said. Zubkis is a native of the former Soviet Union.Dave - 12-21-2005 at 11:32 AM
Quote:
Originally posted by BajaNews
"He is by his own admission a good pitchman . . . but a very bad closer," said Carroll, who added that the business world is full of
deals that get pitched but don't "come to fruition."
Are you kidding?
Steve was a great closer. When the money changed hands the deal was "closed".
I will miss him. He and his crew loved the deli. jerry - 12-21-2005 at 07:41 PM
so the guys a crook sure but the ppl that gave him money expecting to get that kind of return were a victum of thier own greed
im not in any way saying he was right in his way of doing things
but not mutch different from martha, amron,the ceo of quest, oj simson, pres clinton lies are the same as the truth if you have enoff bucks to pay
the lawyers
sounds like he just wasnt big enoff??
have a good one jerry
