Three top executives of the now defunct Lloyd, Carr & Co. commodities trading firm pleaded guilty yesterday to criminal contempt charges in Grand Rapids, Mich.
Alan H. Abrahams, who used the name James Carr while running the Boston-based firm, vice president James Brien and employe Ralph Zolla surprised courtroom observers on the second day of their trial in Federal Court by reversing earlier pleas of innocence.
One of the two remaining defendants, Michael Schuster, maintained his plea of innocence. The fifth defendant, Lee Barry Brown, who headed the firm's St. Louis office, turned state's evidence and testified during the first day of the trial after charges against him were dropped.
Abrahams ran one of the most sophisticated con operations federal authorities have ever come across, according to investigators, who discovered after his arrest that he was a prison escapee with a history of jumping bail.
Lloyd, Carr & Co. sold an estimated $50 million of controversial London options through offices in 11 cities to thousands of unususpecting customers. The customers were technically betting that certain commodities, like sugar, would be worth more at a future date.
But authorities claim that in many cases Carr never actually bought the options on the London exchange, while at the same time dramatically overcharging customers.
And, the government charged, Carr's salesmen used high pressure sales techniques while concealing the true value of investments and the risks involved.
The newly created federal Commodity Futures Trading Commission spent more than a year trying to shut down Carr's operations, but he kept the federal authorities at bay with legal wrangling. He was finally arrested in Boston in January, and immediately faced charges in several states.
U.S. Attorney James Brady said the three men would be sentenced on Sept. 22, and face maximum sentences of six months in jail and a $10,000 fine. Meanwhile, Abrahams was ordered returned to Massachusetts to face charges there.
In entering the guilty pleas yesterday, told the court that his clients decided to plead guilty because of outstanding charges in Boston: a 50-count indictment there charging mail fraud and violations of the Commodities Exchange Act. Bailey said because the charges overlapped, his clients did not wish to present a defense in the Michigan case.
The Michigan charges were filed last December after Lloyd, Carr reportedly ignored a federal court injection ordering the firm to close down.