Sweethearts in crime

They’ll have to beat it out of me,said Jeffery Stone,a balding 46-year-old heavy-set man with a goatee. He said he had no intention of ever paying the U.S. regulators who secured a civil judgment against him and his wife in January 2009,referring to them with an expletive involving mothers.

The former Lehman Brothers broker,who spent a year in federal prison a little over a decade ago for his part in another penny stock scam,makes no apologies for raking in more than $1 million from the sale of shares of WebSky,a tiny San Francisco broadband company. Regulators call the Stones’ scheme a classic pump-and-dump,charging that they artificially drove up the price of the stock by issuing spam emails to prospective investors and then unloaded tens of millions of shares.

We did nothing wrong,said Stone,who oversees the operations of the Wakabayashi Fund out of the couple’s upscale Tokyo home. We took profits and I would do it again,for crying out loud.

His wife of four years,Janette,who was raised in Hong Kong and Taiwan before moving to the United States as a teenager,is more demure: I am just tired of the SEC matter. But she too insists the couple did nothing wrong.

MORE THAN PILLOW TALK

At one time,the idea of a husband and wife team like the Stones working in tandem to orchestrate a securities fraud might seem like a Wall Street novelty act. But that’s not the case any more.

While statistics are hard to come by,the number of married couples caught engaging in insider trading,stock manipulation or running a Ponzi scheme appears to be on the rise. In the past three years,at least a dozen legally joined couples have been charged with securities fraud by U.S. regulators or prosecutors.

Some of the alleged scams authorities have busted in the past year include a Ponzi scheme targeting Cuban-Americans in Miami and a fraudulent investment fund managed by a San Diego husband and wife.

In all of these so-called sweethearts-in-crime cases,U.S. authorities say the husbands and wives were working as equal partners in conning ordinary investors out of their money or manipulating the markets to generate a profit.

That represents a change from the past,when one spouse would typically leave the other in the dark. A husband,say,might make illegal stock trades in a wife’s brokerage account without her knowledge. Or a wife may talk about some deal she is involved with at work and her husband then goes out and trades on that seemingly innocent pillow talk.

In the granddaddy of all Ponzi cases,Ruth Madoff,the wife of Bernard Madoff,has not been charged with any wrongdoing and it appears unlikely she ever will be. But that hasn’t stopped Madoff victims from sniping and the trustee is still seeking to recoup about $45 million from her,claiming she lived in the lap of luxury on his ill-gotten gains.

The growing number of conjugal cons challenges the conventional wisdom that securities fraud is only perpetrated by men in pinstripe suits.

The beauty of these husband and wife cases is that they take advantage of the basic sexism of Wall Street,which is that these women aren’t really smart enough to do this,said Bill Singer,a securities attorney,who has defended a number of married couples in his day. But that just isn’t true.

Regulators,defense lawyers and criminologists suggest the uptick in securities fraud crimes by couples who love to scam may simply reflect the fact that more women work in Wall Street jobs where they get better access to confidential market-moving information. Or it may reflect the natural ability of married couples to better win the confidence of potential victims than a male swindler acting alone or with other men.

It is pretty easy to look at a guy and be suspicious of him for being too slick,said Michael Benson,a professor at the University of Cincinnati School of Criminal Justice. But if a guy has his wife involved,for some people I can imagine that would be very reassuring.