Investors Defrauded In Horseshoe Manufacturing Scheme

Horseshoes proved very unlucky for investors in New Jersey who were swindled to the tune of $1.7 million by the promoter of a horseshoe manufacturing plant.

Samuel M. Serritella of Bergan County, N.J., pleaded guilty to a second-degree charge of securities fraud. New Jersey Attorney General Paula Dow brought the charges, claiming Serritella defrauded investors by selling unregistered shares of stock in his startup horseshoe manufacturing company and misappropriating investor funds for his personal use

Serritella faces a sentence of five to 10 years in state prison, and must sign a consent judgment to pay $1.7 million in restitution to the investors he defrauded. Judge Roma scheduled sentencing for Serritella for Jan. 14, 2011.

Serritella was president, chief financial officer and chairman of International Surfacing Inc., based at 5 Erie Street in Garfield, N.J. Between February 2002 and May 2008, Serritella obtained approximately $1.7 million from more than 300 investors by selling them shares of International Surfacing. The shares were not registered with the Bureau of Securities as required by law, and Serritella was not registered as an agent authorized to sell securities in New Jersey.

Most investors were from New Jersey, and many of them were police officers and firefighters. Serritella represented that he was manufacturing therapeutic horseshoes with a cushioning layer of rubber on them.

Too good to be true

The indictment reads like a cautionary tale about investment scams, where a promoter holds out "opportunities" that seem too good to be true. According to Dow, Serritella held investment conferences where he told investors they could get in on the ground floor by purchasing shares in a company he planned to take public.

He told at least one group of investors during a hotel meeting that the venture's clients included a prince in Dubai who purchased the shoes for his camels.

He also falsely claimed that they were being used by Olympic competitors and would be used in the Olympics in Athens, Greece.

The state's investigation revealed that Serritella misappropriated more than $350,000 in investor funds to pay for personal expenses. Although he used some funds for startup costs for the company, including renting a building and paying salaries, he never purchased the necessary equipment and tools to manufacture the horseshoes, and the venture failed.

Serritella deposited the investors' funds into several bank accounts that he controlled. He wrote checks to himself, made cash withdrawals at ATMs, paid credit card bills, and made debit card purchases using investor funds in the accounts. He used the funds to pay for such personal expenses as airline and hotel bills, tavern bills, and medical costs. He also used investor funds to make personal loans to friends totaling $64,000.