March 8, 2005
 
Contact:
 
Robert Nardoza
United States Attorney's Office
(718) 254-6323
 
PRESS RELEASE
 
Peter Paul, Co-founder of Stan Lee Media, Inc., Pleads Guilty to Securities Fraud Fraud Scheme Caused $25 Million in Losses to Investors and Financial Institutions
 

ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, ROBIN M. DALGLEISH, Inspector-in-Charge of the New York Division of the United States Postal Inspection Service, and PASQUALE J. D'AMURO, Assistant Director-in-Charge of the Federal Bureau of Investigation in New York, announced that PETER F. PAUL pleaded guilty today for his role in a scheme to commit securities fraud involving the purchase and sale of the common stock of Stan Lee Media, Inc., a publicly-traded corporation which PAUL co-founded. The guilty plea proceedings were held before United States District Judge Leonard D. Wexler, at the U.S. Courthouse in Central Islip, New York. The investigation leading to today's guilty plea was conducted under the auspices of the President's Corporate Fraud Task Force, of which the United States Attorney's Office, the Federal Bureau of Investigation and the Postal Inspection Service are members.

The securities fraud charges arise from PAUL's leading role in a scheme to manipulate the price of Stan Lee Media common stock, including transactions in which PAUL secretly borrowed money using the stock as collateral, and to profit unlawfully from such manipulations. The scheme resulted in losses to the investing public and financial institutions of approximately $25 million.

Under the terms of the plea agreement, PAUL faces up to 10 years' imprisonment, a maximum fine of $5 million, or two times the greater of the gross gain or gross loss resulting from his crime, and mandatory restitution in an amount to be determined by the Court.

Stan Lee Media was an Internet-based production and marketing company located in Encino, California. Common stock of Stan Lee Media began to trade publicly on the OTC Bulletin Board in approximately August 1999 and was traded on the NASDAQ National Market System from approximately May 2000 until December 2000, when trading was suspended. PAUL co-founded Stan Lee Media in 1998, in association with Stan Lee, a well-known creator of comic books, and continued his participation in the management of Stan Lee Media through December 2000 as a consultant. Lee was not implicated in the investigation and is not suspected of any wrongdoing. Earlier in his career, Lee played a key role in the creation of characters at Marvel Comics such as Spiderman, the Incredible Hulk and X-Men. Stan Lee Media was formed for the stated purpose of producing and promoting new characters and stories created by Lee.

The securities fraud charge to which PAUL pleaded guilty is contained in a second superseding indictment, returned by an Eastern District of New York grand jury in August 2004. PAUL, and others, were originally indicted for securities fraud in this case in June 8, 2001. (1) The Securities and Exchange Commission announced in 2001 that it was investigating Stan Lee Media. After that announcement and before he was first indicted, PAUL left the United States for Brazil and refused to return after the United States Attorney's Office informed him that he was the target of a criminal investigation. Subsequent to the filing of first indictment, PAUL again refused the United States Attorney's Office demand that he return to this country. Accordingly, the government sought the assistance of law enforcement authorities in Brazil. On August 3, 2001, PAUL was arrested in Brazil and jailed pending the outcome of extradition proceedings, which PAUL contested for the next two years. In July 2003, the Supreme Court of Brazil ordered PAUL's extradition to the United States. PAUL was arraigned in September 2003 on the original securities fraud charges, and his trial was scheduled to commence on March 28, 2005.

At today's guilty plea proceedings, PAUL admitted orchestrating a scheme in which he and others manipulated Stan Lee Media stock, trading it through numerous nominee accounts that hid from the investing public PAUL's ownership and control of large volumes of stock that were being traded. PAUL also admitted that to further the scheme, he sought to inflate and stabilize the price of the stock by instructing market makers in Stan Lee Media stock to execute trades that created a false appearance of constant demand and that concealed from the investing public the fact that PAUL had arranged for large blocks of stock to be sold at substantial discounts in after-hours trading. Finally, PAUL admitted that he had secretly borrowed millions of dollars on margin using as collateral the stock that he had traded through the nominee accounts; in this way PAUL concealed from the investing public that he was effectively liquidating a substantial part of his stock holdings in Stan Lee Media.

"Ensuring the fair and open operation of the securities markets demands persistence," stated United States Attorney MAUSKOPF. "Persistence paid off today when PETER PAUL admitted his guilt. The message of today's guilty plea to stock swindlers is clear: We will investigate you thoroughly, catch you if you flee and make sure you confront the charges against you." Ms. MAUSKOPF thanked the Securities and Exchange Commission, the NASD Regulation's Criminal Prosecution Assistance Group and Brazilian law enforcement authorities for their assistance in the investigation.

Postal Inspector-in-Charge DALGLEISH stated, "Once again we see a corporate insider whose selfish actions cost investors millions of dollars. This is precisely why the President's Corporate Fraud Task Force was created. As members of this task force, the Postal Inspection Service has proudly worked along side the U. S. Attorney's Office, the FBI and other members of the law enforcement community with the goal of making it clear -- we will work tirelessly to identify, arrest and prosecute those who commit securities fraud."

FBI Assistant Director-in-Charge D'AMURO stated, "In the fantasy world of comic book heroes, the bad guys often wear disguises to avoid detection, and use superpowers to avoid capture. In the real world, they may try to hide behind nominee shareholders and

surreptitious sell-offs in after-hours trading, and they may flee the country. But today's guilty plea shows that it's not only in the comic book world that the good guys can cast a very wide web to get their man."

The government's case is being prosecuted by Assistant United States Attorneys Jed Davis and Sean Casey, and was initiated by Assistant United States Attorney Ken Breen.

 
The Defendant:
 

PETER F. PAUL

DOB: 9/2/48

Address: Asheville, North Carolina

 
1. PAUL's co-defendants in the original indictment, STEPHEN M. GORDON, JEFFREY PITTSBURG and CHARLES KUSCHE, were also charged in the first and second superseding indictments, together with JONATHAN GORDON. On February 15, 2005, GORDON pleaded guilty to securities fraud before United States Magistrate Judge Cheryl L. Pollak, and on March 1, 2005, PITTSBURG pleaded guilty to conspiracy to commit securities fraud before United States Magistrate Judge Roanne L. Mann. The guilty plea proceedings were held at the U.S. Courthouse in Brooklyn, New York. Charges against KUSCHE and JONATHAN GORDON remain pending.