United States Attorney James T. Jacks
Northern District of Texas

WEDNESDAY, DECEMBER 15, 2010
http://www.usdoj.gov/usao/txn/

HOUSTON-AREA MAN INDICTED IN W FINANCIAL GROUP
SECURITIES FRAUD MATTER

$17 Million Fraudulently Raised from 180 Investors

DALLAS — A federal grand jury in Dallas returned an indictment today charging Adley Husni Abdulwahab, a.k.a. Adley H. Wahab, with felony offenses in connection with the sale of investments issued by W Financial Group, announced U.S. Attorney James T. Jacks of the Northern District of Texas. Specifically, the indictment charges Abdulwahab, 35, of Spring, Texas, with five counts of securities fraud and one count of conspiracy. Wahab is presently in custody in the Eastern District of Virginia on charges stemming from an unrelated $100 million securities fraud scheme.

According to the indictment, from September 2006 until February 2007, Abdulwahab conspired with Michael Wallens, Sr., and Michael Wallens, Jr., to defraud investors in connection with sales of investments called Collateral Secured Debt Obligations (CSDOs), a type of promissory note, that were issued by W Financial Group (WFG). Abdulwahab and the Wallenses received more than $17 million in proceeds from sales of CSDOs to more than 180 investors. Michael Wallens, Sr., 54, of Nantucket, Massachusetts, and Michael Wallens, Jr., 31, of Plano, Texas, were charged separately for their roles in the fraud and have each pleaded guilty to one count of securities fraud. They each face a maximum statutory sentence of five years in prison, a $250,000 fine and restitution.

According to the indictment, Abdulwahab and his co-conspirators made a number of misstatements, through written offering materials and other communications to investors. They claimed that insurers Lloyd’s of London and Republic Group “reinsured” the CSDOs, when they knew the CSDOs were not insured. The offering materials represented that investors’ money would be held in cash, government or corporate AAA bonds, automotive receivables or insured notes, when in fact Abdulwahab and the Wallenses were spending investors’ money in various ways they didn’t disclose to investors. They also represented that “the parent company and management company” behind the CSDOs had been in business “for over 17 years without one customer complaint or late payment,” but no entity associated with WFG had been using CSDOs for more than a few months.

Through WFG, Abdulwahab, Wallens, Sr. and Wallens, Jr. used investor money to purchase Michael Wallens, Sr.’s used car dealership for more than $300,000. They also used investor money to purchase residential lots and to invest in a home building company and a power company. They also took investor money as their own compensation.

An indictment is an accusation by a federal grand jury, and a defendant is entitled to the presumption of innocence unless proven guilty. Each of the securities fraud counts in the indictment carries a maximum statutory sentence of 20 years in prison, a $250,000 fine and restitution. The conspiracy count carries a maximum statutory sentence of five years in prison, a $250,000 fine and restitution. The indictment also includes a forfeiture allegation which would require Abdulwahab, upon conviction, to forfeit to the government any proceeds traceable to his offense.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The investigation of this matter has been conducted by the FBI, the FDIC Office of Inspector General, the Texas State Securities Board and the U.S. Securities & Exchange Commission. Assistant U.S. Attorney Alan M. Buie is in charge of the prosecution.

###