United States Attorney …

                               United States Attorney
                               Southern District of New York


FOR IMMEDIATE RELEASE    CONTACT:   U.S. ATTORNEY'S OFFICE
JULY 8, 2005                        HERBERT HADAD, MEGAN GAFFNEY
                                    PUBLIC INFORMATION OFFICE
                                    (212) 637-2600

       U.S. CONVICTS ATTORNEY AND FORMER CFO IN
   MASSIVE SCHEME TO DEFRAUD ELECTRONIC DATA SYSTEMS
          DAVID N. KELLEY, the United States Attorney for the

Southern District of New York and MARK J. MERSHON, the Assistant

Director In Charge of the New York Field Office of the FBI,

announced the conviction in Manhattan federal court late Thursday

of two defendants ­ JOHN FASCIANA and JOSEPH AMATO ­ for their

participation in a sophisticated scheme to defraud Electronic

Data Systems Corporation ("EDS") out of millions of dollars.    The

defendants were convicted by a jury after an 11-week trial before

United States District Judge LAURA TAYLOW SWAIN.

          The evidence at trial established that defendant

FASCIANA, an attorney and Certified Public Accountant, and AMATO,

the former Chief Financial Officer of EDS's Global Securities

Industry Group ("GSIG"), participated in an elaborate scheme to

defraud EDS out of millions of dollars.   (An earlier trial ended

in a mistrial in December 2002.)

         As part of the scheme, FASCIANA and AMATO helped the

head of GSIG, co-defendant MICHAEL REDDY (now deceased), and

others to steal hundreds of thousands of dollars from EDS by
diverting checks sent to EDS for payment for services performed

by EDS, and then laundering those checks through FASCIANA's

attorney's trust account, the evidence at trial revealed.

          The evidence at trial also revealed that FASCIANA and

AMATO helped REDDY falsify and alter GSIG's books and records in

order to make it appear that GSIG had met various revenue and

profit targets.    By engaging in these falsifications and

alterations, REDDY and others reaped millions of dollars in

bonuses under EDS's incentive compensation agreement plan, the

evidence showed.   The evidence established that FASCIANA made

more than $350,000 from the check-stealing and bonus compensation

scheme through secret side deals he had entered into with REDDY

and others.   The evidence established that AMATO made more than

$70,000 from the scheme.

          The evidence at trial established that, prior to May

1995, REDDY, then a member of Wall Street's G30 Working

Committee, and the author of a book on securities industry

operations, headed a company known as FACS Corporation

International ("FCI").   FCI was headquartered in the Wall Street

area of Manhattan, and provided various services to investment

banks and brokerage firms.    REDDY was the chairman and chief

executive officer of FCI, and owned approximately 70% of FCI.

AMATO was the chief financial officer of FCI.    FASCIANA, who

practiced law through the law firm of Fasciana & Associates,



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P.C., served as REDDY's personal lawyer and as outside counsel to

FCI and FCI's shareholders.

           In or about May 1995, EDS acquired 100% ownership of

FCI.   After the acquisition, FCI became a part of EDS's Global

Securities Industry Group, later renamed the Global Financial

Markets Group ("GFMG"), the evidence showed.   After EDS purchased

FCI, REDDY became the Chairman and CEO of the GSIG/GFMG. It was

established at trial that FASCIANA provided various services to

REDDY, to GSIG, and then later to GFMG.

           The fraud established at trial centered on the

activities of GSIG/GFMG' Asset Research and Recovery division.

Among other things, the Asset Research and Recovery division

specialized in assisting clients in recovering funds escheated to

states as abandoned property, according to the trial evidence.

The Asset Research and Recovery division typically received 30%

of any funds recovered for its clients.

           One aspect of the fraud established at trial involved

GSIG/GFMG's efforts to collect certain receivables that remained

on FCI's books as of the date that EDS acquired FCI.   Under the

agreement between EDS and the FCI shareholders, $1 million of the

purchase price was set aside in an escrow account controlled by

FASCIANA, to be paid out to the former FCI shareholders when

GSIG/GFMG successfully collected of pre-acquisition receivables.

For each dollar of pre-acquisition receivables collected on EDS's



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behalf after May of 1996, FCI's former shareholders would be

entitled to recover one dollar from the escrow account.     The

evidence at trial established, among other things, that by

November 1996, more than $500,000 in pre-acquisition receivables

remained uncollected, and a corresponding amount remained in

escrow awaiting payment to FCI's shareholders upon collection of

the pre-acquisition receivables.      As demonstrated at trial, from

in or about November 1996, up to and including in or about

December 1998, REDDY, FASCIANA, AMATO and others misled EDS into

believing that they had collected over $500,000 of these pre-

acquisition receivables which had not, in fact, been legitimately

collected.   The evidence showed that REDDY, AMATO, FASCIANA and

others accomplished this by, among other things, creating fake

invoices and accounting records which made it appear that checks

received from post-acquisition clients of EDS for post-

acquisition work represented the collection of pre-acquisition

receivables.   REDDY and FASCIANA facilitated this scheme by

laundering through FASCIANA's bank accounts approximately

$400,000 in funds EDS received from post-acquisition work

performed for clients of EDS, and then representing to EDS that

the funds were in fact attributable to the collection of pre-

acquisition receivables.   As a result, EDS paid to the FCI

shareholders over $500,000 that was not in fact due to the FCI

shareholders under the EDS/FCI purchase agreement.



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          Another aspect of the fraud proven at trial involved

bonuses that EDS agreed to pay the former FCI shareholders and

key employees if certain performance targets were met.     The

evidence showed, for example, that REDDY, FASCIANA, AMATO and

others doctored the books of GSIG/GFMG in order to meet their

1995 performance targets and thereby fraudulently obtained a $2

million bonus for the former FCI shareholders.

          The evidence at trial also showed that REDDY, FASCIANA,

AMATO and others engaged in a scheme to doctor GSIG/GFMG's books

in 1997, to make it appear that they had met performance targets

for 1997 and therefore were entitled a $5 million bonus due under

EDS's incentive compensation plan ("ICP").     In order to create

the appearance that the performance targets had been met, and to

receive the $5 million payment, REDDY and others decided to

record as income in 1997 more than $7 million representing EDS's

putative share of more than $20 million in potential claims that

the Asset Research and Recovery division was researching on

behalf of two clients, Cigna Investments, Inc. ("Cigna") and

Prudential Investments ("Prudential").     The claims were for

principal, dividend and interest payments potentially due to

Cigna and Prudential on securities held by custodial banks on

behalf of Cigna and Prudential.     The evidence at trial showed



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that the claims were bogus.   Nevertheless, recording the bogus

claims increased the apparent income and profit margin for the

GSIG/GFMG to an amount that met the performance targets set in

the ICP, and allowed the key employees, including REDDY, to

qualify for their $5 million ICP payments for 1997.   REDDY

received approximately $3.6 million of this $5 million payment

under the ICP.   FASCIANA received approximately $195,000 as part

of a side deal he had with REDDY in connection with this aspect

of the fraud.

          The evidence showed that, in order to conceal the

improper recording of income associated with potential claims in

1997, REDDY and FASCIANA instructed the head of the Asset

Research and Recovery division to "substitute" new claims

identified in 1998 for any of the inadequately researched Cigna

and Prudential claims booked in 1997 that subsequently proved to

be invalid.   That is, REDDY and FASCIANA instructed the Asset

Research and Recovery group to alter EDS's books so that valid

claims identified in 1998 would appear to have been made in 1997,

and invalid 1997 claims in corresponding dollar amounts would be

erased from EDS's books.   This resulted in understating the

GSIG/GFMG's true income in 1998, and concealed the overstatement

of the GSIG/GFMG's true income in 1997.



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          To generate sufficient funds in 1998 to eliminate the

previously booked bogus claims and still to approach 1998

performance targets, the employees of the Asset Research and

Recovery division created fraudulent claims to the states of

Massachusetts and New York on behalf of EDS clients for the

return of abandoned property that did not, in fact, belong to EDS

clients, the evidence showed.

           FASCIANA and AMATO were found guilty of 1 count of

conspiracy to commit mail fraud and wire fraud.   FASCIANA was

also found guilty of 8 counts of mail fraud, and 3 counts of wire

fraud.   AMATO also was found guilty of 2 counts of mail fraud.

           FASCIANA, age 60, lives in Bedford Hills, New York.

           AMATO, age 64, lives in Wycoff, New Jersey.

           FASCIANA faces a maximum sentence of 60 years

imprisonment; AMATO faces a maximum sentence of 15 years

imprisonment. They both faces fines and restitution to be

determined by the court.

           REDDY previously lived in Saddle Brook, New Jersey.    He

died before trial.

           Assistant United States Attorneys MARCUS A. ASNER and

JOSEPH V. De MARCO are in charge of the prosecution.

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