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About Grifco International Inc. (Ticker Symbol : GFCI.PK)
Pink OTC Markets has discontinued the display of quotes on otcmarkets.com for this security because it has been labeled Caveat Emptor (Buyer Beware) and because adequate current information has not been made available by the issuer of the securities. It has been labeled Caveat Emptor for one of the following reasons:
On 1/19/07 Robinson Reed filed a suit against Grifco:
Link to some of the court reports:
http://picasaweb.google.com/naturalpenny
The case involved a loan of over $1,000,000 that Grifco never made any payments back for. Guess Grifco wasn't debt free as it assured it's shareholders that it was. This post summarizes the legal proceedings pretty well.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=17310750
Jim Dial statement/response during proceedings:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=18504367
Looks like it ended in some sort of Settlement on 7/19/07
http://www.mediafire.com/file/lw4x8j6mu7b6ng4/3006042882006002SCIV.pdf
On 2/1/07 Grifco got sued by Corrosion Inhibitor Systems, LLC forTrademark Infringement:
Corrosion Inhibitor Systems, LLC v. Grifco International, Inc et al
Plaintiff: Corrosion Inhibitor Systems, LLC
Defendant: Grifco International, Inc, Jerry Griffith and James Dial
Case Number: 4:2007cv00459
Filed: February 1, 2007
Court: Texas Southern District Court
Office: Houston Office [ Court Info ]
County: Harris
Presiding Judge: Judge David Hittner
Nature of Suit: Intellectual Property - Trademark
Cause: 15:1125 Trademark Infringement (Lanham Act)
Jurisdiction: Federal Question
Jury Demanded By: Plaintiff
http://dockets.justia.com/docket/court-txsdce/case_no-4:2007cv00459/case_id-490403/
Around 7/16/07 - Darrel Uselton and Jack Uselton were named in SEC litigation for using spam emails to promote penny stocks including Grifco:
Arrest video:
https://www.oag.state.tx.us/media/videos/play.php?image=070907uselton_arrest&id=235
Litigation:
http://www.sec.gov/news/press/2007/2007-130.htm
http://www.mediafire.com/file/d1budqacpd5uqgd/SECComplaint.pdf
Grifco International, Inc. (Pink Sheets: GFCI)
71. Grifco International, Inc. (“Grifco”) is a Nevada-based corporation that purports to be an international provider of oil and gas services equipment.
72. On or about September 20, 2005, Grifco issued 220,000 shares of common stock to the Useltons as part of a Rule 504 offering. These unregistered shares were issued without restrictive legends. On or about October 5, 2005, the Useltons transferred the shares into two brokerage accounts that they controlled.
73. Between approximately October 28 and November 3, 2005, the Useltons orchestrated a spam email campaign touting Grifco. The spam emails, which contained no disclaimers, indicated that “Rocking Stock Times Selects: GFCI” as a “real winner” and that “nsiders tell us breaking news is expected that can make this company go very high immediately.” The principal spammer charged the Useltons at least $54,896 for spamming Grifco.
74. During the Grifco spamming campaign, the Useltons sold all 220,000 shares of Grifco stock, realizing proceeds of approximately $71,866. Grifco stock, which appears to have been the subject of other market manipulations, traded between $0.30
22and $0.36 during the spamming campaign on average daily volume of approximately 525,000 shares.
75. After the spamming campaign ended, Grifco stock drifted downward, trading at $0.07 by year-end 2006.
This case finally reached closure on 3/18/09:
http://www.sec.gov/litigation/litreleases/2009/lr20961.htm
BUSINESS Wednesday, Mar 18, 2009
Houston men, accused of spamming scheme, settle lawsuit with SEC, Harris County
Two Houston-area men accused of hijacking personal computers to spam investors — and then bilk them of $4.6 million — have settled a civil lawsuit with the SEC and Harris County authorities.
One of the men, Darrel Uselton, still faces charges of engaging in organized criminal activity, said Donna Hawkins, assistant Harris County district attorney.
Two attorneys representing Uselton and his relatives who also were named in the settlement did not respond to messages seeking comment.
The Useltons were accused of buying shares of penny-stock companies and selling them after hyping them through spam.
Out of about $4.2 million seized by authorities, about $400,000 will be returned to Darrel Uselton, Jack Uselton and Lorena Uselton, according to Harris County court documents. Another $1 million will go to the Securities and Exchange Commission.
The remainder, about $2.8 million, is "contraband and subject to forfeiture," according to court documents. Hawkins was unsure whether any money would go to the Harris County district attorney.
On April 30, 2009 the SEC files a Complaint against Golden Gate Equity Investors (formerly Golden Gate Investments, Inc) (GGI). The Complaint alleges that GGI was given 15,750,000 unregistered shares to sell for Grifco most of the proceeds went back to Grifco ($2.3 million) and the rest GGI got to keep ($1.2 million):
http://sec.gov/litigation/litreleases/2009/lr21019.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21019 / April 30, 2009
Securities and Exchange Commission v. Golden State Equity Investors, Inc., Case No. 4:09-CV-01037 (S.D. Tex. filed April 30, 2009)
SEC Files Settled Action Against Golden State Equity Investors, Inc. for Securities Registration Violations
The Securities and Exchange Commission ("SEC") today filed a settled civil action in the United States District Court for the Southern District of Texas against Golden State Equity Investors, Inc., formerly known as Golden Gate Investors, Inc. ("GGI"), for its alleged violations of the registration provisions of the federal securities laws. The Commission's complaint alleges that, during the period from June 2005 through September 2006, Grifco International, Inc. ("Grifco"), a publicly-traded company that claims to be an international provider of oil and gas services equipment, issued 15,750,000 purportedly unrestricted, nonexempt securities to GGI. The agreements underlying the unregistered stock transactions provided that Grifco would issue GGI large blocks of Grifco stock in return for an up-front monetary advance and a large percentage of the net sales proceeds after the stock was sold. Shortly after receiving its shares, GGI sold its Grifco stock to the investing public and then returned a portion of the proceeds to Grifco. The complaint alleges that none of the securities transactions were registered with the Commission and the transactions did not satisfy any exemption from registration. The SEC alleges that, as a result of this conduct, GGI received nearly $3.8 million from the sale of newly-issued Grifco stock and remitted approximately $2.3 million of those proceeds to Grifco during 2005 and 2006. As a result, GGI's ill-gotten gains on these unregistered securities transactions were $1,269,907.
GGI, without admitting or denying the allegations in the complaint, consented to the entry of a final judgment enjoining it from violating Sections 5(a) and 5(c) of the Securities Act of 1933. The final judgment also orders it to pay disgorgement of $1,269,907, plus $257,672 in prejudgment interest, and to pay a civil penalty in the amount of $50,000.
The Commission acknowledges the assistance of the United States Attorney's Office for the Southern District of Texas, the Federal Bureau of Investigation, and The Harris County (Houston, Texas) District Attorney's Office.
GGI is not affiliated with Golden Gate Capital, a private equity firm based in San Francisco, California.
The investigation is ongoing.
http://sec.gov/litigation/complaints/2009/comp21019.pdf
Part of the money was used by Jim Dial to pay for his Gentleman's Club (from the complaint):
1 In January 2006, GGI and Grifco entered into another stock sale agreement that covered multiple unregistered stock transactions. As with the 2005 agreements, the Grifco Officer represented to GGI that all of the funds sent to Grifco by GGI would be used to purchase equipment and inventory for Grifco. At the same time, the Grifco Officer also sought a personal loan from GGI of $400,000 in order to purchase a gentleman’s club. GGI agreed to enter into the stock sale agreement and also agreed to make the personal loan to the Grifco Officer.
In May of 2009 the Texas Monthly prints a story about Evan "Nick" Jarvis and Lois Newman and another company they formed while still involved with Grifco, NuTech. Through NuTech they were promoting the same NORM tool. The NuTech scam broke because of a congressman's involvement in the scam (There is some mention of Grifco in the articles):
ACTIVE FEDERAL INVESTIGATION INTO GRIFCO:
http://www.texasmonthly.com/2009-06-01/letterfromtomball.php
Risky Business:
Risky BusinessHow did state representative Allen Fletcher—the chairman of a House subcommittee on white-collar crime—find his very own company tangled up in, well, a white-collar crime investigation? Web preview: A version of this story will be published in the June 2009 issue of TEXAS MONTHLY.
A federal civil complaint filed last fall by the U.S. attorney’s office alleges that a company affiliated with Tomball state representative Allen Fletcher, the chairman of a House subcommittee on white-collar crime, was involved in securities fraud. No criminal case has been filed in the alleged fraud, and an attempt to confiscate more than $3 million in assets seized from the company and related parties stalled in November 2008, at which time the money was returned. Federal authorities left themselves the option of trying again, however, and spokespersons for both the U.S. attorney’s office and the FBI have declined to describe the investigation as closed. The complaint, obtained recently by TEXAS MONTHLY, together with other documents reviewed for this story, raises a question about the freshman legislator’s business dealings: How does a man like Allen Fletcher, a retired police sergeant who spent years heading a white-collar-crimes unit at the Houston Police Department, find himself in business with a group of alleged con artists?
Fletcher, who was elected to the House in 2008 representing District 130, in northwestern Harris County, owns a company called Resource Protection Management, or RPM, which provides security guards and other security services, and, until recently, sold burglar- and fire-alarm systems. In May 2007, Fletcher took on a business partner named Lois Newman, who, through her company, NuTech, purchased half of RPM. Acting on a tip received that same spring, the Harris County district attorney’s office began investigating NuTech along with another company that Newman once helped direct, Grifco International, and began building a case that both companies were being used for a stock manipulation scheme known as “scalping.” Investigators concluded that Newman and her son-in-law, a stock promoter named Evan “Nick” Jarvis, and others were artificially inflating the prices of NuTech and Grifco stock and benefiting from sales of those stocks that they did not disclose to shareholders. (This type of scam is also known as a “pump and dump.”) Both companies are penny stocks that trade through brokerage vehicles commonly known as “pink sheets,” which operate largely below the radar of federal regulators.
In the case of Grifco, which purported to be an oil field equipment firm, the stock was allegedly inflated in part through a series of bogus press releases about Coil Tubing Technology, a company Grifco had recently acquired. According to the federal complaint, Grifco stock promoters falsely claimed that the company had developed and shipped an improved type of jet motor, when in fact work on the motor was still two years from completion. The complaint also identifies a series of press releases that Nick Jarvis, the stock promoter, prepared for NuTech. Although Fletcher and RPM are not mentioned by name in the complaint, TEXAS MONTHLY has reviewed the NuTech press releases cited by the complaint, and virtually all of them tout Fletcher’s alleged accomplishments and promising developments at RPM. In particular, NuTech flogged a new type of burglar alarm system known as “dual notification,” which was said to use proprietary technology developed by RPM to drastically reduce police response time. Fletcher’s entry into politics was also used as a selling point; in one press release, NuTech informed potential stock buyers that Fletcher had decided to run for state office, noting that he had the support of Dan Patrick, the Republican state senator and popular radio host from Houston.
According to the federal complaint, the press releases, in conjunction with a spam campaign, helped boost NuTech’s stock to $3.50 by August 2007, by which time Newman had issued millions of shares to herself and to her son-in-law Jarvis. Though he was urging investors to buy NuTech stock at the time, the complaint alleges that Jarvis quickly sold his own stock for about $950,000. According to the complaint, Jarvis then kicked some of the proceeds back to Newman. Jarvis also made about $2 million on sales of Grifco stock. According to the complaint, investors should have been informed that Jarvis was selling large volumes of the same stocks he was promoting, and that insiders in the two companies were being issued millions of shares of stock.
Things began to unravel when Coil Tubing’s chief financial officer, Edwin Leonard, became suspicious about his new business associates. According to a search warrant affidavit filed by the Harris County district attorney’s office, Nick Jarvis allegedly hired an acquaintance to stage a robbery of Leonard at his home, apparently in the hope of recovering a laptop containing the company’s accounting files. Leonard went to the police. On December 18, 2007, investigators raided the homes of Jarvis and Newman, and seized property and bank accounts controlled by the two. Officers also arrested Jarvis on a robbery charge. When Harris County authorities decided to turn the case over to federal investigators, the robbery charge against Jarvis was dropped. To date no federal criminal charges have been filed against anyone involved in the investigation.
Asked last week about his involvement in the alleged scam, Fletcher said that he had no knowledge of any illegal activities involving his company. “I’m the victim here,” he said. Fletcher said that he knew press releases were being issued about his activities, but he denied actively participating in their drafting, despite the fact that most of them contain quotes from Fletcher himself. One of the releases refers investors to an audio interview that Fletcher recorded on a Web site that promotes penny stocks. Fletcher acknowledged doing the interview, which was posted on November 1, 2007, six weeks before the raid on Jarvis and Newman, but he said that everything in the press releases and the interview was accurate and factual.
“I thought Nick could take my company and take my story and raise money legitimately and help us turn our company around,” Fletcher explained. Fletcher said RPM had never recovered from losing its biggest contract, providing security at the Enron complex in Houston, and that the company was in serious financial trouble when Jarvis approached him. Fletcher said he knew that Jarvis was building an enormous new house in an exclusive Montgomery County subdivision, and that when Jarvis pulled up to RPM’s offices in Tomball to pitch him on the NuTech deal, he was driving a $100,000 Mercedes-Benz. “I’m telling’ you I didn’t have a clue he wasn’t legitimate,” Fletcher said. “He had all the legitimate trappings; why would I think that Nick wasn’t?”
In fact, there were, or should have been, warning signs about the NuTech deal from the start. Jarvis is a felon who served time in the penitentiary for burglary and drug convictions in 1995. Fletcher, whose company performs background checks on prospective employees for clients, told TEXAS MONTHLY he had had no idea that Jarvis had served time in prison. He conceded that he or a business partner had found a criminal history for Jarvis when they checked him out, but that Jarvis had explained away the charge, and that he never really followed up on the issue.
But Fletcher had crossed paths with the Jarvis family before, and, by his own account, had doubts about their business endeavors. Fletcher said he first met Nick Jarvis at a Tomball bowling alley owned by Nick’s brother John. Nick managed the bowling alley, and Lois Newman ran the counter. John Jarvis had incorporated a series of penny stock companies in Montgomery County over the years, hawking a variety of ventures: independent films, casinos, online gambling—even a data center to be built in a renovated underground nuclear fallout shelter. Fletcher told me that in 2004, John Jarvis brought him a business proposition, offering to help him raise money from investors by merging RPM into a publicly traded shell company known as LitFiber. It was essentially the same type of deal that Nick Jarvis would bring Fletcher two and a half years later. Fletcher said that he got out of the deal with John Jarvis because he didn’t like the way he was promoting the new enterprise—issuing press releases in support of the stock that Fletcher considered false, or at least greatly exaggerated. In other words, Fletcher now says he felt he was being drawn into a scam very similar to the one described in the federal complaint against Grifco and NuTech. In fact, according to the Harris County search warrant affidavit, the same shell company John Jarvis offered to Fletcher was eventually used to acquire Coil Tubing. (John Jarvis, who could not be reached for this story, has also had trouble with the law, having been convicted of felony check forgery in the late eighties. Fletcher told TEXAS MONTHLY he was unaware of this fact.)
Why would Fletcher agree to do business with Nick Jarvis if he felt he had just been burned in an almost identical deal by his brother John Jarvis? At the time Fletcher said yes to Nick’s deal, he was also being sued by a businessman named James Buchanan in Massachusetts, who claimed that Fletcher and a Miami investment broker named Mychal Jefferson had tried to defraud him in yet another effort to raise capital for RPM. Fletcher said that Nick told him he was no longer doing business with his brother John, because the two had had a falling out. “He says, ‘Look, I know you’ve been burned. You walked away from John’s deal. And I know that you got burned on the Buchanan deal. The reason both of those deals [came up] is because your company is prime for this, and because of your technology for the patent-pending methodology for the dual notification. I’m telling you that if you get with somebody that’s legitimate, like me, we can make this happen.” Fletcher said that he and his business partner had the deal vetted by an attorney and decided to go ahead with it. The contract Fletcher signed was countersigned by Lois Newman, who was handing out shoes at the bowling alley when Fletcher first met her. Her title now was “NuTech president.”
Fletcher, who recently settled the Buchanan suit, said he was a victim of deception in that case as well and denied any wrongdoing. In a relatively short period of time, in other words, Fletcher claims he was talked into participating in three different efforts to raise capital for his company, each of which ended in legal trouble and allegations of wrongdoing. “Have I said to myself more than once, ‘What a dumbass. In a two-year period, you got drove off into this stuff’?” Fletcher said. “Little ol’ me, our company, all we were doing was trying to make payroll every two weeks, trying to stay open. That’s all I was doing.” Fletcher continued, “And you know what, you really don’t know sometimes, when you have people that show up saying they’re going to put money into your company, you don’t know that their money might not be good. I’m not trying to be naïve here. I’m a cop.”
Mychal Jefferson, the broker who brought Fletcher the Buchanan deal, was also involved in the LitFiber deal in 2004. He said he warned Fletcher about the Jarvis brothers after the LitFiber deal didn’t pan out. “I have no idea why he would go into business with them again,” he said of the NuTech deal. “Unless it was desperation.” Fletcher acknowledged that RPM owed hundreds of thousands of dollars to creditors during this time, and that he was having trouble meeting payroll on a regular basis. He was borrowing money wherever he could to keep RPM afloat. According to court records, Fletcher was also being sued during that period by a Tomball man named Ronald Morgan, who had lent Fletcher $65,000 and hadn’t been repaid. In fact, TEXAS MONTHLY has determined that Fletcher owed several people in Montgomery County large sums of money at the time of the NuTech deal. Sometime in 2003, for example, Fletcher borrowed $50,000 from David Johnston, a retired police officer who was working part-time as a security guard for RPM. Johnston died before he could recover his money. “We’re talking about a very unsophisticated, seventy-year-old man,” said Johnston’s son Chris Johnston, who has been trying to recover the money from Fletcher for the past several years.
Asked about these debts, Fletcher acknowledged that he had borrowed money from a number of people and failed to repay it in full, but he said that he kept careful track of the debts, which he characterized variously as investments or loans to RPM. Fletcher said he had repaid a portion of the debt owed to Johnston’s family and that he had recently promised to repay the remainder. Fletcher settled Ronald Morgan’s suit in June 2007 by paying him the full amount owed. (Fletcher told TEXAS MONTHLY he was able to repay Morgan only by borrowing money from somebody else.) He attributed his inability to make good on most of his debts to the disastrous deals he’s been a victim of in recent years. “I’ve said more than once how blessed I am to have survived this. My in-laws, my brother-in-law, my best friend from college, people that are retired from HPD that work with me—these people all lost money on investing in RPM. I could have filed bankruptcy fifteen times. I could have walked away from all this. But I told them, “As God is my witness, the day will come when I pay you back,’” he said. “And you know what some of them have told me? ‘Well, if you can, fine. Don’t worry about it.’” He continued, “Because you know what, people make investments every day and they lose money, but I felt like because they stepped out and did this for me, and invested in me, that I owed them the money and I’m gonna pay them.”
Fletcher also owed approximately $600,000 to a wealthy investor in Magnolia named David Weber, whom Fletcher describes as his business partner. (Weber did not return phone calls for this story.) After the December 2007 raid on Jarvis and Newman, Weber demanded the most valuable part of RPM—all the company’s alarm-monitoring contracts—as compensation for the debt. Fletcher agreed, and Weber took the contracts and opened a new security company. Today Fletcher has just a handful of security guard contracts, including providing guards for the Montgomery County courthouse, as well as some businesses in the Tomball area. His wife runs the business out of the couple’s house, and Fletcher says they are barely breaking even. “The truth is that this has ruined me,” he said. “As God is my witness, I will never, as long as I live, ever let anybody talk to me about taking my company public again.”
The raid was not reported in the press, and Fletcher was not publicly linked to the investigation. By the time of the raid, he had already raised $35,000 dollars for his political campaign—the primary was less than three months away—and retained Senator Dan Patrick’s chief of staff, Court Koenning, as his campaign consultant. Fletcher, who said he has never been contacted by investigators about the case, said he heard about the raid from old friends in the district attorney’s office. “When I agreed to run for this office, I did not have a clue—not a clue—that Nick Jarvis was fixing to get arrested in a few days. And when I heard that, I thought, ‘Well, that’s some shit. I hope that doesn’t hit the front page.’” In the months leading up to the primary election, Patrick, who owns a Houston radio station, donated nearly $50,000 in free radio advertising to Fletcher’s campaign. Patrick, who was in a well-publicized feud with the Republican incumbent Fletcher was trying to unseat, also provided more than $18,000 in campaign mailings for Fletcher, making him Fletcher’s biggest single contributor by far.
Fletcher said he did not tell Patrick or Koenning about the raid or that he had been in business with Jarvis. “When that came up, it was my belief that it would have been unfair—with the commitment [Patrick] made to me—it would have been unfair to bring that up to him,” Fletcher said. “I will tell you right now that there’s no doubt in my mind that if Dan Patrick had talked to me about that, he would have known I had nothing to do with it, he would have backed me all the way.”
Contacted earlier this week, Senator Patrick said he was unaware of the investigation into NuTech or the arrest of Jarvis but that he did not regret his decision to endorse Fletcher. “Unless I find out other information, I stand by Allen. He’s done a great job,” Patrick said.
Fletcher said he never made any money off the NuTech deal, nor did he profit from the LitFiber deal or the James Buchanan deal. Fletcher acknowledged that he bought a $409,000 house in Tomball in December 2007, just before the NuTech deal fell apart. (His previous home was assessed at $115,000.) But Fletcher said that no proceeds from the NuTech deal were used to buy the house. After the raid on Jarvis and Newman, Fletcher said that attorneys for RPM formally ended the company’s association with NuTech and that he also at that time returned NuTech stock that had been issued to him. (The value of NuTech shares had plummeted by the end of 2007.) As a company insider, Fletcher’s shares were restricted, and he was never able to sell them, he said.
Fletcher did receive tangible benefits from the NuTech deal, however. He acknowledged, for example, that NuTech provided money to RPM as part of their business agreement, though he said he had no way of knowing if the money came from illicit activities. He also acknowledged that NuTech wrote checks to David Weber, in essence helping to pay down the debt that Fletcher owed Weber and forestalling Weber’s eventual takeover of RPM’s most valuable assets.
Fletcher also acknowledged that he received $50,000 from Mychal Jefferson as an up-front payment prior to the failed Buchanan deal, though the details of that transaction are in dispute. According to Jefferson, Fletcher called him shortly after the LitFiber deal fell through, asking for money to pay down a line of credit at his bank, which was threatening to shut down RPM if he didn’t make an immediate payment. Fletcher acknowledged that the $50,000 went to the bank, but he said that it was Jefferson that contacted him, not vice versa, and that his situation was not as dire as Jefferson described.
In the months following the raid on Jarvis and Newman, the stock fraud investigation seemed to bog down. Federal authorities dragged their feet after taking the case over from Harris County prosecutors. Meanwhile, Newman and Jarvis hired top Houston trial lawyer Dick DeGuerin, who began pressuring the government to either file an official forfeiture action in court or return the seized money and assets—which included cars, jet skis, office equipment, and other items—to his clients. A state judge set a deadline, and assistant U.S. attorneys filed their complaint on the last possible day. As an associate at DeGuerin’s firm argued convincingly in his motion to dismiss the case, the complaint seemed rushed and incomplete, containing a great deal less detail, for example, than the search warrant affidavit prepared by the Harris County district attorney’s office at the time of the raid. Rather than risk an unfavorable ruling from the judge, the government voluntarily withdrew the complaint and returned the money. But the U.S. Attorney’s office withdrew “without prejudice to bring action in future,” which means prosecutors are free to refile the case with a revised complaint at any time. Attorneys for Newman and Jarvis told TEXAS MONTHLY that their clients have done nothing wrong.
One of the first bills Fletcher filed as a new state legislator was a measure making the organizing of a Ponzi scheme a first-degree felony, a move he now says was a response to the fraud he says he has been a victim of in recent years. Fletcher likes to tell people that RPM really stands for “Retired Police Men,” and the walls of his Capitol office are covered with mementos from his many years at the Houston Police Department. Last week, Fletcher was asked what he would say if someone asked how it was that Edwin Leonard, the Coil Tubing employee who blew the whistle on Jarvis and Newman, caught on to the alleged scam before Fletcher, with his years of experience investigating white-collar crime. “I’d say that I was a victim, just like all the rich people that gave money to Madoff and Stanford. And that’s why I’m up here trying to pass a bill so the rest of us don’t get taken advantage of,” he replied. “And I’m gonna be real hard—real hard—to burn again.”
A follow up story to this one was printed in the Texas Monthly in April of 2010:
Other Shoe Drops—But Not On Allen Fletcher
http://www.texasmonthly.com/2010-04-01/webextra10.php
A former business associate of Allen Fletcher, the Republican state representative from northern Harris County, was arrested on March 10 in connection with an alleged stock fraud scam, following a lengthy investigation by the FBI and Harris County authorities. Fletcher was not named in the indictment, but this latest action marks for the freshman lawmaker the resurfacing of a troubling story that won’t seem to die.
Last June, texas monthly broke the story that a company owned by Fletcher had become embroiled in a stock fraud investigation. That’s never good news for any sitting legislator, but it was uniquely embarrassing for Fletcher. A former Houston police officer who once supervised a white collar crimes unit, Fletcher had been appointed that spring to chair the House Jurisprudence Committee’s subcommittee on white collar crime. As we reported in June, federal agents raided the homes of two of Fletcher’s business associates, Nick Jarvis and Lois Newman, whom they accused of running a “pump and dump” penny stock scam, in which they allegedly duped investors into sinking money into Fletcher’s moribund burglar alarm and security guard company, known as Resource Protection Management, or RPM. A federal complaint asserted that Nick Jarvis made close to a million dollars on the alleged scam, and that he and Newman made even more on a similar penny stock scheme involving an unrelated oilfield services company called Grifco.
Fletcher was not named in the complaint or accused of a crime, and he told texas monthly last summer that he was an innocent victim of a scam he knew nothing about. But Fletcher had trouble explaining why he decided to go into business with Jarvis, a man he knew had a criminal history. Fletcher also acknowledged that he owed hundreds of thousands of dollars to various creditors or RPM investors at the time of the Jarvis deal, but said he would never have intentionally done anything illegal to get himself out of debt. Trouble seems to circle Fletcher and his modest company, which is now run from Fletcher’s home in Tomball and has only a few contracts. In 2004, Fletcher briefly went into business with Nick Jarvis’s brother, John (who also has a criminal history) but the deal went sour, Fletcher said, when John began making bogus claims about RPM in an effort to take the company public. (The same scheme, in other words, that Fletcher says Nick Jarvis duped him with a few years later.) Then, in 2007, Fletcher was sued by a Massachusetts businessman when yet another attempt to take RPM public fell apart amid accusations of fraud. (Fletcher eventually settled the suit for a modest sum, and admitted no wrongdoing.)
After the raid on Jarvis and Newman, the FBI’s “pump and dump” investigation bogged down. The pair hired top Houston defense attorney Dick DeGuerin, who convinced a judge to return millions in assets seized in conjunction with the raid. The case seemed dead until early this month, when Jarvis and two of his associates were charged with several counts of wire fraud, which carry sentences of up to 20 years each. (Lois Newman was not indicted.) The indictment focuses on the alleged Grifco scam, and does not mention Fletcher or his company.??Fletcher told texas monthly he had not heard about Nick Jarvis’s indictment, and that he had not been asked to testify before the grand jury. “I don’t know anything about it,” he said. “If they’re guilty, as an old peace officer and the only elected peace officer in the House, I hope that they suffer the fullest extent of the law.”??The last time Jarvis’s name was on a warrant, Fletcher was in the middle of his first campaign for the House. The timing is a little better this time around: Fletcher has already secured his party’s nomination for a second term. He drew no primary opponent this spring, and likewise figures to have no Democratic opponent in the fall in the heavily Republican district 130. Fletcher’s effortless return to office has caused some head-scratching around Tomball, according to city council member Derek Townsend. “A lot of people read the texas monthly story, and a lot of people were wondering, ‘What’s going on here? And why hasn’t this investigation gone any further?’”??“The majority of our members are not happy with Allen Fletcher,” said Becky Clepper, a member of the Tomball chapter of the Yellow Rose of Texas Republican Women’s Club. So why didn’t anybody run against him in the primary? According to Clepper, the answer is state senator Dan Patrick, who has emerged as the 800-pound gorilla of northern Harris County politics. Everybody in Tomball knows that Patrick, the talk radio iconoclast and first term senator, recruited Fletcher in 2008 to run against the incumbent, Corbin Van Arsdale, a political enemy of Patrick’s. Clepper, who volunteered for Van Arsdale’s campaign in 2008, said this time around nobody wanted to take the abuse Patrick heaped on Van Arsdale on his daily radio show. Patrick, who did not return calls for this story, has stood by Fletcher in the wake of his recent troubles. “Admitting he’s wrong is not in Dan Patrick’s vocabulary,” Clepper said
March 11, 2010 news breaks about arrests in the Grifco scam:
John Dial,, Evan "Nick" Jarvis, and Alex Ellerman lead a Grifco scam of issuing unregistered shares to themselves and using false PR to pump up the stock press while they sold their shares into the market:
http://www.justice.gov/usao/txs/releases/March%202010/031110%20Jarvis,%20Dial%20and%20Ellerman_print.htm
http://whitecollarcrimenews.com/2010/03/13/three-charged-in-alleged-grifco-international-stock-fraud/
http://www.chron.com/disp/story.mpl/nb/conroe/news/6913085.html
http://houston.fbi.gov/dojpressrel/pressrel10/ho031110a.htm
INFORMATION ABOUT LEGAL PROCEEDINGS:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=51190552
RE: United States v. Defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN
Case Number 2008R05121 and Court Docket Number 10-CR-00056
Dear XXXXX XXXXXX
The United States Department of Justice believes it is important to keep victims of federal crime informed of court proceedings. This notice provides information about the above-referenced criminal case.
Charges have been filed against defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN. The lead prosecutor for this case is JOHN R. LEWIS. The main charge is categorized as Corporate Fraud.
The Crime Victims' Rights Act gives victims of criminal offenses in Federal court the following rights: (1) The right to be reasonably protected from the accused; (2) The right to reasonable, accurate, and timely notice of any public court proceeding, or any parole proceeding GOOD!, involving the crime, or of any release or escape of the accused; (3) The right not to be excluded from any such public court proceeding, unless the court, after receiving clear and convincing evidence, determines that testimony by the victim would be materially altered if the victim heard other testimony at that proceeding; (4) The right to be reasonably heard at any public proceeding in the district court involving release, plea, sentencing, or any parole proceeding; (5) The reasonable right to confer with the attorney for the Government in the case; (6) The right to full and timely restitution as provided in law; (7) The right to proceedings free from unreasonable delay; and (8) The right to be treated with fairness and with respect for the victim's dignity and privacy.
Please be aware that many criminal cases are resolved by a plea agreement between the United States Attorney's Office and the defendant. You should also know that it is not unusual for a defendant to seek to negotiate a plea agreement shortly before a trial is scheduled to begin. Plea agreements can be made at any time and as late as the morning of trial, leaving little or no opportunity to provide notice to you of the date and time of the plea hearing. If the court schedules a plea hearing in this case, we will use our best efforts to notify you of available information as soon as practicable. If you want to inform the prosecutor of your views regarding potential plea agreements, or any other aspect of the case, please contact the prosecutor assigned to this case or me.
We will make our best efforts to ensure you are provided the rights described above. It is important to keep in mind that the defendant(s) are presumed innocent until proven guilty BOOO and that presumption requires both the Court and our office to take certain steps to ensure that justice is served. While our office cannot act as your attorney or provide you with legal advice, you can seek the advice of an attorney with respect to these rights or other related legal matters.
A status hearing is scheduled before Judge David Hittner for October 1, 2010, 10:00 AM at Courtroom 8A, United States District Court, 515 Rusk Ave., Courtroom 8A, Houston, TX 77002 for defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN. The purpose of this hearing is to determine if there are issues that the Court needs to address and to schedule any necessary future court dates. Because of the Court's schedule, hearing dates could change on very short notice. If you plan on attending, you may want to call the VNS Call Center or check the web site to confirm the date and time. Please note, there is a 24-hour delay in information transfer to the web site.
A trial is scheduled before Judge David Hittner on October 4, 2010, 10:00 AM at Courtroom 8A, United States District Court, 515 Rusk Ave., Courtroom 8A, Houston, TX 77002 for the case which involves defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN.
Because of the Court's schedule, hearing dates could change on very short notice. If you plan on attending, you may want to call the VNS Call Center or check the web site to confirm the date and time. Please note, there is a 24-hour delay in information transfer to the web site.
Sincerely,
José Angel Moreno
United States Attorney
Casey Jones
Victim Witness Assistant
The Trial is now scheduled for March of 2011
The trial previously scheduled for defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN on October 25, 2010, 01:30 PM at Courtroom 8A, United States District Court, 515 Rusk Ave., Courtroom 8A, Houston, TX 77002 has been rescheduled by the court. VNS will continue to provide you with updated case scheduling and event information.
A trial is scheduled before Judge David Hittner on March 7, 2011, 10:00 AM at Courtroom 8A, United States District Court, 515 Rusk Ave., Courtroom 8A, Houston, TX 77002 for the case which involves defendant(s) JAMES ROLAND DIAL, EVAN "NICK" JARVIS, ALEX ELLERMAN.
Please be aware that many criminal cases are resolved by a plea agreement between the United States Attorney's Office and the defendant. You should also know that it is not unusual for a defendant to seek to negotiate a plea agreement shortly before a trial is scheduled to begin. Plea agreements can be made at any time and as late as the morning of trial, leaving little or no opportunity to provide notice to you of the date and time of the plea hearing. If the court schedules a plea hearing in this case, we will use our best efforts to notify you of available information as soon as practicable. If you want to inform the prosecutor of your views regarding potential plea agreements, or any other aspect of the case, please contact the prosecutor assigned to this case or me
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