Medical Tech CEO Gets Probation In Kickback Scheme
Law360, New York (January 6, 2016, 7:58 PM ET) -- The former CEO and president of a medical technology supplier has been sentenced to probation and agreed to forfeit the proceeds of a microcap stock kickback scheme paid by an undercover agent, the U.S.Securities and Exchange Commission announced Wednesday.
Ronald L. Schuman, 59, of Palm City, Florida, was sentenced to 12 months of probation by a Massachusetts federal judge on Dec. 11, 2015, and ordered to forfeit $22,500 in proceeds he collected in a kickback scheme by selling shares in Florida medical technology and supply company Connectyx Technologies Corp. to a purported hedge fund manager, who was in reality an undercover FBI agent.
An attorney for Schuman, Jonathan H. Rosenthal of J. Rosenthal Law PA, told Law360 on Wednesday that the sentence illustrated U.S. District Judge Mark L. Wolf's "understanding that Mr. Schuman was merely trying to raise capital for a real company" and that prosecutors had conceded at the sentencing hearing that there was no evidence Schuman had previously committed securities fraud.
"Mr. Schuman was ensnared in a transaction devised, created and planned by government agents, and presented to Schuman after he was introduced to the agents by an attorney and financial advisor Schuman trusted," Rosenthal said in an email. "That he broke the law in [trying to raise capital] is an unfortunate fact, but his motivation was not greed or personal gain and in fact, he did not personally benefit from the transaction at issue."
Representatives for the prosecutors did not respond Wednesday to a request for comment.
Schuman pled guilty in May 2014, admitting to charges that he conspired to commit wire fraud by agreeing to enter the scheme kickback scheme and “kicking back” payments he received from the undercover agent in exchange for Connectyx shares.
The former CEO was one of seven defendants charged with securities fraud in February 2014 after an undercover investigation focused on preventing fraud in microcap stock markets, along with Barry Hawk, the managing director of Status Equities LLC, who helped facilitate the meeting with the purported hedge fund manager. Five other individuals related to other microcap companies were also charged for similar schemes.
According to the criminal information, Hawk arranged for Schuman to meet the representative of a major investment fund in September 2011 to discuss the possibility of investing fund cash in Connectyx in exchange for a secret 50 percent kickback, without realizing the representative was an FBI agent.
The undercover agent represented that he would invest $5 million of the fund in Connectyx stock in exchange for a $2.5 million kickback, directing Schuman to conceal the kickbacks by creating fake consulting agreements with companies the agent claimed to control, prosecutors said.
Schuman agreed to the plan, and the FBI paid $45,000 to a Connectyx bank account, disguised as payments from the investment fund, in exchange for 1.1 million Connectyx shares, according to prosecutors. Schuman then paid $22,500 in kickbacks, with Connectyx retaining $22,500 of the funds, the information said.
The sentencing order, signed by U.S. District Judge Mark L. Wolf, included an order of forfeiture requiring Schuman to turn over the remaining $22,500 proceeds from the scheme.
The SEC entered a settlement of parallel civil charges in an administrative order in June 2015 barring Schuman from any future securities fraud and prohibiting him from acting as an officer or director of a public company for five years.
Schuman also agreed as part of the SEC settlement to be barred from participating in any penny stock offerings for at least five years.
Hawk was sentenced in March 2015 to three years of probation and a $20,000 fine for his role in the Connectyx scheme, and also reached a settlement with the SEC in June 2015.
The SEC declined to comment.
