Shawn Hackman and pump and dumps...
Wednesday, February 25, 2004
Copyright © Las Vegas Review-Journal
JOHN L. SMITH: Fraud scheme case promises to set local legal community on its ear
Shawn Hackman didn't distinguish himself as an attorney in Las Vegas, but for a while he sure excelled as a criminal.
There's a lawyer joke in there somewhere, but the trouble in which Hackman finds himself is anything but humorous.
Hackman, 35, on Thursday pleaded guilty in U.S. District Court to one count of racketeering in a case that promises to turn Southern Nevada's legal community upside down: the 64-count indictment of lawyers linked to what authorities believe is the largest "boxed stock" fraud scheme in local history.
A conservative estimate of the profit from the sale of stock in more than 60 cardboard pump-and-dump companies is $35 million. Sources with knowledge of the setup say that number might represent less than 20 percent of the actual amount separated from investors who believed they were buying freely traded stock.
In exchange for his guilty plea, Hackman has agreed to cooperate fully against the remaining defendants: James Farrell of Sandy, Utah, and attorneys Sean Flanagan and Daniel Chapman of Las Vegas and Herbert Jacobi of New York. Their trial is set for June 15 in U.S. District Judge James Mahan's court.
Hackman, who faces up to 20 years in prison, is in line to receive a downward departure from the federal sentencing guidelines if he provides "substantial assistance," according to his plea agreement.
If Hackman's testimony holds up, it will bolster the government's paper-heavy prosecution against the remaining defendants. The case is being investigated by the Internal Revenue Service's Criminal Investigation unit and the FBI's Organized Crime Squad.
Hackman, after all, was in position to view the operation with his own eyes. And he admits he benefitted illegally from the scheme, which allegedly committed acts of "securities fraud, money laundering, wire fraud, mail fraud, interstate transportation of stolen securities and receipt and sale of stolen securities," according to the plea agreement, which was secured by Assistant U.S. Attorney J. Gregory Damm of the Organized Crime Strike Force.
As part of Hackman's deal, he also admitted he was hired by Las Vegan Peter Berney to "issue false and misleading legal opinions" associated with the fraudulent stocks. Hackman also participated in creating front men as corporate officers and helped set up mergers of the phony shell corporations with private companies.
As a result, he said, investors were led to believe they were purchasing shares in legitimate companies with names like Big Tex Enterprises Inc., Tera West Ventures Inc., Dream Team International Inc., Far East Ventures Inc. and Custom Leathers of Las Vegas Inc., among many.
After the shells merged with private companies, Berney, Las Vegan Robert Potter, and others would dump their shares and reap millions. Potter has subsequently pleaded guilty to money laundering conspiracy.
Although it's clear from the indictment and Hackman's plea agreement that Berney is the central figure in the investigation, his part of the case remains sealed. And for good reason.
This case is arguably the largest "boxed stock" fraud investigation in Southern Nevada history, but it's even bigger than that.
Take Jacobi, for instance. He pleaded guilty in October 2001 to plotting to obtain records stolen from the Las Vegas office of the FBI. Jacobi and Potter received the confidential documents from FBI employee James Hill, who later pleaded guilty. Jacobi paid former FBI agent Michael Levin for documents he believed to be authentic.
"It doesn't take much to figure out who's pulling that information from that computer," Jacobi told Levin.
Trouble for the lawyer was, the double-dealing Levin had already cut his own gig with the government and was wearing a wire.
As if that weren't compelling enough, Potter has been identified as part of a mob-connected pump-and-dump stock scheme in New York. One of Potter's alleged partners was an associate of the Genovese crime family.
It was into the middle of this insanely lucrative and dangerous high-wire world of stock fraud that Shawn Hackman found himself.
It's no wonder he wanted out.
