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National Storm's Clark, Gordon could spend life in jail

2010-08-17 14:14 ET - Street Wire
by Mike Caswell
http://www.stockwatch.com/News/Item.aspx?bid=Z-U:NLST-1751118&symbol=NLST&news_region=U

David Gordon and Richard Clark, the two Oklahoma men convicted in a $41.8-million pump-and-dump case that includes former Canadian broker Dean Sheptycki, are unfairly facing potential life sentences, their lawyers say. (All figures are in U.S. dollars.) Prosecutors have recommended that the men receive 30-year and 255-year jail terms. For Mr. Gordon, who is 48, and Mr. Clark, who is 62, the sentences would amount to life in jail, or close to it.

On April 30, 2010, an Oklahoma jury convicted the pair on charges stemming from the fraudulent promotion of four pink sheets companies. The jury found that they paid for misleading faxes and e-mails, then dumped millions of shares. The judge sent the men to jail to await sentencing, which is scheduled for Aug. 25, 2010. Now, with the sentencing date approaching, lawyers for the two men have filed presentencing memorandums, in which they plea for leniency.

Mr. Clark, who is facing a possible 255-year jail term, points out that if he were to receive such a sentence it would exceed the 150-year term that Bernie Madoff is serving. He argues that such a term is "draconian" given the nature of his crime. The government has not proven several required sentencing factors, including investor losses of over $20-million, his memorandum claims. He says he should receive up to six months, which he could do as home confinement.

Mr. Gordon, who faces 30 years, also says there are flaws in how the government calculated the losses he inflicted on investors. Prosecutors determined that he caused losses totalling $8.7-million to 157 investors. Mr. Gordon says that there are so many difficulties in accurately determining the figure, it should be reduced to nil. He notes that the probation officer who prepared his presentence report wrote that "any estimate of loss was so fraught with defective methods and theories, that estimating the harm should be abandoned." After removing this and other problems he sees with the sentencing recommendation, he should receive five to 10 years in jail, Mr. Gordon argues.

While Mr. Gordon and Mr. Clark are awaiting sentencing, two other defendants remain wanted men. One is Mr. Sheptycki, who was arrested in the Bahamas on Feb. 11, 2009, the same day U.S. authorities took Mr. Gordon and Mr. Clark into custody. The U.S. tried to extradite him, but government lawyers failed to file necessary paperwork in the Bahamas on time. A Bahamian judge threw out the extradition case and released Mr. Sheptycki from jail, and it is not clear where he is now. He and another defendant, Joshua Lankford of Dallas, are considered fugitives in the U.S.

The only remaining defendant, James Reskin, pleaded guilty without a trial and awaits sentencing.

Indictment

Prosecutors filed charges against the men on Jan. 15, 2009, in the Northern District of Oklahoma. According to an indictment, they pumped and dumped four companies: National Storm Management Inc., Deep Rock Oil and Gas Inc., Global Beverage Solutions Inc., and International Power Group Ltd. The scheme ran from April, 2004, to December, 2006.

One of the promotions, National Storm, took advantage of the perceived demand for restoration work in the wake of Hurricane Katrina, the massive storm that devastated New Orleans in 2005. National Storm had gone public earlier that year when it merged with a shell called 18th Letter Inc. As part of the transaction, Mr. Gordon, who was a securities lawyer, wrote false opinion letters which the company used to issue blocks of free-trading shares.

Then, in the two weeks after Hurricane Katrina, Mr. Sheptycki sent out multiple faxes and e-mails touting National Storm. The spam stated that the company stood to benefit from the construction work that was sure to follow the storm. "Katrina means National Storm (NLST) is poised for a massive run up as demand to repair homes skyrockets," one of the faxes read.

After the spam, the stock rose from 53 cents to $2.50. According to prosecutors, Mr. Gordon sold $278,815 worth of shares and wired $50,000 to Mr. Sheptycki. By the end of the year, the stock fell back to 18 cents.

The other promotions followed a similar script, prosecutors said. The indictment provided few details, simply listing share sales totalling $3.03-million. It also listed payments to Mr. Sheptycki of $162,500 for sending blast faxes. (Prosecutors later said that losses to investors were much higher, and sought $41.8-million in asset forfeitures from Mr. Gordon and Mr. Clark.)

Sentencing memorandums

Mr. Clark and Mr. Gordon filed separate sentencing memorandums on Aug. 13, 2010.

In his, Mr. Clark claims that the judge should consider his family circumstances in calculating an appropriate sentence. He is a father to seven children, ranging in age from 10 to 32, and is a grandfather as well. He says the strains of the trial caused his wife to file for divorce, and his children would suffer if their relationship with their father were reduced to prison visits.

He further argues that he has already suffered greatly, with the government having taken all his assets and his reputation having been destroyed by the trial. "[Mr. Clark] has been publicly disgraced and vilified. He has had to witness the shame and suffering that his family has endured. He has lost every penny and possession that he ever had. And now he is faced with the possibility of losing his freedom forever," his sentencing memorandum concludes.

Like Mr. Clark, Mr. Gordon argues that he has already suffered enough. He says he will lose his law licence and the U.S. Securities and Exchange Commission will ban him from penny stocks. "The public does not need protection from Mr. Gordon, and there is no risk of recidivism in this case," his memorandum reads.

In addition to the criminal charges, all of the defendants face a parallel civil suit from the SEC, which is on hold pending completion of the criminal matter.

http://www.stockwatch.com/News/Item.aspx?bid=Z-U:NLST-1751118&symbol=NLST&news_region=U