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Louis Zehil sentenced to 3 years.

United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE

CONTACT: U.S. ATTORNEY'S OFFICE
FEBRUARY 28, 2010
ELLEN DAVIS
EDELI RIVERA
PUBLIC INFORMATION OFFICE
[phone]

FORMER LAW FIRM PARTNER SENTENCED IN MANHATTAN FEDERAL
COURT TO THREE YEARS IN PRISON FOR $17 MILLION
SECURITIES FRAUD

PREET BHARARA, the United States Attorney for the
Southern District of New York, announced that LOUIS W. ZEHIL was
sentenced today to three years in prison for his participation in
a fraudulent "PIPE" transaction scheme. ZEHIL obtained
unregistered, restricted securities, which he then sold under the
false pretense that they were registered and freely tradable. As
a result of the scheme, he reaped approximately $17 million
dollars in illicit profits. ZEHIL pled guilty to one count of
conspiracy and one count of securities fraud in March 2010. The
sentence was imposed in Manhattan federal court by U.S. District
Judge DEBORAH A. BATTS.

According to documents previously filed in Manhattan
federal court and statements made during court proceedings:

ZEHIL, a former law firm partner, specialized in both
representing small companies seeking to become public through
reverse mergers and obtaining capital for those companies through
private placement transactions. Typically, these companies would
enter into a "PIPE" private placement transaction to generate
financing for the newly merged public company.

Under the terms of the PIPE transactions, the stock
issued to the PIPE investors was not freely tradeable because it
was not registered with the United States Securities and Exchange
Commission ("SEC"). Consequently, all shares issued in the PIPE
transactions were required to bear restrictive legends until such
time as those shares were registered with the SEC and the SEC
declared the registration statements for those securities
effective. The PIPE investors typically entered into
"registration rights" agreements that allowed them, at a future
date, to register the securities they obtained in the PIPE
transactions for resale.

Between January 2006 and February 2007, ZEHIL
represented the following seven companies that issued stock
pursuant to PIPE transactions: Gran Tierra Energy, Inc.,
Foothills Resources, Inc., MMC Energy, Inc., Alternative Energy
Sources, Inc., Ethanex Energy, Inc., GoFish Corp., and Kreido
Biofuels, Inc. (collectively, the "Charged Transactions").

ZEHIL invested in each of the Charged Transactions
through nominee entities he controlled (the "Entities").
Investors in each of the Charged Transactions, including ZEHIL,
and the Entities entered into subscription agreements for each
such transaction, pursuant to which they agreed that the shares
they received would be issued with restrictive legends (that
would prevent their resale) until such time as the issuers filed
registration statements with the SEC and the SEC declared the
registration statements effective.

Acting as counsel for the issuers in the Charged
Transactions, ZEHIL sent opinion letters to the issuers' stock
transfer agents directing the issuance of restricted shares to
the PIPE investors. ZEHIL's letters instructed that all of the
issued shares should bear restrictive legends except the shares
issued to the Entities. ZEHIL's letters stated, falsely, that
the shares issued to the Entities satisfied legal criteria
permitting them to be issued without a restrictive legend.

As a result, ZEHIL was able to receive shares without
restrictive legends. Almost immediately after Zehil obtained
these free trading shares of the issuers' stock, he deposited
them in securities trading accounts and sold them before the
issuers had filed any registration statements with the SEC. By
obtaining stock free of the restrictive legends, ZEHIL was able
to sell these shares immediately in the open market at a profit,
in advance of the other PIPE investors. ZEHIL reaped
approximately $17 million dollars in profit through these illegal
sales.
* * *
In addition to his prison term, Judge BATTS sentenced
ZEHIL, 45, of Jacksonville, Florida, to 3 years of supervised
release. Judge BATTS also ordered ZEHIL to forfeit $17 million
which represent the proceeds of the fraud, ordered ZEHIL to pay
restitution to the victims of the offense, and imposed a $10,000
fine.
Mr. BHARARA praised the efforts of the Criminal
Investigators of the U.S. Attorney's Office for the Southern
District of New York. He also thanked the Securities and
Exchange Commission for their assistance in the investigation of
this case.
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* * *
This case was brought in coordination with President
BARACK OBAMA's Financial Fraud Enforcement Task Force, on which
Mr. BHARARA serves as a Co-Chair of the Securities and
Commodities Fraud Working Group. President OBAMA established the
interagency Financial Fraud Enforcement Task Force to wage an
aggressive, coordinated, and proactive effort to investigate and
prosecute financial crimes. The task force includes
representatives from a broad range of federal agencies,
regulatory authorities, inspectors general, and state and local
law enforcement who, working together, bring to bear a powerful
array of criminal and civil enforcement resources. The task
force is working to improve efforts across the federal executive
branch, and with state and local partners, to investigate and
prosecute significant financial crimes, ensure just and effective
punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover
proceeds for victims of financial crimes.

This case is being handled by the Office's Securities
and Commodities Fraud Task Force. Assistant U.S. Attorney EUGENE
INGOGLIA is in charge of the prosecution.
11-060 ###
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http://www.justice.gov/usao/nys/pressreleases/February11/zehillouissentencingpr.pdf