Thursday, July 12, 2007 3:27:38 PM
Here's the text from the pdf file for the Superceeding Indictment against Plant and Lane:
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICA : CRIMINAL NO. 07-375
v. : DATE FILED: ________________
JAMES PLANT : VIOLATIONS:
RUTH LANE
:
:
:
:
:
15 U.S.C. §§ 78j(b), 78ff, and 17
C.F.R. § 240.10b-5 (securities fraud - 1
count)
18 U.S.C. § 1512(b)(1) (witness tampering
- 1 count)
18 U.S.C. § 1519 (obstruction of an
agency proceeding - 1 count)
18 U.S.C. § 1001 (false statements - 2
counts)
18 U.S.C. § 2 (aiding and abetting)
Notice of forfeiture
SUPERSEDING INDICTMENT
COUNT ONE
THE GRAND JURY CHARGES THAT:
At all times relevant to this superseding indictment:
Introduction
The Defendant and His Company
1. CyberKey Solutions, Inc. (“CyberKey”), formerly known as CyberKey
Corporation, is a Nevada corporation headquartered in St. George, Utah. CyberKey is engaged
in the business of selling Universal Service Bus (“USB”) flash memory drives and other
electronic devices. Defendant JAMES PLANT is the Chairman, Chief Executive Officer and
President of CyberKey.
2. CyberKey was formed by defendant JAMES PLANT sometime in 2001.
Sometime in 2003, defendant PLANT merged CyberKey with a publicly traded shell company
named Thin Express, Inc. Thereafter, CyberKey’s common stock was traded under the symbol
“CYKC,” and then later under the symbol “CKYS,” on the “Pink Sheets,” a quotation service for
over-the-counter stocks.
Other Relevant Entity
3. The United States Department of Homeland Security (“DHS”) is a federal
agency whose stated mission is to prevent and deter terrorist attacks and protect against and
respond to the hazards to the nation.
The Scheme to Defraud
4. As set forth more fully below, from in or about July 2005 through in or
about March 2007, in the Eastern District of Pennsylvania and elsewhere, defendant JAMES
PLANT engaged in a scheme to defraud the members of the investing public in connection with
the purchase and sale of CyberKey common stock.
5. As part of this scheme, between December 8, 2005 and March 15, 2007,
defendant JAMES PLANT caused CyberKey to issue numerous press releases containing
materially false and misleading public statements, which were designed artificially to inflate the
market price of CyberKey common stock. As a further part of the scheme, defendant PLANT
caused CyberKey to retain Big Apple Consulting to generate interest in CyberKey common
stock. As defendant PLANT knew, Big Apple Consulting promoted CyberKey stock by calling
stock brokers across the country on the telephone and provided them with news about CyberKey.
Defendant PLANT knew that by providing Big Apple Consulting with the materially false and
public statements, Big Apple Consulting would pass those misstatements along to the stock
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brokers contacted by Big Apple Consulting.
6. As set forth more fully below, the false and misleading public statements
issued by defendant JAMES PLANT concerned (a) a fictitious $24.5 million purchase order that
CyberKey had supposedly received from DHS; (b) falsely inflated revenues and profits that
CyberKey had supposedly realized from the fictitious DHS purchase order; (c) false
representations that CyberKey’s financial statements were in the process of being audited and
would be released in the near future; and (d) false representations that the misstatements
regarding the DHS purchase order in CyberKey’s press releases were the result of improper
accounting methods and reporting procedures.
7. As further part of this scheme, between on or about December 9, 2005 and
on or about January 29, 2007, defendant JAMES PLANT caused CyberKey to issue more than
880 million shares of CyberKey common stock directly to various entities and individuals,
resulting in CyberKey receiving more than $2.5 million from the sale of CyberKey common
stock. As further part of this scheme, and during the same time period, defendant PLANT sold
millions of shares of his own personal CyberKey common stock directly to various individuals,
resulting in defendant PLANT receiving more than $1 million from the sale of CyberKey
common stock.
Misrepresentations Concerning The United States
Department of Homeland Security Purchase Order
8. As part of the scheme to defraud, defendant JAMES PLANT caused
CyberKey to issue press releases containing the following materially false and misleading public
statements concerning a fictitious $24.5 million purchase order that CyberKey supposedly
received from DHS, when as defendant PLANT knew, that DHS purchase order did not exist:
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a. On or about December 8, 2005, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Receives Multi-Million
Dollar Purchase Order from the Department of Homeland Security,” which stated that CyberKey
has received a multi-million Dollar purchase order from the Department of Homeland Security.
The initial purchase order is in excess of 150,000 units.” In this press release, defendant PLANT
was quoted as stating the following: “We are extremely pleased with the opportunity that we
have been granted to provide the Department of Homeland Security with our solutions.
Government/military sales will develop into a very profitable segment of CyberKey Solutions
Inc.”
b. On or about December 29, 2005, defendant JAMES PLANT
caused CyberKey to issue a press release entitled “CyberKey Corporation Closes 2005 with a
Multi-Million Dollar Purchase Order from the Federal Government,” which repeated that
CyberKey had “close[d] 2005 successfully with a multi-million Dollar purchase order from the
Department of Homeland Security “ In this press release, defendant PLANT was quoted as
stating the following: “We are very happy with the response that we have been receiving and the
momentum that CyberKey has created. We are proud to be providing the Department of
Homeland Security and their service men and women with our solutions. This is only the
beginning. We expect many more great developments in 2006.”
c. On or about January 31, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Delivers Initial Shipment
Valued Over $4.2 Million to the Department of Homeland Security,” which stated that
CyberKey had “delivered 33,000 CyberKey units, worth more than $4.2 Million, to the
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Department of Homeland Security. This is the initial delivery of the total 150,000 unit and
multi-million dollar order submitted by the federal government.” In this press release, Plant was
quoted as stating the following: “We are extremely pleased to be providing solutions to the
Department of Homeland Security. Having achieved the important milestone signifies a new
stage in growth of our company.”
d. On or about February 23, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Engages Second
Manufacturing Facility to Fulfill Increased Number of Orders,” which stated that CyberKey had
“engaged with a second manufacturing facility in Northern California. This is in addition to
their first production facility located in China.” The press release continued that “[t]he new
facility will also allow CyberKey Corporation to continue delivering upon their order of 150,000
units to the Department of Homeland Security. This facility aids CyberKey Corporation in
meeting the requirements of the United States government, due to the fact that any company
which sells products to the federal government needs to manufacture those products within the
U.S.” In this press release, defendant PLANT is quoted as stating the following: “We are very
excited to bring on this manufacturing facility in order to assist in fulfilling the overwhelming
number of orders that CyberKey has received from different military and government agencies.”
e. On or about March 22, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation is Set to Deliver Second
Shipment Valued Over $4 Million to the Department of Homeland Security,” which stated that
CyberKey had “received another delivery release and is shipping another 30,000 CyberKey
units, worth more than $4 Million, to the Department of Homeland Security. This is the second
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delivery of the total 150,000 unit purchase order submitted.” In this press release, defendant
PLANT is quoted as stating the following: “We are incredibly excited to have supplied our
second shipment of solutions to the Department of Homeland Security. As a result of this
multi-million dollar order, we anticipate record breaking revenues that will be positively
reflected in the price per share.”
f. On or about July 25, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc.’s Board Approves Insiders
Purchase of up to Five Million Shares,” which stated that CyberKey’s “Board of Directors has
authorized its officers and directors to buy up to five million shares of common stock directly
from the open market. The Board’s decision was based upon the various events that have
already unfolded and what the Company believes will be happening in the near future as they
continue the fulfillment of the Department of Homeland Security purchase order for
$25,000,000.” In the same press release, defendant PLANT was quoted as stating the following:
“Our Directors feel that our shares are extremely undervalued at this time due to the orders we
have already received. We entered 2006 with a large purchase order from the Department of
Homeland Security for $25,000,000 and have already delivered half of that shipment.” Plant
continued that: “We expect to complete the entire order by the end of the year.”
g. On or about August 1, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Receives Forty-Thousand
Unit Purchase Order from the Department of Homeland Security,” which stated that CyberKey’s
“$25,000,000 purchase order from the Department of Homeland Security has been increased by
40,000 units.” The press release continued by stating that “[t]he new order from the Department
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of Homeland Security is estimated to be worth more than $600,000. The initial purchase order
from the Department of Homeland Security was for 150,000 CyberKey units, of which 63,000
have already been shipped.” In this press release, defendant PLANT is quoted as stating the
following: “This addition of 40,000 CyberKey BIO units is an exciting development for our
Company and our shareholders. By expanding our relationships with current customers and
increasing orders and revenue, we are continuing to prove that we are an undervalued company
with a profitable future.”
9. All of these statements were false and misleading because, as defendant
JAMES PLANT knew, CyberKey did not receive any purchase order from DHS and CyberKey
did not deliver any of its USB flash memory drives to DHS.
10. Representatives from DHS investigated CyberKey’s claims in its press
releases that CyberKey had received a purchase order from DHS. DHS determined that it had no
record of doing business with CyberKey. In or about September 2006, counsel for DHS
contacted defendant JAMES PLANT several times to attempt either to have CyberKey
substantiate its claim that CyberKey has a business relationship with DHS, or to withdraw those
press releases referencing that relationship. Neither defendant PLANT nor anyone from
CyberKey ever provided DHS with proof of such a business relationship.
11. On September 25, 2006, DHS issued a cease and desist letter to defendant
JAMES PLANT. In relevant part, the letter stated the following:
It has come to our attention that CyberKey Solutions, Inc. (“CYKS”) is
advertising and claiming a business relationship with the Department of
Homeland Security (“DHS”) in its website press releases. The CYKS website
cites business with [DHS] in press releases dated August 1, 2006 and August 4,
2006 respectively.
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The DHS Chief Information Officer has no knowledge of a contract with CYKS,
and CYKS could not be located in a recent search of the DHS contract database.
Despite repeated requests, CYKS has been unable to substantiate or verify that
CYKS has received a purchase order from DHS. Accordingly, the press releases
on the CYKS website are inappropriate and misleading. Therefore, we request
that you immediately remove the referenced press releases from your website and
halt the reference to business with DHS in any further press releases or
communications. We understand your company’s intent to market its products;
however, your company’s reference to business with DHS is inappropriate.
12. Despite the issuance of the cease and desist letter, defendant JAMES
PLANT failed to withdraw the false press releases referencing a business relationship between
CyberKey and DHS. On October 11, 2006, DHS representatives contacted defendant PLANT
concerning his failure to comply with the cease and desist letter, stated the following in a letter:
“Although you removed the DHS name from the press release header, your website still refers to
DHS in press releases dated August 1, 2006 and August 4, 2006. If all references to DHS are not
immediately removed from CyberKey’s website, we will contact the Justice Department and
pursue the Government’s legal remedies.”
13. Subsequent to DHS’s October 11, 2006 letter, PLANT revised
CyberKey’s previously-released press releases by replacing “Department of Homeland Security”
with more general descriptions, such as “Federal Government Agency” or “the Federal
Government.” The revised press releases continued to maintain, however, that CyberKey had a
$24.5 million purchase order, although they now stated that the purchase order was with an
unnamed large federal agency.
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Misrepresentations Concerning Revenues from the
Fictitious DHS Purchase Order
14. As a further part of the scheme to defraud, defendant JAMES PLANT
caused CyberKey to issue press releases containing materially false and misleading public
statements concerning the revenues and profits that CyberKey had supposedly realized from the
fictitious DHS purchase order, when as defendant PLANT knew, CyberKey did not receive, and
did not expect to receive, any revenues or profits from the fictitious DHS purchase order:
a. On or about April 4, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Receives $4.2 Million
Payment for Initial Shipment to the Department of Homeland Security,” which stated that
“received a payment of $4.2 Million from the Department of Homeland Security for its initial
shipment of 33,000 CyberKey units. The total order submitted by the federal government is for
150,000 units and is expected to exceed $24 Million.” In the press release, defendant PLANT is
quoted as stating the following: “The relationship with the Department of Homeland Security
gives CyberKey a platform for generating a continuous revenue stream. We are very excited
about providing a suite of solutions to the Federal Government and the growth we are achieving
because of it.”
b. On or about July 28, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12 Million
in Earnings for First Two Quarters of 2006,” which stated that CyberKey had “reported total Net
Income of $12,152,060 for the first and second quarters of 2006. The press release further stated
that “CyberKey Solutions total income was $25,050,708.23 which includes the purchase order
from the Department of Homeland Security for 150,000 CyberKey units,” and that “CyberKey
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Solutions posted a Gross Profit of 12,806,298.97 with total expenses of only $654,238.78 for the
first 6 months of 2006. As a result, CyberKey’s Net profit of more than $12 Million yielded an
earnings per share of more than $.027.” In the same press release, defendant PLANT was quoted
as stating the following: “These financial statements are an accurate reflection of the progress
that we made this year. We continue to exceed expectations and show the financial community
that we are grossly undervalued at this point in our corporate growth.”
c. Referenced in the July 28, 2006 press release, and available on
public Internet websites, were CyberKey’s unaudited financial statements for the first and
second quarters of 2006. The financial statements contained the same revenue and profit
numbers contained in the July 28, 2006 press release. Although the financial statements were
unaudited, defendant PLANT personally signed a certification of the financial statements as
follows:
“I, Jim Plant, CyberKey Solutions Chairman, President and Chief Executive
Officer, hereby certify that the financial statements filed herewith and any notes
thereto, fairly present, in all material respects, the financial position, results of
operations, and cash flows for the periods presented, in conformity with
accounting principles generally accepted in the United States, consistently
applied.”
d. On or about January 29, 2007, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12.5 Million
in Net Earnings and $33 Million in Revenues for 2006,” which stated that CyberKey had
reported “earnings of $12,884,030 for the fiscal year 2006.” The press release continued that
“CyberKey Solutions has generated over $33,000,000 in revenues, which includes the purchase
order from various federal government agencies for 150,000 CyberKey units. CyberKey has
also reported total assets exceeding $28,000,000, which is a 45% increase over the $19,500,000
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in assets reported for the first half of 2006.” In this press release, defendant PLANT is quoted as
stating the following: “This was truly an amazing year for the growth of our company and it is
reflected in our financial statements. We will continue to aggressively market our cutting edge
security solutions and product line to our ever expanding list of vertical markets.”
e. Referenced in the January 29, 2007 press release, and available on
public Internet websites, were CyberKey’s unaudited financial statements for all four quarters of
2006. The financial statements contained the same revenue and profit numbers contained in the
January 29, 2007 press release. Although the financial statements were unaudited, defendant
PLANT again personally signed a certification of the financial statements as follows:
“I, Jim Plant, CyberKey Solutions Chairman, President and Chief Executive
Officer, hereby certify that the financial statements filed herewith and any notes
thereto, fairly present, in all material respects, the financial position, results of
operations, and cash flows for the periods presented, in conformity with
accounting principles generally accepted in the United States, consistently
applied.”
15. These statements were false and misleading because, as defendant JAMES
PLANT knew, the supposed purchase order from DHS did not exist. Thus, CyberKey did not
receive, and did not expect to receive, any revenue or profits from sales of USB flash memory
drives to DHS.
Misrepresentations Concerning the Auditing
of CyberKey’s Financial Statements
16. As a further part of the scheme to defraud, defendant JAMES PLANT
caused CyberKey to issue press releases containing materially false and misleading public
statements concerning Cyberkey’s false representations that its financial statements were in the
process of being audited and would be released in the near future, when as defendant PLANT
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knew, CyberKey did not expect to release audited financial statements in that time period:
a. On or about July 28, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12 Million
in Earnings for First Two Quarters of 2006,” which stated that CyberKey was “currently in the
process of auditing their financial statements and is expecting to file them in the near future.”
b. On or about December 20, 2006, defendant JAMES PLANT
falsely announced in a paid-for video interview broadcast on a publicly available Internet
website that CyberKey’s audited financial statements would be publicly released in “two or three
weeks.”
17. These statements were false and misleading because, as defendant
JAMES PLANT knew, at the time CyberKey issued those public statements, CyberKey did not
expect to release audited financial statements in the near future.
Misrepresentations Concerning The Events Surrounding the
Discovery of the Fictitious DHS Purchase Order
18. On or about March 15, 2007, defendant JAMES PLANT caused
CyberKey to issue a press release designed to reassure members of the investing public. This
press release acknowledged that CyberKey did not have a purchase order directly with DHS, but
claimed that defendant PLANT was not involved in, and had no knowledge of, the non-existence
of the DHS purchase order. Specifically, the press release stated that CyberKey had never
received any revenues, or realized any profits, from the supposed DHS purchase order. The
press release claimed that the prior misstatements were issued because “a certain company
official has utilized improper accounting methods and reporting procedures while handling
critical company contracts.” The press release added that the DHS purchase order “was not
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directly with DHS but instead with a third party distributor that was representing it was having
the Cyberkey products delivered directly to DHS facilities in different locations.” The press
release continued that this unnamed third party never shipped any products to DHS as promised.
The press release explained that CyberKey did not receive any revenues because the unnamed
third party “circumvented [CyberKey’s] relationship with its manufacturer in China and secured
direct payment and delivery of the Cyberkey products without paying Cyberkey anything.”
Finally, the press release claimed that CyberKey’s controller “had improperly entered financial
data into the accounting system and had forged critical documents and other material
information.”
19. In the same press release, defendant JAMES PLANT was quoted as
stating the following: “I am deeply troubled by the findings related to the accounting practices of
our company. I apologize to our shareholders and the investment community for these problems,
which happened on my watch but without my knowledge. I am fully committed to resolving all
remaining issues as quickly as possible and to putting the proper remedial measures in place to
ensure that this never happens again. We will be releasing corrected financial statements as soon
as practicable. We will be updating the investors through our website as more information
becomes available.”
20. These statements were false and misleading because, as defendant JAMES
PLANT knew, defendant PLANT, and not CyberKey’s controller, Ruth Lane, charged elsewhere
herein, was responsible for creating the fictitious DHS purchase order and carrying out the
scheme to defraud. These statements were also false and misleading because, as defendant
PLANT knew, the reason why CyberKey never realized any revenues from the DHS purchase
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order was not because a third-party had circumvented its relationship with CyberKey, but rather
because no DHS purchase order ever existed.
Statutory Violation
21. On or about the dates set forth below, in the Eastern District of
Pennsylvania and elsewhere, defendant
JAMES PLANT
did knowingly and willfully use and employ, and aided and abetted the use and employment of,
manipulative and deceptive devices and contrivances, directly and indirectly, in violation of Rule
10b-5 of the Rules and Regulations of the SEC (Title 17, Code of Federal Regulations, Section
240.10b-5), in that the defendant did knowingly and willfully, directly and indirectly (a) employ
devices, schemes and artifices to defraud; (b) make untrue statements of material fact and omit to
state material facts necessary to make the statements made, in light of the circumstances under
which they were made, not misleading; and (c) engage in acts, practices, and courses of business
which would and did operate as a fraud and deceit upon the members of the investing public, in
connection with purchases and sales of CyberKey stock, by the use of the means and
instrumentalities of interstate commerce and the mails.
In violation of Title 15, United States Code, Sections 78j(b) and 78ff; Title 17,
Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2.
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COUNT TWO
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count One are incorporated here by reference.
2. In or about early November 2006, the SEC began an informal inquiry
concerning defendant JAMES PLANT’s and CyberKey’s claims that it had received a $24.5
million purchase order from DHS. During the same time, the SEC contacted defendant JAMES
PLANT and requested that defendant PLANT contact the SEC regarding those claims.
3. On or about November 30, 2006, in response to a written request from the
SEC, defendant JAMES PLANT, through CyberKey’s counsel, produced to the SEC a purchase
order for USB drives totaling approximately $25 million and purporting to be between a
company named Leading Points and DHS. Through CyberKey’s counsel, defendant PLANT
also produced to the SEC two invoices totaling approximately $9.3 million and purporting to be
from CyberKey to Leading Points. Through CyberKey’s counsel, defendant PLANT explained
that CyberKey’s DHS purchase order was actually through Leading Points as a third-party
intermediary. Defendant PLANT also explained through CyberKey’s counsel that both invoices
had been paid by Leading Points. DHS later determined that there was no business relationship
between DHS and any company called Leading Points.
4. On or about February 2, 2007, the SEC began a formal investigation of
CyberKey concerning defendant JAMES PLANT’s and CyberKey’s claims that it had received a
$24.5 million purchase order from DHS.
5. On or about February 9, 2007, via facsimile, in response to a subpoena
request from the SEC to CyberKey, defendant JAMES PLANT submitted to the SEC through
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CyberKey’s counsel a document purporting to show that CyberKey’s $24.5 million purchase
order with DHS was actually through a company called Kikomac as a third-party intermediary.
As part of that same submission, defendant PLANT, through CyberKey’s counsel, also
submitted to the SEC via facsimile four invoices purporting to be from CyberKey to Kikomac.
Defendant PLANT further provided the SEC with banking and wire transfer documents
purporting to show five wire transfer payments -- totaling approximately $26.5 million -- paid
from Kikomac’s bank account in Hong Kong to CyberKey’s bank account in St. George, Utah.
On or about February 12, 2007, the SEC received the same documents from defendant PLANT
and CyberKey via Federal Express.
6. As defendant JAMES PLANT knew, all of the documents described in
paragraph 5 were false and fraudulent because he instructed defendant RUTH LANE to create
those documents using false information supplied by defendant PLANT. As defendant PLANT
further knew, defendant LANE created each of the false documents using a personal computer at
CyberKey. Defendant PLANT later instructed defendant LANE to submit the false and
fraudulent documents both to the SEC and to CyberKey’s counsel.
7. On or about February 9, 2007, in the District for the District of Columbia
and the District of Utah, defendants
JAMES PLANT and
RUTH LANE
knowingly altered, destroyed, mutilated, and falsified, and aided and abetted the alteration,
destruction, mutilation and falsification of, records, documents, and tangible objects, that is: (1)
bank records from CyberKey’s corporate bank account and wire transfer documents purporting
to show wire transfer payments from Kikomac to CyberKey; and (2) invoices from CyberKey to
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Kikomac purporting to show that CyberKey had billed Kikomac for products shipped to DHS,
with the intent to impede, obstruct, and influence the investigation and proper administration of a
matter within the jurisdiction of the United States Securities and Exchange Commission, which
is an agency of the United States.
In violation of Title 18, United States Code, Sections 1519 and 2.
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COUNT THREE
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count One and paragraphs 2 through 6 of
Count Two are incorporated here by reference.
2. On or about March 7, 2007, defendant JAMES PLANT provided sworn
testimony during a deposition to the United States Securities and Exchange Commission
(“SEC”) concerning a fictitious purchase order to the United States Department of Homeland
Security (“DHS”). During the deposition, defendant PLANT stated, among other things, that the
DHS purchase order was not directly between DHS and CyberKey Solutions Inc. (“CyberKey”),
but rather was through a different company called Kikomac as the third-party intermediary.
Defendant PLANT further stated that CyberKey had received each of the above-described five
wire transfer payments from Kikomac. DHS later determined that there was no business
relationship between DHS and any company called Kikomac.
3. As defendant JAMES PLANT knew, those statements were false and
misleading because CyberKey did not have a purchase order with DHS, either directly or
indirectly through a third-party intermediary, and therefore CyberKey did not receive any wire
transfer payments in connection with the fictitious DHS purchase order.
4. On or about March 7, 2007, in the District for the District of Columbia,
defendant
JAMES PLANT,
in a matter within the jurisdiction of the SEC, an agency of the executive branch of the
government of the United States, knowingly and willfully made materially false, fictitious, and
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fraudulent statements and representations, stating in sworn testimony before the SEC: (a) that
CyberKey had a $24.5 million purchase order with DHS through a third-party, when in fact
defendant PLANT knew that CyberKey had no such business relationship, either directly or
indirectly, with DHS, and (b) that CyberKey had received payments from a third party on the
$24.5 million DHS purchase order, when in fact defendant PLANT knew that CyberKey had not
received any such payments relating to the fulfillment of the fictitious DHS purchase order.
In violation of Title 18, United States Code, Section 1001(a)(2).
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COUNT FOUR
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count Two, paragraphs 2 through 6 of Count
Two, and paragraphs 2 through 3 of Count Three are incorporated here by reference.
2. On March 7,2007, after providing sworn testimony to the United States
Securities and Exchange Commission (“SEC”), defendant JAMES PLANT called Ruth Lane,
charged elsewhere herein, and told her that the SEC had found out that the banking and wire
transfer documents they had submitted to the SEC were fabricated. After defendant PLANT and
Lane agreed that Lane would take sole responsibility for creating and submitting the false
documents to the SEC, defendant PLANT instructed Lane to resign her position as the controller
of CyberKey Solutions Inc. (“CyberKey”). Defendant PLANT further instructed Lane to sign a
written statement falsely stating that she alone was responsible for creating the false documents
submitted to the SEC, and that defendant PLANT had no knowledge that she had done so.
3. Immediately after speaking with defendant JAMES PLANT, Ruth Lane, at
the instruction of defendant PLANT, resigned as the controller of CyberKey and signed a written
statement falsely admitting that she alone was responsible for creating the false documents
submitted to the SEC, and that defendant PLANT had no knowledge that she had done so.
4. On or about March 7, 2007, in the District for the District of Columbia,
and elsewhere, defendant
JAMES PLANT
corruptly persuaded, attempted to corruptly persuade, and engaged in misleading conduct
toward, Ruth Lane, charged elsewhere herein, by instructing her to provide a signed statement
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falsely taking sole responsibility for the creation of false documents associated with a fictitious
$24.5 million purchase order between CyberKey Solutions Inc. and the United States
Department of Homeland Security, and to absolve defendant PLANT of the same conduct, with
the intent to influence, delay, and prevent her testimony for use in a federal criminal
investigation subsequently instituted within the Eastern District of Pennsylvania.
In violation of Title 18, United States Code, Sections 1512(b)(1).
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COUNT FIVE
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count Two, paragraphs 2 through 6 of Count
Two, paragraphs 2 through 3 of Count Three, and paragraphs 2 through 3 of Count Four are
incorporated here by reference.
2. On or about March 13, 2007, in the District of Utah, defendant
RUTH LANE,
in a matter within the jurisdiction of the Federal Bureau of Investigation (“FBI”) and United
States Postal Inspection Service (“USPIS”), both agencies of the executive branch of the
government of the United States, knowingly and willfully made a materially false, fictitious, and
fraudulent statement and representation, in that defendant LANE told a Special Agent of the FBI
and a Postal Inspector of the USPIS that James Plant, charged elsewhere herein, was not
involved in a scheme to defraud concerning a fictitious $24.5 million purchase order between
CyberKey and the United States Department of Homeland Security, when in fact, as defendant
LANE knew, Plant devised and carried out that scheme to defraud.
In violation of Title 18, United States Code, Section 1001(a)(2).
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NOTICE OF FORFEITURE
THE GRAND JURY FURTHER CHARGES THAT:
1. As a result of the violations of Title 15, United States Code, Sections
78j(b), 78ff and Title 17 Code Federal Regulations § 240.10b-5 set forth in this superseding
indictment, defendant
JAMES PLANT
shall forfeit to the United States of America any property, real or personal, that constitutes or is
derived from proceeds traceable to the commission of such offenses, including, but not limited
to, the sum of $3.5 million.
2. If any of the property subject to forfeiture, as a result of any act or
omission of the defendant:
a. cannot be located upon the exercise of due diligence;
b. has been transferred or sold to, or deposited with, a third party;
c. has been placed beyond the jurisdiction of the Court;
d. has been substantially diminished in value; or
e. has been commingled with other property which cannot be divided
without difficulty;
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it is the intent of the United States, pursuant to Title 28, United States Code, Section 2461(c),
incorporating Title 21, United States Code, Section 853(p), to seek forfeiture of any other
property of the defendant up to the value of the property subject to forfeiture.
All pursuant to Title 28, United States Code, Section 2461(c) and Title 18, United
States Code, Section 981(a)(1)(C).
A TRUE BILL:
FOREPERSON
PATRICK L. MEEHAN
UNITED STATES ATTORNEY
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICA : CRIMINAL NO. 07-375
v. : DATE FILED: ________________
JAMES PLANT : VIOLATIONS:
RUTH LANE
:
:
:
:
:
15 U.S.C. §§ 78j(b), 78ff, and 17
C.F.R. § 240.10b-5 (securities fraud - 1
count)
18 U.S.C. § 1512(b)(1) (witness tampering
- 1 count)
18 U.S.C. § 1519 (obstruction of an
agency proceeding - 1 count)
18 U.S.C. § 1001 (false statements - 2
counts)
18 U.S.C. § 2 (aiding and abetting)
Notice of forfeiture
SUPERSEDING INDICTMENT
COUNT ONE
THE GRAND JURY CHARGES THAT:
At all times relevant to this superseding indictment:
Introduction
The Defendant and His Company
1. CyberKey Solutions, Inc. (“CyberKey”), formerly known as CyberKey
Corporation, is a Nevada corporation headquartered in St. George, Utah. CyberKey is engaged
in the business of selling Universal Service Bus (“USB”) flash memory drives and other
electronic devices. Defendant JAMES PLANT is the Chairman, Chief Executive Officer and
President of CyberKey.
2. CyberKey was formed by defendant JAMES PLANT sometime in 2001.
Sometime in 2003, defendant PLANT merged CyberKey with a publicly traded shell company
named Thin Express, Inc. Thereafter, CyberKey’s common stock was traded under the symbol
“CYKC,” and then later under the symbol “CKYS,” on the “Pink Sheets,” a quotation service for
over-the-counter stocks.
Other Relevant Entity
3. The United States Department of Homeland Security (“DHS”) is a federal
agency whose stated mission is to prevent and deter terrorist attacks and protect against and
respond to the hazards to the nation.
The Scheme to Defraud
4. As set forth more fully below, from in or about July 2005 through in or
about March 2007, in the Eastern District of Pennsylvania and elsewhere, defendant JAMES
PLANT engaged in a scheme to defraud the members of the investing public in connection with
the purchase and sale of CyberKey common stock.
5. As part of this scheme, between December 8, 2005 and March 15, 2007,
defendant JAMES PLANT caused CyberKey to issue numerous press releases containing
materially false and misleading public statements, which were designed artificially to inflate the
market price of CyberKey common stock. As a further part of the scheme, defendant PLANT
caused CyberKey to retain Big Apple Consulting to generate interest in CyberKey common
stock. As defendant PLANT knew, Big Apple Consulting promoted CyberKey stock by calling
stock brokers across the country on the telephone and provided them with news about CyberKey.
Defendant PLANT knew that by providing Big Apple Consulting with the materially false and
public statements, Big Apple Consulting would pass those misstatements along to the stock
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2
brokers contacted by Big Apple Consulting.
6. As set forth more fully below, the false and misleading public statements
issued by defendant JAMES PLANT concerned (a) a fictitious $24.5 million purchase order that
CyberKey had supposedly received from DHS; (b) falsely inflated revenues and profits that
CyberKey had supposedly realized from the fictitious DHS purchase order; (c) false
representations that CyberKey’s financial statements were in the process of being audited and
would be released in the near future; and (d) false representations that the misstatements
regarding the DHS purchase order in CyberKey’s press releases were the result of improper
accounting methods and reporting procedures.
7. As further part of this scheme, between on or about December 9, 2005 and
on or about January 29, 2007, defendant JAMES PLANT caused CyberKey to issue more than
880 million shares of CyberKey common stock directly to various entities and individuals,
resulting in CyberKey receiving more than $2.5 million from the sale of CyberKey common
stock. As further part of this scheme, and during the same time period, defendant PLANT sold
millions of shares of his own personal CyberKey common stock directly to various individuals,
resulting in defendant PLANT receiving more than $1 million from the sale of CyberKey
common stock.
Misrepresentations Concerning The United States
Department of Homeland Security Purchase Order
8. As part of the scheme to defraud, defendant JAMES PLANT caused
CyberKey to issue press releases containing the following materially false and misleading public
statements concerning a fictitious $24.5 million purchase order that CyberKey supposedly
received from DHS, when as defendant PLANT knew, that DHS purchase order did not exist:
-
3
a. On or about December 8, 2005, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Receives Multi-Million
Dollar Purchase Order from the Department of Homeland Security,” which stated that CyberKey
has received a multi-million Dollar purchase order from the Department of Homeland Security.
The initial purchase order is in excess of 150,000 units.” In this press release, defendant PLANT
was quoted as stating the following: “We are extremely pleased with the opportunity that we
have been granted to provide the Department of Homeland Security with our solutions.
Government/military sales will develop into a very profitable segment of CyberKey Solutions
Inc.”
b. On or about December 29, 2005, defendant JAMES PLANT
caused CyberKey to issue a press release entitled “CyberKey Corporation Closes 2005 with a
Multi-Million Dollar Purchase Order from the Federal Government,” which repeated that
CyberKey had “close[d] 2005 successfully with a multi-million Dollar purchase order from the
Department of Homeland Security “ In this press release, defendant PLANT was quoted as
stating the following: “We are very happy with the response that we have been receiving and the
momentum that CyberKey has created. We are proud to be providing the Department of
Homeland Security and their service men and women with our solutions. This is only the
beginning. We expect many more great developments in 2006.”
c. On or about January 31, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Delivers Initial Shipment
Valued Over $4.2 Million to the Department of Homeland Security,” which stated that
CyberKey had “delivered 33,000 CyberKey units, worth more than $4.2 Million, to the
-
4
Department of Homeland Security. This is the initial delivery of the total 150,000 unit and
multi-million dollar order submitted by the federal government.” In this press release, Plant was
quoted as stating the following: “We are extremely pleased to be providing solutions to the
Department of Homeland Security. Having achieved the important milestone signifies a new
stage in growth of our company.”
d. On or about February 23, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Engages Second
Manufacturing Facility to Fulfill Increased Number of Orders,” which stated that CyberKey had
“engaged with a second manufacturing facility in Northern California. This is in addition to
their first production facility located in China.” The press release continued that “[t]he new
facility will also allow CyberKey Corporation to continue delivering upon their order of 150,000
units to the Department of Homeland Security. This facility aids CyberKey Corporation in
meeting the requirements of the United States government, due to the fact that any company
which sells products to the federal government needs to manufacture those products within the
U.S.” In this press release, defendant PLANT is quoted as stating the following: “We are very
excited to bring on this manufacturing facility in order to assist in fulfilling the overwhelming
number of orders that CyberKey has received from different military and government agencies.”
e. On or about March 22, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation is Set to Deliver Second
Shipment Valued Over $4 Million to the Department of Homeland Security,” which stated that
CyberKey had “received another delivery release and is shipping another 30,000 CyberKey
units, worth more than $4 Million, to the Department of Homeland Security. This is the second
-
5
delivery of the total 150,000 unit purchase order submitted.” In this press release, defendant
PLANT is quoted as stating the following: “We are incredibly excited to have supplied our
second shipment of solutions to the Department of Homeland Security. As a result of this
multi-million dollar order, we anticipate record breaking revenues that will be positively
reflected in the price per share.”
f. On or about July 25, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc.’s Board Approves Insiders
Purchase of up to Five Million Shares,” which stated that CyberKey’s “Board of Directors has
authorized its officers and directors to buy up to five million shares of common stock directly
from the open market. The Board’s decision was based upon the various events that have
already unfolded and what the Company believes will be happening in the near future as they
continue the fulfillment of the Department of Homeland Security purchase order for
$25,000,000.” In the same press release, defendant PLANT was quoted as stating the following:
“Our Directors feel that our shares are extremely undervalued at this time due to the orders we
have already received. We entered 2006 with a large purchase order from the Department of
Homeland Security for $25,000,000 and have already delivered half of that shipment.” Plant
continued that: “We expect to complete the entire order by the end of the year.”
g. On or about August 1, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Receives Forty-Thousand
Unit Purchase Order from the Department of Homeland Security,” which stated that CyberKey’s
“$25,000,000 purchase order from the Department of Homeland Security has been increased by
40,000 units.” The press release continued by stating that “[t]he new order from the Department
-
6
of Homeland Security is estimated to be worth more than $600,000. The initial purchase order
from the Department of Homeland Security was for 150,000 CyberKey units, of which 63,000
have already been shipped.” In this press release, defendant PLANT is quoted as stating the
following: “This addition of 40,000 CyberKey BIO units is an exciting development for our
Company and our shareholders. By expanding our relationships with current customers and
increasing orders and revenue, we are continuing to prove that we are an undervalued company
with a profitable future.”
9. All of these statements were false and misleading because, as defendant
JAMES PLANT knew, CyberKey did not receive any purchase order from DHS and CyberKey
did not deliver any of its USB flash memory drives to DHS.
10. Representatives from DHS investigated CyberKey’s claims in its press
releases that CyberKey had received a purchase order from DHS. DHS determined that it had no
record of doing business with CyberKey. In or about September 2006, counsel for DHS
contacted defendant JAMES PLANT several times to attempt either to have CyberKey
substantiate its claim that CyberKey has a business relationship with DHS, or to withdraw those
press releases referencing that relationship. Neither defendant PLANT nor anyone from
CyberKey ever provided DHS with proof of such a business relationship.
11. On September 25, 2006, DHS issued a cease and desist letter to defendant
JAMES PLANT. In relevant part, the letter stated the following:
It has come to our attention that CyberKey Solutions, Inc. (“CYKS”) is
advertising and claiming a business relationship with the Department of
Homeland Security (“DHS”) in its website press releases. The CYKS website
cites business with [DHS] in press releases dated August 1, 2006 and August 4,
2006 respectively.
-
7
The DHS Chief Information Officer has no knowledge of a contract with CYKS,
and CYKS could not be located in a recent search of the DHS contract database.
Despite repeated requests, CYKS has been unable to substantiate or verify that
CYKS has received a purchase order from DHS. Accordingly, the press releases
on the CYKS website are inappropriate and misleading. Therefore, we request
that you immediately remove the referenced press releases from your website and
halt the reference to business with DHS in any further press releases or
communications. We understand your company’s intent to market its products;
however, your company’s reference to business with DHS is inappropriate.
12. Despite the issuance of the cease and desist letter, defendant JAMES
PLANT failed to withdraw the false press releases referencing a business relationship between
CyberKey and DHS. On October 11, 2006, DHS representatives contacted defendant PLANT
concerning his failure to comply with the cease and desist letter, stated the following in a letter:
“Although you removed the DHS name from the press release header, your website still refers to
DHS in press releases dated August 1, 2006 and August 4, 2006. If all references to DHS are not
immediately removed from CyberKey’s website, we will contact the Justice Department and
pursue the Government’s legal remedies.”
13. Subsequent to DHS’s October 11, 2006 letter, PLANT revised
CyberKey’s previously-released press releases by replacing “Department of Homeland Security”
with more general descriptions, such as “Federal Government Agency” or “the Federal
Government.” The revised press releases continued to maintain, however, that CyberKey had a
$24.5 million purchase order, although they now stated that the purchase order was with an
unnamed large federal agency.
-
8
Misrepresentations Concerning Revenues from the
Fictitious DHS Purchase Order
14. As a further part of the scheme to defraud, defendant JAMES PLANT
caused CyberKey to issue press releases containing materially false and misleading public
statements concerning the revenues and profits that CyberKey had supposedly realized from the
fictitious DHS purchase order, when as defendant PLANT knew, CyberKey did not receive, and
did not expect to receive, any revenues or profits from the fictitious DHS purchase order:
a. On or about April 4, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Corporation Receives $4.2 Million
Payment for Initial Shipment to the Department of Homeland Security,” which stated that
“received a payment of $4.2 Million from the Department of Homeland Security for its initial
shipment of 33,000 CyberKey units. The total order submitted by the federal government is for
150,000 units and is expected to exceed $24 Million.” In the press release, defendant PLANT is
quoted as stating the following: “The relationship with the Department of Homeland Security
gives CyberKey a platform for generating a continuous revenue stream. We are very excited
about providing a suite of solutions to the Federal Government and the growth we are achieving
because of it.”
b. On or about July 28, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12 Million
in Earnings for First Two Quarters of 2006,” which stated that CyberKey had “reported total Net
Income of $12,152,060 for the first and second quarters of 2006. The press release further stated
that “CyberKey Solutions total income was $25,050,708.23 which includes the purchase order
from the Department of Homeland Security for 150,000 CyberKey units,” and that “CyberKey
-
9
Solutions posted a Gross Profit of 12,806,298.97 with total expenses of only $654,238.78 for the
first 6 months of 2006. As a result, CyberKey’s Net profit of more than $12 Million yielded an
earnings per share of more than $.027.” In the same press release, defendant PLANT was quoted
as stating the following: “These financial statements are an accurate reflection of the progress
that we made this year. We continue to exceed expectations and show the financial community
that we are grossly undervalued at this point in our corporate growth.”
c. Referenced in the July 28, 2006 press release, and available on
public Internet websites, were CyberKey’s unaudited financial statements for the first and
second quarters of 2006. The financial statements contained the same revenue and profit
numbers contained in the July 28, 2006 press release. Although the financial statements were
unaudited, defendant PLANT personally signed a certification of the financial statements as
follows:
“I, Jim Plant, CyberKey Solutions Chairman, President and Chief Executive
Officer, hereby certify that the financial statements filed herewith and any notes
thereto, fairly present, in all material respects, the financial position, results of
operations, and cash flows for the periods presented, in conformity with
accounting principles generally accepted in the United States, consistently
applied.”
d. On or about January 29, 2007, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12.5 Million
in Net Earnings and $33 Million in Revenues for 2006,” which stated that CyberKey had
reported “earnings of $12,884,030 for the fiscal year 2006.” The press release continued that
“CyberKey Solutions has generated over $33,000,000 in revenues, which includes the purchase
order from various federal government agencies for 150,000 CyberKey units. CyberKey has
also reported total assets exceeding $28,000,000, which is a 45% increase over the $19,500,000
-10
in assets reported for the first half of 2006.” In this press release, defendant PLANT is quoted as
stating the following: “This was truly an amazing year for the growth of our company and it is
reflected in our financial statements. We will continue to aggressively market our cutting edge
security solutions and product line to our ever expanding list of vertical markets.”
e. Referenced in the January 29, 2007 press release, and available on
public Internet websites, were CyberKey’s unaudited financial statements for all four quarters of
2006. The financial statements contained the same revenue and profit numbers contained in the
January 29, 2007 press release. Although the financial statements were unaudited, defendant
PLANT again personally signed a certification of the financial statements as follows:
“I, Jim Plant, CyberKey Solutions Chairman, President and Chief Executive
Officer, hereby certify that the financial statements filed herewith and any notes
thereto, fairly present, in all material respects, the financial position, results of
operations, and cash flows for the periods presented, in conformity with
accounting principles generally accepted in the United States, consistently
applied.”
15. These statements were false and misleading because, as defendant JAMES
PLANT knew, the supposed purchase order from DHS did not exist. Thus, CyberKey did not
receive, and did not expect to receive, any revenue or profits from sales of USB flash memory
drives to DHS.
Misrepresentations Concerning the Auditing
of CyberKey’s Financial Statements
16. As a further part of the scheme to defraud, defendant JAMES PLANT
caused CyberKey to issue press releases containing materially false and misleading public
statements concerning Cyberkey’s false representations that its financial statements were in the
process of being audited and would be released in the near future, when as defendant PLANT
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knew, CyberKey did not expect to release audited financial statements in that time period:
a. On or about July 28, 2006, defendant JAMES PLANT caused
CyberKey to issue a press release entitled “CyberKey Solutions, Inc. Reports Over $12 Million
in Earnings for First Two Quarters of 2006,” which stated that CyberKey was “currently in the
process of auditing their financial statements and is expecting to file them in the near future.”
b. On or about December 20, 2006, defendant JAMES PLANT
falsely announced in a paid-for video interview broadcast on a publicly available Internet
website that CyberKey’s audited financial statements would be publicly released in “two or three
weeks.”
17. These statements were false and misleading because, as defendant
JAMES PLANT knew, at the time CyberKey issued those public statements, CyberKey did not
expect to release audited financial statements in the near future.
Misrepresentations Concerning The Events Surrounding the
Discovery of the Fictitious DHS Purchase Order
18. On or about March 15, 2007, defendant JAMES PLANT caused
CyberKey to issue a press release designed to reassure members of the investing public. This
press release acknowledged that CyberKey did not have a purchase order directly with DHS, but
claimed that defendant PLANT was not involved in, and had no knowledge of, the non-existence
of the DHS purchase order. Specifically, the press release stated that CyberKey had never
received any revenues, or realized any profits, from the supposed DHS purchase order. The
press release claimed that the prior misstatements were issued because “a certain company
official has utilized improper accounting methods and reporting procedures while handling
critical company contracts.” The press release added that the DHS purchase order “was not
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directly with DHS but instead with a third party distributor that was representing it was having
the Cyberkey products delivered directly to DHS facilities in different locations.” The press
release continued that this unnamed third party never shipped any products to DHS as promised.
The press release explained that CyberKey did not receive any revenues because the unnamed
third party “circumvented [CyberKey’s] relationship with its manufacturer in China and secured
direct payment and delivery of the Cyberkey products without paying Cyberkey anything.”
Finally, the press release claimed that CyberKey’s controller “had improperly entered financial
data into the accounting system and had forged critical documents and other material
information.”
19. In the same press release, defendant JAMES PLANT was quoted as
stating the following: “I am deeply troubled by the findings related to the accounting practices of
our company. I apologize to our shareholders and the investment community for these problems,
which happened on my watch but without my knowledge. I am fully committed to resolving all
remaining issues as quickly as possible and to putting the proper remedial measures in place to
ensure that this never happens again. We will be releasing corrected financial statements as soon
as practicable. We will be updating the investors through our website as more information
becomes available.”
20. These statements were false and misleading because, as defendant JAMES
PLANT knew, defendant PLANT, and not CyberKey’s controller, Ruth Lane, charged elsewhere
herein, was responsible for creating the fictitious DHS purchase order and carrying out the
scheme to defraud. These statements were also false and misleading because, as defendant
PLANT knew, the reason why CyberKey never realized any revenues from the DHS purchase
-13
order was not because a third-party had circumvented its relationship with CyberKey, but rather
because no DHS purchase order ever existed.
Statutory Violation
21. On or about the dates set forth below, in the Eastern District of
Pennsylvania and elsewhere, defendant
JAMES PLANT
did knowingly and willfully use and employ, and aided and abetted the use and employment of,
manipulative and deceptive devices and contrivances, directly and indirectly, in violation of Rule
10b-5 of the Rules and Regulations of the SEC (Title 17, Code of Federal Regulations, Section
240.10b-5), in that the defendant did knowingly and willfully, directly and indirectly (a) employ
devices, schemes and artifices to defraud; (b) make untrue statements of material fact and omit to
state material facts necessary to make the statements made, in light of the circumstances under
which they were made, not misleading; and (c) engage in acts, practices, and courses of business
which would and did operate as a fraud and deceit upon the members of the investing public, in
connection with purchases and sales of CyberKey stock, by the use of the means and
instrumentalities of interstate commerce and the mails.
In violation of Title 15, United States Code, Sections 78j(b) and 78ff; Title 17,
Code of Federal Regulations, Section 240.10b-5; and Title 18, United States Code, Section 2.
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COUNT TWO
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count One are incorporated here by reference.
2. In or about early November 2006, the SEC began an informal inquiry
concerning defendant JAMES PLANT’s and CyberKey’s claims that it had received a $24.5
million purchase order from DHS. During the same time, the SEC contacted defendant JAMES
PLANT and requested that defendant PLANT contact the SEC regarding those claims.
3. On or about November 30, 2006, in response to a written request from the
SEC, defendant JAMES PLANT, through CyberKey’s counsel, produced to the SEC a purchase
order for USB drives totaling approximately $25 million and purporting to be between a
company named Leading Points and DHS. Through CyberKey’s counsel, defendant PLANT
also produced to the SEC two invoices totaling approximately $9.3 million and purporting to be
from CyberKey to Leading Points. Through CyberKey’s counsel, defendant PLANT explained
that CyberKey’s DHS purchase order was actually through Leading Points as a third-party
intermediary. Defendant PLANT also explained through CyberKey’s counsel that both invoices
had been paid by Leading Points. DHS later determined that there was no business relationship
between DHS and any company called Leading Points.
4. On or about February 2, 2007, the SEC began a formal investigation of
CyberKey concerning defendant JAMES PLANT’s and CyberKey’s claims that it had received a
$24.5 million purchase order from DHS.
5. On or about February 9, 2007, via facsimile, in response to a subpoena
request from the SEC to CyberKey, defendant JAMES PLANT submitted to the SEC through
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CyberKey’s counsel a document purporting to show that CyberKey’s $24.5 million purchase
order with DHS was actually through a company called Kikomac as a third-party intermediary.
As part of that same submission, defendant PLANT, through CyberKey’s counsel, also
submitted to the SEC via facsimile four invoices purporting to be from CyberKey to Kikomac.
Defendant PLANT further provided the SEC with banking and wire transfer documents
purporting to show five wire transfer payments -- totaling approximately $26.5 million -- paid
from Kikomac’s bank account in Hong Kong to CyberKey’s bank account in St. George, Utah.
On or about February 12, 2007, the SEC received the same documents from defendant PLANT
and CyberKey via Federal Express.
6. As defendant JAMES PLANT knew, all of the documents described in
paragraph 5 were false and fraudulent because he instructed defendant RUTH LANE to create
those documents using false information supplied by defendant PLANT. As defendant PLANT
further knew, defendant LANE created each of the false documents using a personal computer at
CyberKey. Defendant PLANT later instructed defendant LANE to submit the false and
fraudulent documents both to the SEC and to CyberKey’s counsel.
7. On or about February 9, 2007, in the District for the District of Columbia
and the District of Utah, defendants
JAMES PLANT and
RUTH LANE
knowingly altered, destroyed, mutilated, and falsified, and aided and abetted the alteration,
destruction, mutilation and falsification of, records, documents, and tangible objects, that is: (1)
bank records from CyberKey’s corporate bank account and wire transfer documents purporting
to show wire transfer payments from Kikomac to CyberKey; and (2) invoices from CyberKey to
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Kikomac purporting to show that CyberKey had billed Kikomac for products shipped to DHS,
with the intent to impede, obstruct, and influence the investigation and proper administration of a
matter within the jurisdiction of the United States Securities and Exchange Commission, which
is an agency of the United States.
In violation of Title 18, United States Code, Sections 1519 and 2.
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COUNT THREE
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count One and paragraphs 2 through 6 of
Count Two are incorporated here by reference.
2. On or about March 7, 2007, defendant JAMES PLANT provided sworn
testimony during a deposition to the United States Securities and Exchange Commission
(“SEC”) concerning a fictitious purchase order to the United States Department of Homeland
Security (“DHS”). During the deposition, defendant PLANT stated, among other things, that the
DHS purchase order was not directly between DHS and CyberKey Solutions Inc. (“CyberKey”),
but rather was through a different company called Kikomac as the third-party intermediary.
Defendant PLANT further stated that CyberKey had received each of the above-described five
wire transfer payments from Kikomac. DHS later determined that there was no business
relationship between DHS and any company called Kikomac.
3. As defendant JAMES PLANT knew, those statements were false and
misleading because CyberKey did not have a purchase order with DHS, either directly or
indirectly through a third-party intermediary, and therefore CyberKey did not receive any wire
transfer payments in connection with the fictitious DHS purchase order.
4. On or about March 7, 2007, in the District for the District of Columbia,
defendant
JAMES PLANT,
in a matter within the jurisdiction of the SEC, an agency of the executive branch of the
government of the United States, knowingly and willfully made materially false, fictitious, and
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fraudulent statements and representations, stating in sworn testimony before the SEC: (a) that
CyberKey had a $24.5 million purchase order with DHS through a third-party, when in fact
defendant PLANT knew that CyberKey had no such business relationship, either directly or
indirectly, with DHS, and (b) that CyberKey had received payments from a third party on the
$24.5 million DHS purchase order, when in fact defendant PLANT knew that CyberKey had not
received any such payments relating to the fulfillment of the fictitious DHS purchase order.
In violation of Title 18, United States Code, Section 1001(a)(2).
-19
COUNT FOUR
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count Two, paragraphs 2 through 6 of Count
Two, and paragraphs 2 through 3 of Count Three are incorporated here by reference.
2. On March 7,2007, after providing sworn testimony to the United States
Securities and Exchange Commission (“SEC”), defendant JAMES PLANT called Ruth Lane,
charged elsewhere herein, and told her that the SEC had found out that the banking and wire
transfer documents they had submitted to the SEC were fabricated. After defendant PLANT and
Lane agreed that Lane would take sole responsibility for creating and submitting the false
documents to the SEC, defendant PLANT instructed Lane to resign her position as the controller
of CyberKey Solutions Inc. (“CyberKey”). Defendant PLANT further instructed Lane to sign a
written statement falsely stating that she alone was responsible for creating the false documents
submitted to the SEC, and that defendant PLANT had no knowledge that she had done so.
3. Immediately after speaking with defendant JAMES PLANT, Ruth Lane, at
the instruction of defendant PLANT, resigned as the controller of CyberKey and signed a written
statement falsely admitting that she alone was responsible for creating the false documents
submitted to the SEC, and that defendant PLANT had no knowledge that she had done so.
4. On or about March 7, 2007, in the District for the District of Columbia,
and elsewhere, defendant
JAMES PLANT
corruptly persuaded, attempted to corruptly persuade, and engaged in misleading conduct
toward, Ruth Lane, charged elsewhere herein, by instructing her to provide a signed statement
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falsely taking sole responsibility for the creation of false documents associated with a fictitious
$24.5 million purchase order between CyberKey Solutions Inc. and the United States
Department of Homeland Security, and to absolve defendant PLANT of the same conduct, with
the intent to influence, delay, and prevent her testimony for use in a federal criminal
investigation subsequently instituted within the Eastern District of Pennsylvania.
In violation of Title 18, United States Code, Sections 1512(b)(1).
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COUNT FIVE
THE GRAND JURY FURTHER CHARGES THAT:
1. Paragraphs 1 through 20 of Count Two, paragraphs 2 through 6 of Count
Two, paragraphs 2 through 3 of Count Three, and paragraphs 2 through 3 of Count Four are
incorporated here by reference.
2. On or about March 13, 2007, in the District of Utah, defendant
RUTH LANE,
in a matter within the jurisdiction of the Federal Bureau of Investigation (“FBI”) and United
States Postal Inspection Service (“USPIS”), both agencies of the executive branch of the
government of the United States, knowingly and willfully made a materially false, fictitious, and
fraudulent statement and representation, in that defendant LANE told a Special Agent of the FBI
and a Postal Inspector of the USPIS that James Plant, charged elsewhere herein, was not
involved in a scheme to defraud concerning a fictitious $24.5 million purchase order between
CyberKey and the United States Department of Homeland Security, when in fact, as defendant
LANE knew, Plant devised and carried out that scheme to defraud.
In violation of Title 18, United States Code, Section 1001(a)(2).
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NOTICE OF FORFEITURE
THE GRAND JURY FURTHER CHARGES THAT:
1. As a result of the violations of Title 15, United States Code, Sections
78j(b), 78ff and Title 17 Code Federal Regulations § 240.10b-5 set forth in this superseding
indictment, defendant
JAMES PLANT
shall forfeit to the United States of America any property, real or personal, that constitutes or is
derived from proceeds traceable to the commission of such offenses, including, but not limited
to, the sum of $3.5 million.
2. If any of the property subject to forfeiture, as a result of any act or
omission of the defendant:
a. cannot be located upon the exercise of due diligence;
b. has been transferred or sold to, or deposited with, a third party;
c. has been placed beyond the jurisdiction of the Court;
d. has been substantially diminished in value; or
e. has been commingled with other property which cannot be divided
without difficulty;
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it is the intent of the United States, pursuant to Title 28, United States Code, Section 2461(c),
incorporating Title 21, United States Code, Section 853(p), to seek forfeiture of any other
property of the defendant up to the value of the property subject to forfeiture.
All pursuant to Title 28, United States Code, Section 2461(c) and Title 18, United
States Code, Section 981(a)(1)(C).
A TRUE BILL:
FOREPERSON
PATRICK L. MEEHAN
UNITED STATES ATTORNEY
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