HOUSTON - The former chief executive of a now defunct Houston-based oil and gas company has been indicted on charges he devised a scheme to inflate the price and trading volume of his company's stock, federal prosecutors said Friday. John N. Ehrman, 52, the former CEO of Rocky Mountain Energy Corp. is charged in a 13-count indictment with securities fraud and making false filings to the Securities and Exchange Commission.
Ehrman, of the Houston suburb The Woodlands, was arrested by FBI agents Friday morning and made his initial court appearance later in the day. His bond was set at $100,000.
His attorney, Donald Petrillo, declined to comment on the charges.
According to the indictment, Ehrman is accused of 10 counts of securities fraud for devising a scheme to inflate the price and trading volume of Rocky Mountain stock. He planned to profit by selling and directing others to sell and transfer shares issued under an obscure exemption to the registration provisions of federal securities laws, the indictment claims.
In the scheme, Ehrman allegedly signed separate agreements on behalf of Rocky Mountain to acquire small privately held oil and gas companies, or parts of the companies, in exchange for Rocky Mountain stock.
A Utah court issued orders finding that Rocky Mountain's plans to issue and exchange shares were fair to shareholders and owners of the acquired companies and did not constitute a public securities offering by Rocky Mountain.
The indictment alleges Ehrman caused Rocky Mountain to issue more than 46 million shares that had not been registered with the SEC. As part of the scheme, Ehrman caused Rocky Mountain to make false and misleading statements to the investing public, according to the indictment. Ehrman allegedly received about $500,000 in proceeds from sales of Rocky Mountain shares during the scheme, which the indictment says took place between June 1, 2002 and April 3, 2003.
Ehrman also allegedly caused Rocky Mountain to not disclose to the public that the company issued tens of millions of shares of stock, which diluted the value of shares held by investors. Investors allegedly lost approximately $1.1 million during the scheme.
Ehrman is also accused of three counts of making false and misleading statements in reports and documents filed with the SEC.
He faces up to 20 years in prison and a fine of up to $5 million if convicted.
Ehrman's indictment comes after the SEC prevailed in a civil complaint it had filed in 2003 against Rocky Mountain Energy and several company officials for false and misleading statements they made regarding the company's business and its operations.
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