Four plead guilty to e-mail, securities fraud
Men cost investors more than $20 million in stock manipulation scheme that included sending out tens of millions of spam messages
By Grant Gross, IDG News Service
September 06, 2007 Talkback E-mail Printer Friendly
Three U.S. men and one man living in France have pleaded guilty to charges related to a stock manipulation scheme that included sending out tens of millions of spam messages to pump up the stock value of 15 companies, the U.S. Department of Justice said Thursday.
Michael Saquella, also known as Michael Paloma, 47, of Mesa, Arizona., pleaded guilty in U.S. District Court for the Eastern District of Virginia in Alexandria on Aug. 20. Lawrence J. Kaplan, 63, of Scottsdale, Arizona, pleaded guilty on July 25, in Alexandria to similar charges. Henry "Hank" J. Zemla, 38, of Harris Township, Michigan, also pleaded guilty in federal court in Alexandria on July 20.
The three defendants are scheduled to be sentenced between late November and early February.
Saquella pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud and one count of electronic mail fraud involving 15 publicly traded companies. Kaplan pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud involving 14 of these companies, and Zemla pleaded guilty to a criminal information charging him with one count of conspiracy to commit securities fraud involving one of the companies. The plea agreements for all three defendants were unsealed Thursday.
The scheme involved stocks from companies including eDollars, Xtreme Technologies, and PokerBook Gaming.
Justin Medlin, 26, of Paris, also pleaded guilty in federal court in Alexandria on Aug. 20 to a criminal information charging him with one count of electronic mail fraud and one count of conspiracy to commit securities fraud and electronic mail fraud involving seven of the companies. Medlin's plea agreement was unsealed Thursday. He will be sentenced on Nov. 30.
The maximum penalties for each of the fraud charges is five years in prison and a $250,000 fine.
The stock manipulation schemes generally followed a similar pattern, the DOJ said. The defendants generally solicited small, privately held companies that needed to raise money. One of the defendants would offer to help the company raise significant money through the sale of the company's stock, and then the defendants would list the company's shares on the Pink Sheets, a price quotation system primarily used for trading small companies' stocks.
The group of defendants would then gain control of a majority of the stock of the company, the DOJ said.
The co-conspirators then engaged in deceptive and manipulative trading practices to boost the price and volume of the company's stock, the DOJ said. In some cases, members of the conspiracy encouraged investors to purchase companies' stock by giving the investors free-trading shares in return for buying blocks of shares at agreed-upon prices, thereby creating the illusion of trading volume and active investor interest.
In other instances, members of the conspiracy bought and sold shares of the companies' stock between and among themselves to give the appearance of investor interest, the DOJ said.
The co-conspirators also falsely manipulated the price and volume of each company's stock by making materially false and misleading statements in news releases and in spam e-mails distributed by Medlin and other spammers to tens of millions of U.S. e-mail addresses, in an effort to create artificial demand for the companies' stock, the DOJ said.
In related actions, the U.S. Securities and Exchange Commission has filed civil charges against Saquella and Kaplan for their part in the schemes to manipulate the price and volume of the companies' securities.
Three other defendants, Steven P. Luscko, Gregory A. Neu, and Brian G. Brunette, have pleaded guilty and have been sentenced in federal court in Alexandria for their roles in related stock manipulation schemes. Luscko and Neu were each sentenced to five years in prison and Brunette was sentenced to one year in prison.
Anonymous 2007-09-09 14:40:42 flag as inappropriate
Michael Paloma/Saquella is far worse a person than this or any other press release can possibly describe. Without the slightest inclination of remorse, he will lie, cheat and steal from/to anyone, including his own family, just so long as he stands to benefit. He manipulated millions of dollars from thousands of others, caused jobs losses, businesses closures, and forced individuals and their families into poverty and misery. How could someone do such horrible things? In his delusions of grandeur, Mr. Paloma/Saquella bought a personal jet, second and third houses, multiple cars, trucks, motorcycles, multiple mistresses, (with a family at home) made patheticly distasteful and talentless movies and music cds, bought billboard ads in several major cities that which exhibited his face (and sometimes one of his many mistresses) as so he could advertise his so-called (self proclaimed) entertainment success, and those were just the basics. All the while, he knew he was harming others, yet that was not in the slightest bit, any concern of his. It is strongly advised that no person should ever consider conducting any sort of business with this man.
