I've been watching this-finally some justice>
2009-03-13 14:08 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-AVLL) AVL Global Inc
by Mike Caswell
David Stocker, an Arizona securities lawyer, has pled guilty to criminal fraud charges for his role in the manipulation of 19 stocks over a two-year period. The companies he helped manipulate included AVL Global Inc., a pink sheets listing allegedly run by Ontario father and son Peter and Tyler Fisher, and Motion DNA Corp., a pink sheets company allegedly manipulated through accounts at Research Capital Corp.
The U.S. Department of Justice charged Mr. Stocker, 49, with one count of conspiracy to commit securities fraud on March 11, 2009, in the Eastern District of Virginia. Mr. Stocker simultaneously pled guilty, and admitted in a statement of facts that had the case gone to trial, prosecutors would have proven that he helped with a pump-and-dump of 19 stocks between May, 2003, and February, 2005.
According to the statement of facts, Mr. Stocker was the securities counsel for most of the 19 companies. As counsel, he helped devise a plan in which the companies could evade share registration requirements by issuing stock through sham transactions. His part in the scheme included providing legal opinion letters that gave the false appearance that the shares were exempt from registration. Essentially, this allowed the companies to issue free-trading shares to insiders or anybody else they designated.
Once the shares were issued, Mr. Stocker's co-conspirators began pumping the stocks, through spam and manipulative trades. "Although he generally knew that his co-conspirators were engaged in these sorts of fraudulent activities, he remained willfully blind ... so that he could deny knowledge of their fraudulent acts at a future time if necessary," the statement of facts reads. For example, he knew that spams, fax blasts and mailers issued to tout the stocks contained false information, and were timed to boost prices as Mr. Stocker's co-conspirators sold the stocks.
While Mr. Stocker did not participate directly in pumping the stocks, he did sell shares of the companies as they were being pumped. "This resulted in Stocker and his co-conspirators making millions of dollars in illegal profits from their market manipulation scheme," according to the statement of facts. With most of the companies, the stock collapsed after the promotion ended, "and innocent investors were left with near-worthless securities."
As Mr. Stocker has pled guilty, the statement of facts does not have full details of the manipulations. It does, however, include some examples. One of the companies cited is Emerging Holdings Inc., which purported to be in the business of "data encryption, web access management, and developer solutions." The company had no actual operations. On July 1, 2004, Mr. Stocker filed the documents to take the company public. Around the same time, a private Texas company called Steep Blue Holdings Inc., which was controlled by a co-conspirator identified as "P.O.," purported to buy 10 million shares of the company for $100,000. (All figures are in U.S. dollars.) Steep Blue did not actually pay for the shares, but Mr. Stocker issued an opinion letter stating that the company was relying on Rule 504 to issue 10 million free-trading shares to Steep Blue Holdings without filing a registration statement. (Rule 504 provides an exemption from registering shares. Issuers relying on this exemption cannot be SEC reporting companies and they cannot be "blank check" companies.) Steep Blue then transferred the shares to other entities controlled by Mr. Stocker's co-conspirators. It also transferred 400,000 shares to Curtis Case Inc., a private company controlled by Mr. Stocker.
On July 10, 2004, Mr. Stocker's co-conspirators launched a spam campaign, in which they touted Emerging Holdings with materially false information, according to the statement of facts. The stock went to $1.88 on July 12, 2004. That same day, Mr. Stocker sold 75,000 shares for a gain of $77,250, and his co-conspirators also sold their shares for "a sizeable gain." The scheme was similar for all of the 19 stocks that Mr. Stocker helped manipulate. In total, Mr. Stocker made $2.25-million selling shares of the companies. In all cases, this was only a portion of the money made from the schemes, as his co-conspirators also profited.
Mr. Stocker is scheduled to be sentenced on Nov. 6, 2009, by U.S. District Judge Liam O'Grady. He faces a maximum fine of $250,000 plus five years in prison. He has also agreed to forfeit all of his assets, except his home in Maricopa county, Arizona.
Eight of Mr. Stocker's co-conspirators have already pled guilty. They include Michael Saquella, who was sentenced to 10 years in prison; Justin Medlin, who received six years; Seven Luscko and Gregory Neu, who each received five years; Lawrence Kaplan, who received three years; Brian Brunette, who received one year; Anthony Tarantola, who received six months; and Henry Zemla, who received three months.
AVL Global
One of the companies Mr. Stocker pled guilty to manipulating was AVL Global, which was run by Ontario residents Peter and Tyler Fisher. There were no criminal charges against the Fishers, but on June 11, 2007, the U.S. Securities and Exchange Commission filed civil fraud charges against them and Mr. Stocker. It alleged that they issued false and misleading news releases that pushed the company to $4.10 on Dec. 16, 2004.
Tyler Fisher settled the case out of court by paying a $25,000 penalty and agreeing to a five-year ban from penny stocks. The others, including Mr. Stocker, deny any wrongdoing, and the case has not yet gone to trial.
Motion DNA
The other company with a Canadian connection was Motion DNA, which was run by Michael Saquella, a recidivist securities violator from Mesa, Ariz. On Sept. 6, 2007, the U.S. Department of Justice charged Mr. Saquella with conspiracy to commit securities fraud. It alleged that he manipulated the company through a series of wash trades run through accounts at Research Capital. Mr. Saquella pled guilty to the charges, as well as to an SEC case filed against him. He received 10 years in jail and agreed to pay the SEC $2.5-million. There were no allegations against Research Capital, and it appears the brokerage was just an unwitting conduit.
AI
