SEC target Offill loses bid to move case home
2009-06-10 14:39 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
Phillip Offill, the former U.S. Securities and Exchange Commission lawyer indicted for fraud, has lost a motion to have his criminal case moved from Virginia to his home state of Texas. U.S. District Judge Liam O'Grady issued an order denying the motion on June 2, 2009. He did not provide his reasons. Mr. Offill had sought to have the case moved from Virginia on the grounds that the indictment does not allege that he committed any fraud in that state. He also said that he could not afford a lawyer in Virginia, and that a friend in Texas had agreed to represent him there.
Prosecutors allege that Mr. Offill and a former associate, David Stocker, helped promoters of several OTC Bulletin Board companies obtain millions of unregistered shares in their companies. One of the stocks was AVL Global Inc., an alleged pump-and-dump run by Ontario father and son Peter and Tyler Fisher. Mr. Offill pled not guilty to the charges on March 27, 2009, and he is currently free on a $50,000 bond. (All figures are in U.S. dollars.)
While the judge denied Mr. Offill's motion for a change of venue, he did approve his request for a federal public defender. Mr. Offill made the request on June 8, 2009, citing his financial condition, and the judge approved it the same day. The judge said he had reviewed a financial affidavit from Mr. Offill (which is sealed) and had determined that Mr. Offill was indigent.
Offill's indictment
Prosecutors indicted Mr. Offill in the Eastern District of Virginia on March 12, 2009. They claimed that he and Mr. Stocker were behind a scheme that helped insiders of nine companies obtain millions of free-trading shares in violation of the registration requirements of the U.S. Securities Act. To facilitate the scheme, Mr. Offill allegedly incorporated private companies in Texas and purported to have those companies buy shares of the public companies using a Rule 504 exemption, which applies to accredited investors who do not intend to resell the stock. Then he transferred those shares to insiders using legal opinions prepared by Mr. Stocker, according to the indictment.
In the case of AVL Global, Mr. Offill and Mr. Stocker allegedly helped the Fishers obtain 10 million free-trading shares. Prosecutors claimed that Mr. Offill, in one of the transactions, purported to buy five million shares of the company on July 27, 2004, for $50,000. The same day, he sent a signed, blank stock transfer form for those shares to Mr. Stocker, the indictment stated. Mr. Stocker then signed an opinion letter stating that the shares complied with Rule 504, and could be freely traded, and transferred them to entities designated by the Fishers, according to the indictment.
(In a separate civil case, the SEC claimed that the Fishers then started issuing false and misleading news releases touting AVL Global. One of the news releases said that the company could have a substantial contract to sell GPS tracking devices to the government of Botswana. The stock went to a $4.10 high on Dec. 16, 2004, and the Fishers sold thousands of shares, the SEC claimed. Mr. Offill denies any wrongdoing in that case, as do the Fishers.)
Virginia prosecutors identified eight other companies that Mr. Offill and Mr. Stocker allegedly followed the same pattern with. They are Emerging Holdings Inc., MassClick Inc., China Score Inc., Auction Mills Inc., Custom-Designed Compressor Systems Inc., Ecogate Inc., Media International Concepts Inc. and Vanquish Productions Inc.
Motion to change venue
Mr. Offill filed a motion to change the venue for the case on April 7, 2009. In it, he said that nearly all of the witnesses in the case, many of whom are in jail, would have to travel great distances to testify in Virginia, but most are close to Dallas. Mr. Offill also claimed that he would have to incur unbearable expenses travelling to Virginia and obtaining lodging for motion practice, discovery and trial. He cited an earlier restraining order in the case, which froze nearly all of his assets, including his 2001 Harley-Davidson motorcycle and his 1972 Porsche 911.
Mr. Offill also claimed that a trial in Virginia would disrupt or destroy his business, which is providing consulting and paralegal services to lawyers. (He is not allowed to work as a lawyer in Texas, because the state bar suspended him on March 13, 2008, for intending to destroy or conceal documents when he knew a former client was about to sue him. The SEC later suspended him from practising before the commission.)
Government response
Prosecutors filed their response to the motion for a transfer on April 14, 2009. In it, they said that the case had substantial connections to Virginia, in that one of the companies allegedly used in the scheme, Emerging Holdings, was based there. In addition, many spams touting the stocks were sent by AOL servers in Virginia and many of the scheme's victims were located there.
Prosecutors also claimed that the investigators who conducted interviews resided in Washington, D.C., and in Virginia. Moving the case would significantly inconvenience the government witnesses and increase the cost of travel, the reply stated. In addition, they said that several of Mr. Offill's co-conspirators were successfully prosecuted in Virginia. "This district has developed significant knowledge regarding this case," the response read. "Duplicating these efforts in Texas ... would waste limited judicial resources."
The case has not yet been scheduled for trial.
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