SEC target Offill seeks to exclude witnesses
2010-01-07 15:37 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 Texas securities lawyer whose criminal fraud trial is about to start, has filed a motion to exclude some witnesses from appearing. He says that the government plans to call several witnesses who bought stocks named in his indictment after receiving spam, and lost money. Their statements could lead a jury to convict him based on an emotional response, rather than an objective evaluation of the evidence, he claims.
The witness maneuvering comes as both sides are preparing for Mr. Offill's Jan. 13, 2010, fraud trial. At that trial, prosecutors will attempt to prove that Mr. Offill and an Arizona lawyer, David Stocker, helped insiders of several companies illegally obtain millions of free-trading shares in their companies. Those insiders then dumped their shares, frequently after running spam campaigns, according to the government. The companies included AVL Global Inc., an OTC Bulletin Board listing run by Ontario father and son Peter and Tyler Fisher.
Offill's motion
In a motion to exclude witnesses filed on Jan. 5, 2010, Mr. Offill says presenting testimony from those who lost money in the scheme would be prejudicial to his defence, because it will not help jurors make an objective decision. Instead, "emotional appeal will lure the jury to convict Mr. Offill because these witnesses lost money" when the jury should be considering whether the statements in the e-mails were material to a reasonable shareholder.
Should the judge decide against his motion, Mr. Offill is seeking an alternative order that would allow him to call his own spam witnesses. These people would be recipients of spam e-mails who either did not buy based on the information, or who made money based on it. In order to call these witnesses, he would need the prosecution to divulge the names and interview notes of the spam recipients it interviewed.
The motion represents the second time that Mr. Offill has attempted to block information from appearing before the jury in the past two months. In a prior motion, dated Nov. 23, 2009, he sought to exclude recordings of conversations he had with convicted market manipulator Stephen Luscko in 2006. He said the tapes, which purportedly contained him discussing market manipulation and spamming, had nothing to do with the charges he faced. The judge disagreed, and dismissed the motion on Dec. 23, 2009.
Offill's indictment
Mr. Offill's trial date comes less than one year after prosecutors indicted him on 10 counts of fraud on March 12, 2009. He pleaded not guilty to the charges on March 27, 2009, and is free on a $50,000 bond. (All figures are in U.S. dollars.) The indictment, filed in the Eastern District of Virginia, claimed that he and Mr. Stocker prepared fraudulent subscription agreements and opinion letters that allowed insiders of nine companies to receive free-trading shares. Prosecutors separately indicted Mr. Stocker in Arizona. He pleaded guilty, and will be sentenced on March 8, 2010.
The indictment listed the nine companies as Emerging Holdings Inc., MassClick Inc., China Score Inc., Auction Mills Inc., Custom-Designed Compressor Systems Inc., Ecogate Inc., Media International Concepts Inc., Vanquish Productions Inc. and AVL Global Inc.
With AVL Global, prosecutors claimed that Mr. Offill and Mr. Stocker caused the company to improperly issue 10 million free-trading shares, relying on a Rule 504 exemption. (Normally, companies can only issue Rule 504 shares to accredited investors who do not plan to sell the stock.) According to the indictment, Mr. Offill bought the shares with a private company, Collective Thought Holdings Inc., and Mr. Stocker prepared an opinion letter stating that the shares complied with Rule 504. Mr. Offill then prepared a blank stock transfer form, which allowed Mr. Stocker to transfer the shares to anybody he wished.
"Offill and Stocker devised a method to evade federal securities registration requirements ... in order to provide co-conspirators with millions of [free-trading] shares of Issuers' common stock, which the co-conspirators could not legally obtain directly from the Issuers, for sale to the general investing public," the indictment read.
With many of the companies, the insiders then used spam campaigns or misleading news releases to tout the stock before they dumped their shares, the indictment stated. With Emerging Holdings, the company's promoters received 9.6 million free-trading shares. Prosecutors claimed that they then launched a spam campaign, which touted a $15 price for the stock. They subsequently dumped some of their shares, generating at least $3.43-million in proceeds.
It was not clear from the indictment how much money Mr. Offill made from the scheme. Prosecutors claimed that he billed $2,500 per "transaction" but they did not say how many transactions he completed, or what constituted a transaction.
In addition to the criminal charges, Mr. Offill is facing a civil suit from the U.S. Securities and Exchange Commission for the AVL Global shares issuances.
Offill's Vancouver connections
Mr. Offill was an enforcement lawyer at the SEC's Forth Worth office until 1999, when he went into private practice. Since then, at least two of his clients have had connections to Vancouver.
One was David Whittemore, a Texas man accused of wrong-number touting. The SEC claims that Mr. Whittemore left voice mail messages purporting to be a hot stock tip erroneously left at the wrong phone number. The messages touted Vancouver-based Yap International Inc. The SEC has since obtained a judgment against Mr. Whittemore, and is waiting for the judge to determine his final penalty.
Government records also show that Mr. Offill filed incorporation documents for Nexus Asset Holdings LLC, a private company managed by Vancouver securities lawyer John Briner. The SEC mentioned Nexus in a civil suit against Mr. Briner, claiming that Mr. Briner used the company to hold shares of Golden Apple Oil and Gas Inc., a pink sheets listing that Mr. Briner and Toronto resident Jay Budd allegedly manipulated. Both men deny any wrongdoing. Mr. Budd has settled the case without a trial, and Mr. Briner awaits trial.
AI
