CEOs charged with conspiring to manipulate stock prices
* One defendant enters plea agreement -- lawyer
By Jonathan Stempel
NEW YORK, June 30 (Reuters) - Three chief executives and two stock promoters were criminally charged with engaging in fraudulent penny stock schemes, after a probe that involved undercover FBI agents, federal investigators said on Thursday.
The U.S. Department of Justice said the executives charged include Donald Klein, 40, of KCM Holdings Corp (KCMH.PK); Douglas Newton, 66, of Real American Capital Corp (RLABD.PK); and Thomas Schroepfer, 54, of Smokefree Innotec Inc (SFIO.PK).
Also charged were Charles Fuentes, 66, accused of promoting Smokefree stock; and Brian Gibson, 63, accused of promoting stock of Xtreme Motorsports International Inc (XTMM.PK).
Each defendant was charged with conspiracy to defraud the investing public and faces a maximum of five years in prison plus fines.
The U.S. Securities and Exchange Commission also filed civil fraud charges against the defendants. The charges were brought in the U.S. District Court for the Southern District of Florida.
Investigators said the defendants manipulated the shares of thinly-traded companies that traded on the Pink Sheets.
Most of the schemes involved kickbacks to a purportedly corrupt pension fund or a broker who agreed to buy shares, while Gibson's scheme involved the alleged creation of a fake website to tout Xtreme stock, the SEC said.
According to the SEC, one example of FBI involvement was when an agent, posing as a corrupt pension fund trustee, met with Newton and agreed to buy Real American stock in exchange for a 30 percent kickback.
A day later, the FBI wired funds to Real American's Billy Martin's USA affiliate, which then issued a check to a bogus consulting firm set up to conceal the kickback, the SEC said.
"Investors deserve better than secret investment strategies based on kickbacks and bribes," SEC enforcement chief Robert Khuzami said in a statement. "These CEOs got more than they bargained for but exactly what they deserved."
Jeffrey Cox, a lawyer for Klein, said his client entered a plea agreement in his criminal case. The other defendants' lawyers were not immediately available to comment on their behalf. (Reporting by Jonathan Stempel, editing by Gerald E. McCormick)
