The Small Business Company (fka SBCO)

[hamachi]

SBCO: Chairman/CEO - Karen Person Indicted on Stock, Wire Fraud, Money Laudering & Criminal Schemes.....

UNITED STATES OF AMERICA,
v.
JAMES PRANGE,
STEVEN BERMAN,
RICHARD KRANITZ,
KAREN PERSON, and
JOHN C. JORDAN,
Defendants.
________________________________
)
)
)
)
) Criminal No.
) 11-10415-NMG

Washington, D.C., Dec. 1, 2011 — The Securities and Exchange Commission, U.S. Attorney for the District of Massachusetts, and Federal Bureau of Investigation today announced parallel cases filed in federal court against several corporate officers, lawyers and a stock promoter alleging they used kickbacks and other schemes to trigger investments in various thinly-traded stocks.
Additional Materials

SEC Complaint: Edward Henderson and Paul Desjourdy
SEC Complaint: Michael Lee and Zipglobal Holdings, Inc.
SEC Complaint: James Wheeler and Microholdings US, Inc.

The criminal case charged 13 defendants who engaged in criminal activity in the midst of an undercover FBI operation. According to the charges filed in U.S. District Court, the schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies; the kickbacks were to be concealed through the use of sham consulting agreements. What the insiders and promoters did not know was that the purported investment fund representative was actually an undercover agent.

The criminal defendants include Kelly Black-White and James Prange, both of whom were in the business of finding capital for emerging companies. The civil case names some of the individuals who were charged criminally, and the SEC also issued trading suspensions in the stocks of a number of the companies involved in the criminal cases.

The charges follow a year-long investigation focusing on preventing fraud in the micro-cap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC.

The SEC suspended trading in seven microcap companies involved in the kickback-for-investment schemes:

1st Global Financial Inc. (FGFB) based in Las Vegas

Augrid Global Holdings Corp. (AGHD) based in Houston

ComCam International, Inc. (CMCJ) based in West Chester, Pa.

MicroHoldings US, Inc. (MCHU) based in Vancouver, Wash.

Outfront Companies (OTFT) based in Fla.

Symbollon Corp./Symbollon Pharmaceuticals, Inc. (SYMBA) based in Medfield, Mass.

ZipGlobal Holdings Inc. (ZIPG) based in Hingham, Mass.

MicroHoldings and ZipGlobal are also charged civilly by the SEC with fraud.

These latest charges follow a series of similar cases filed by the SEC in October 2010 and June 2011 in which more than a dozen companies and penny stock promoters were charged in similar kickback-for-investment schemes.

“The public has a right to invest in an honest and fair market. Companies that agree to pay illegal kickbacks harm investors and undermine fair competition in the markets,” said United States Attorney Carmen Ortiz. “Hard working Americans who invest their savings should not be subjected to backroom deals like those alleged today.”

“We are committed to working with our law enforcement partners here in Massachusetts and around the country to stop abuses in the microcap sector and hold the perpetrators responsible,” said David Bergers, Director of the SEC’s Boston Regional Office. “Kickbacks and phony consulting agreements have no place in the financial strategies of any public company, and executives who engage in this kind of fraud are just selling out their own investors.”

“Boston FBI agents initiated an undercover operation aimed at identifying corporate insiders engaged in illegal investment schemes. No one who is engaged in illegal activity while participating in the markets, including CEOs, traders, fund managers, equities analysts, lawyers and publicists, is exempt from the FBI's scrutiny," said Richard DesLauriers, Special Agent in Charge of the FBI in Boston. "Because the nation's economic security is intertwined with our overall national security, the Boston division of the FBI places a substantial emphasis on investigating white collar crimes. During these difficult economic times, now, more than ever, the well-being of the global economy rests on the diligent enforcement of laws designed to ensure the fair and orderly operation of the capital markets. The FBI will continue to use undercover operations and other sophisticated investigative tools at its disposal to protect the integrity and transparency of financial markets.”

The following individuals were criminally charged today:

Kelly Black-White, 51, of Mesa, Ariz. (Operator of Premier Funding, Inc. and Premiere Services, Inc.), charged with wire fraud.

James Prange, 60, of Greenbush, Wis. (Northern Equity, Inc.), charged with wire fraud.

Michael Lee, 51, of Hingham, Mass. (CEO of ZipGlobal), charged with mail fraud and conspiracy to commit securities fraud.

Edward Henderson, 69, of Lincoln, R.I., charged with wire fraud.

Paul DesJourdy, 50, of Medfield, Mass. (CEO of Symbollon Pharmaceuticals), charged with mail fraud and conspiracy to commit securities fraud.

James Wheeler, 51, of Camas, Wash. (CEO MicroHoldings, Inc.), charged with mail fraud and conspiracy to commit securities fraud.

Steve Berman, 49, of Hillsboro, Ohio (CEO of China Wi-Max Communications), charged with mail and wire fraud.

Richard Kranitz, 68, of Grafton, Wis. (Board Member of China Wi-Max Communications), charged with mail and wire fraud.

JC Jordan, 60, of Cameron Park, Calif. (CEO of Vida Life International, LTD), charged with mail and wire fraud.

Karen Person, 61, of Naperville, Ill. (President of Small Business Company, Inc.), charged with mail and wire fraud.

Albert Reda, 65, of Tustin, Calif. (Treasurer of 1st Global Financial), charged with mail and wire fraud.

Steve Stuart, 48, of Monrovia, Md. (Major Shareholder in ComCam International, Inc.), charged with mail and wire fraud.

Muhammad (“M.J.”) Shaheed, 44, of Houston, Texas (CEO of Augrid Global Holdings Corporation), charged with mail and wire fraud.

Today, the SEC also filed civil charges of securities fraud against Desjourdy, Henderson, Lee and Wheeler alleging they defrauded investors through the use of kickbacks in financing transactions.

If convicted, the defendants charged with mail fraud and wire fraud each face up to 20 years in prison, to be followed by three years of supervised release and a $250,000 fine on each count. If convicted on the conspiracy to commit securities fraud charges, the defendants each face up to five years in prison, to be followed by three years of supervised release and a $250,000 fine on each count.

U.S. Attorney Ortiz; SAC DesLauriers; and Director Bergers made the announcement today. The criminal case is being prosecuted by Assistant U.S. Attorneys Vassili Thomadakis and Sarah E. Walters of Ortiz’s Economic Crimes Unit. The SEC’s case was investigated by Michelle Giard Draeger, Ellen Moynihan, and Marty Healey of the Boston Regional Office.

# # #

For more information about this enforcement action, contact:

David P. Bergers
Regional Director, SEC's Boston Regional Office
[phone]

John T. Dugan
Associate Regional Director, SEC's Boston Regional Office
[phone]

http://www.sec.gov/news/press/2011/2011-251.htm

United States District Court
District of Massachusetts
________________________________
UNITED STATES OF AMERICA,
v.
JAMES PRANGE,
STEVEN BERMAN,
RICHARD KRANITZ,
KAREN PERSON, and
JOHN C. JORDAN,
Defendants.
________________________________
)
)
)
)
) Criminal No.
) 11-10415-NMG
)
)
)
)
)
)
MEMORANDUM & ORDER
GORTON, J.
On January 11, 2012, the Grand Jury returned a 14-count
superceding indictment charging, inter alia, defendants Steven
Berman (“Berman”), Karen Persons (“Persons”) and John Jordan
(“Jordan”) (collectively “the moving defendants”) in three
separate conspiracies to commit securities fraud, in violation of
18 U.S.C. § 1349.
I. Background
The three conspiracies charged in the superceding indictment
stem from the defendants’ relationship with defendant James
Prange (“Prange”), who recruited them to participate in an
illegal kick-back program with a hedge fund manager who turned
out to be an undercover FBI agent (“undercover agent”). Prange
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is charged in each of the three conspiracies: one charging
Berman, Kranitz and Prange in connection with China Wi-Max, a
second charging Person and Prange in connection with Small
Business Co. and a third charging Jordan and Prange in connection
with Vida-Life International Ltd.
Currently before the Court is Berman’s motion for relief
from misjoinder (Docket No. 63) in which he contends that the
joinder of defendants in this case is improper under Fed. R.
Crim. P. 8(b), and alternatively even if joinder is proper, that
he should be granted relief from prejudicial joinder pursuant to
Fed R. Crim. P. 14. Person and Jordan join in Berman’s motion
(Docket Nos. 65 and 66).
II. Misjoinder Under Rule 8(b)
Under Fed. R. Crim. P. 8(b):
The indictment or information may charge 2 or more
defendants if they are alleged to have participated in
the same act or transaction, or in the same series of
acts or transactions, constituting an offense or
offenses. The defendants may be charged in one or more
counts together or separately. All defendants need not
be charged in each count.
The general rule in the First Circuit “is that those indicted
together are tried together to prevent inconsistent verdicts and
to conserve judicial and prosecutorial resources.” United States
v. Soto–Beniquez, 356 F.3d 1, 29 (1st Cir. 2004). The First
Circuit recognizes two requirements for proper joinder under Rule
8(b): 1) the offenses in question must constitute a series of
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acts or transactions and 2) a showing that joining the defendants
is of benefit to the government. United States v. Barbosa, 666
F.2d 704, 707-708 (1st Cir. 1981). For the purposes of Rule 8(b)
a “series of acts of transactions” means more than just similar
acts. King v. United States, 355 F.2d 700, 703 (1st Cir. 1966).
Under the first prong joinder in this case is proper because
the allegations set forth in the indictment indicate that the
three alleged conspiracies are sufficiently related to constitute
a “series of transactions.” In Barbosa the Court upheld joinder
on the grounds that the transactions occurred in the same
location and had overlapping members. 666 F.2d at 707. Here,
the alleged transactions all took place in the same office in
Massachusetts, and Prange and the undercover agent took part in
each. Furthermore, this case is distinguishable from the Webb
case cited by defendant because Prange’s involvement rises above
the level of that of a merely overlapping member of distinct
conspiracies. See United States v. Webb, 827 F.Supp 840, 841
(D.Mass 1993). Instead, the indictment makes it clear that
Prange is alleged to have been the initial link between each of
the moving defendants and the FBI sting operation. Moreover,
Prange is alleged to have derived a benefit from each of the
three alleged conspiracies, in the form of ten-percent of the
kick-back paid to the undercover agent. See also United States v.
Fryer, 333 F.3d 110, 114 (2nd Cir. 2003) (finding that two
separate conspiracies shared a common plan where the purpose of
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the fraudulent schemes was to generate revenue both for those
involved in only one of the conspiracies as well as the
“middleman” who was involved in both).
The second prong is also clearly satisfied. Joinder will
provide a substantial benefit as three separate trials would be
extremely costly to both government and judicial resources.
Although the superceding indictment charges each of the moving
defendants in separate conspiracies with Prange, the presumptive
benefit of proof of facts relevant to all of the alleged
transactions clearly justifies the joinder of the defendants. See
e.g. United States v. Martinez, 479 F.2d 824 (1
st
Cir. 1973)(two
conspiracies involving drug distribution were sufficiently
related for the purposes of Rule 8(b) where evidence of one of
the transactions was relevant to the guilt of a common defendant
in the other).
In our case, proof of the purported agreement between the
undercover agent and Prange, in which Prange was to receive ten-
percent of the kick-back paid to the undercover agent for those
customers Prange recruited, is probative of Prange’s guilt in all
three of the alleged conspiracies. Similarly, evidence that is
relevant to Prange’s guilt as to Wire Fraud (Counts 13 and 14)
related to funds he received from each of the three transactions,
is probative of both Prange’s guilt in each of the alleged
conspiracies as well as the moving defendant’s guilt in each of
their respective conspiracies because it tends to confirm the
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payment of the illegal kick-backs.
III. Prejudice under Rule 14(a)
In the alternative, Berman requests severance under Fed. R.
Crim. P. Rule 14(a). Berman intends to argue in his defense that
he explicitly told the cooperating witness that he would not
enter into any illegal deals and simply relied on the legal
advice of his counsel Krantiz. Berman asserts that his reliance
on counsel’s advice distinguishes his case from those against
Person and Jordan and that he will be prejudiced if the jury is
lead to believe that if Person or Jordan did not act in good
faith that Berman likely did the same.
Under Rule 14:
in order to overcome the presumption in favor of
joinder, a defendant must demonstrate that she would
suffer prejudice so pervasive that it would be likely
to effect a miscarriage of justice.
United States v. Zafiro, 506 U.S. 534, 539 (1993). Here, the
Court finds no such risk of prejudice that could not be addressed
through the use of limiting instructions. Id.
In accordance with the foregoing, the Motion for Relief from
Misjoinder is DENIED.
So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
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United States District Judge
Dated January 8, 2013
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Publisher Information
Note* This page is not part of the opinion as entered by the court.
The docket information provided on this page is for the benefit
of publishers of these opinions.
1:11-cr-10415-NMG-1 USA v. Prange et al
Date filed: 12/14/2011
Date of last filing: 02/05/2013
Attorneys
Scott P. Lopez Lawson & Weitzen 88 Black Falcon
Avenue Suite 345 Boston, MA 02210 617-439-4990
617-439-3987 (fax) [e-mail]
Assigned: 01/13/2012 LEAD ATTORNEY ATTORNEY
TO BE NOTICED
representing James Prange (1)
(Defendant)
Geoffrey M. Raux Foley & Lardner, LLP (Bos) 111
Huntington Avenue Boston, MA 02199 617-342-4000
[e-mail] Assigned: 01/03/2012
TERMINATED: 01/19/2012 ATTORNEY TO BE
NOTICED
representing James Prange (1)
(Defendant)
Vassili Thomadakis US Attorney's Office - MA J.
Joseph Moakley U.S. Courthouse 1 Courthouse Way
Suite 9200 Boston, MA 02210 617-748-3248
[e-mail] Assigned: 12/14/2011
LEAD ATTORNEY ATTORNEY TO BE NOTICED
representing USA (Plaintiff)
Michael J. Tuteur Foley & Lardner, LLP 111
Huntington Avenue Boston, MA 02199 617-342-4000
617-342-4001 (fax) [e-mail] Assigned:
01/03/2012 TERMINATED: 01/19/2012 LEAD
ATTORNEY ATTORNEY TO BE NOTICED
representing James Prange (1)
(Defendant)
Sarah E. Walters United States Attorney's Office
Suite 9200 1 Courthouse Way Boston, MA 02210
617-748-3130 617-748-3960 (fax)
[e-mail] Assigned: 12/14/2011 LEAD
ATTORNEY ATTORNEY TO BE NOTICED
representing USA (Plaintiff)
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